Welcome to the final part! If you read this far, kudos to you! I hope you learnt something from this. In my first article, I explored Fintech in Africa and some of the growing sectors in the space. The second piece featured in-depth research into buy-now-pay-now in Africa and some companies making strides in the sector.
To wrap this up, I created a memo on one company I think would make a good investment for any VC or investor looking to put some money into the sector.
One BNPL company that in my opinion, would make a good investment is CDcare!
CDcare is building Afterpay for Africa, an online marketplace helping consumers afford products from top distributors at the best prices. The best part? Customers can pay in weekly and monthly instalments for up to 12 months.
CDcare wants to provide an affordable way for Africans to make purchases using a combination of elements from savings and lending solutions. They aim to reduce the barriers to affordability for the African society by letting consumers purchase otherwise out of reach products on a payment schedule flexible for their needs.
Why invest?
- The startup is still early enough for a great return on investment and does not appear to have raised funds yet.
- They have a broad inventory of products and a request feature for items not in inventory.
- Easily accessible to consumers as it is available on the web, Android and iOS stores.
- Compared to other BNPLs, where consumers get goods immediately after paying, customers with CDcare must make a 50% commitment before delivery. This approach could reduce risks.
- Moreover, regular/ power users with proven history can receive delivery of items immediately after the first instalment and pay the balance in two more instalments.
- Items purchased are not legally owned by the buyers until fully paid for.
- Provide weekly and monthly repayment options for up to 12 months.
- Also owns an in-built independent credit check and KYC system
Justification
CDcare is helping African consumers afford their needs and wants by letting them pay in instalments for goods. Their platform helps to ensure users do not default on payments using their proprietary technology. The sector in Africa is projected to grow by over $7 billion in 2022. Adoption is expected to increase steadily resulting in a CAGR of 49.2% while GMV is projected to reach over $79 billion by 2028. Considering the increasing adoption of BNPL in Africa and the advantage CDcare has by offering goods at the best prices and their unique business model, it is highly likely they will 100x and reach a $1 billion valuation.
Product/ Service
CDcare is an online BNPL marketplace that lets users shop for goods at regular market prices with the option of making payments in instalments with no interest rates. Customers receive their goods after 50% payments making it more like saving to purchase a product rather than taking out a loan for the same reason. This is an important distinction for the debt-averse African society.
Current Traction
- Over 15,000 orders processed since their launch
- More than 7,000 customers across Nigeria serviced
- 20% month-on-month growth while being mostly bootstrapped.
- Over 100,000 downloads on Google Play Store.
- CDcare is in the top 5 shopping apps ranked on Playstore.
- 4.3 star rating across Google Play Store and the Apple store.
Progress So Far
The product has achieved some sort of product-market fit, having solved challenges around trust, payments, logistics and technology. They are currently looking to expand offerings to other consumer needs such as automobiles.
Customer Sentiment/ Feedback
Customers love the product and the fact that it is trustworthy and easy to use. The app has a 4.3-star rating cumulatively from the Google Play Store and Apple Store.
Business Model
CDcare makes a profit of at least 10% on every product sold on the platform.
Market Outlook
The BNPL sector in Africa is still in its early days but shows a lot of prospects for growth. The gross merchandise value of the sector was valued at over $3 billion in 2021 and is projected to reach over $79 billion by 2028. Furthermore, the sector is expected to record a CAGR of almost 50% between 2022 and 2028. (Source)
As more Africans become comfortable with the concept of BNPL and less credit averse, these figures could even skyrocket more. This figure will even grow more when extended to include the unbanked and financially excluded as well.
There are no regulations governing the sector yet as it is still early days, however, providers have an ethical duty to ensure responsible shopping by consumers to prevent excessive debt.
Competition and Defensibility
CDcare faces competition from other BNPL players in the market like Carbon Zero, Klump, CredPal, M-Kopa, and Trade Depot, including those looking to expand to West Africa from other parts of Africa. This is more so because most have raised external funding from investors.
CDcare distinguishes itself through its radically different business model. It is less capital intensive since they only have to bear half the cost of the value of users’ items and sometimes don’t bear the cost at all through strong partnerships. Partnerships with major distributors mean they are also able to make a profit from the difference between discounted rates at which goods are gotten and the market rate value offered to customers. This also helps them stick to their no interest rate policy which is especially inclusive to Islamic customers to whom interests are taboo.
Risks
The most significant risk for CDcare as with most BNPL providers is the risk of default in payments by the consumer. With the low-trust society in Africa, it is a reasonable concern that consumers may be unwilling to make payments after receiving the delivery of their orders.
CONCLUSION
The BNPL sector in Africa is projected to grow by over $7 billion in 2022. It is expected that adoption will increase steadily resulting in a CAGR of 49.2% while GMV is projected to reach over $79 billion by 2028. Considering the increasing adoption of BNPL in Africa and the rising inflation rates, exchange rates and declining economic power, this seems a sector that may be here to stay and is advisable to get into while it is still early days. CDcare has made incredible progress in the sector despite being bootstrapped, offering the best prices due to its strategic partnerships. The founders also have the requisite knowledge and experience to scale this to a $billion company.