Yoco, a South frican FinTech company, has announced that it will be offering its small business customers, who use Yoco's Point-of-Sale devices, credit based on the data from the PoS devices. The new offering, which will be known as Yoco Capital, will only be available to those businesses that have used Yoco's PoS device for a minimum of 3 months.

The launch of Yoco Capital comes after the FinTech startup recently raised $16 million in a Series B funding round.

Who qualifies for credit from Yoco Capital?

“This [Yoco Capital] offers entrepreneurs a simple and transparent way to fund growth, while ensuring that their assets are not tied up in their business,” said Katlego Maphai, co-founder and CEO at Yoco.

To date, Yoco says they have issued  225 loans to the value of R7,5 million (approximately $510,000) to eligible Yoco merchants without the need for any security or collateral. The loans vary from R2,500 to R75,000.

FinTech in Afrika

If you have been paying attention to the FinTech sector across Afrika, you will likely have observed an emerging pattern of most FinTech startups eventually offering credit as part of their services. This is irrespective of whether they are payments technology focused companies like Yoco, mobile money providers like Safaricom's M-Pesa, or a startup like Branch which uses a customers smartphone data to determine credit affordability.

This trend of FinTech somehow becoming synonymous with credit has also attracted regulators in some countries. In East Afrika, the Central Bank of Kenya is looking to regulate FinTech startups and platforms, especially those offering credit, as they have largely been accused of predatory lending practices and in some cases exorbitant fees.

The above are just a few examples, but it is becoming more and more common to see FinTech startups in Afrika add credit offerings to their services whether they are a payments startup or a mobile money startup. This could be because the margins in payments and mobile money are so small they would need to scale quickly to more customers/merchants in order to make significant profits. The other reason, and more probable, is that as a FinTech startup, especially in payments and mobile money, you collect a lot of data on your customers transactions and thus you are in a better position to determine their eligibility for a loan and their potential ability to repay it.

The more things change

Although the new service by Yoco might feel like the more things change, the more they stay the same, in the sense that the FinTech startup is slowly becoming a bank of sorts, Yoco Capital is different in several ways from how banks offer small businesses loans. Apart from not requiring security or collateral, small businesses don't pay interest on the loan but "one transparent fee" as Yoco puts it.

Also, Additionally, repayment of the loan is done differently. Yoco merchants pay back a small portion of the loan with each swipe they process through their Yoco PoS device. The payments are automatic and are calculated based on a fixed percentage of every card transaction that is processed, until the balance is paid off.


“We understand that accessing capital is one of the hardest challenges faced by small business owners. It's also one of the biggest reasons why small businesses remain small. We are therefore offering a solution that leverages smart technology to help small businesses grow. We're confident that Yoco Capital's ability to deliver frictionless access to funds will revolutionise small business funding, in the same way that Yoco lowered barriers to card payment acceptance in the sector,” concluded Maphai.


Cover image credit: Yoco merchant. Yoco