In the realm of African international trade, a glaring disparity arises: only 30% of trade volumes are financed through financial intermediaries in banks. This significant gap predominantly affects small and medium-sized enterprises (SMEs), which struggle to access capital compared to their larger counterparts. Yet, the immense value of annual international trade volumes in Africa, amounting to a staggering $1.2 trillion, highlights a promising market for startups addressing this issue. Among them is FrontEdge, a Lagos-based fintech that recently raised $10 million in a seed round, with over 70% in debt funding, to drive growth in African cross-border trade.

Founded in 2021 by Moni Alli, FrontEdge empowers SME exporters and importers with working capital and software tools essential for facilitating cross-border and international transactions. Alli, drawing from a career focused on digital transformations for top-tier banks in Nigeria, South Africa, and Morocco, and his experience in private equity at Development Partners International (DPI), identified the need to bridge the SME financing gap in Africa. FrontEdge emerged as a culmination of this vision, aiming to digitize outdated banking processes and cater specifically to African SME exporters.

Moni Alli

FrontEdge recognized a notable challenge faced by agri-commodity traders who front funds to smallholder farmers, resulting in a significant cash tie-up over extended periods, up to 180 days, for exporters. Unlike traditional banks, FrontEdge provides upfront capital to exporters without requiring collateral, offering transaction-based underwriting. This intervention occurs when goods are in transit or even at warehouses, allowing the fintech to bridge the working capital gap and expedite receivables, enabling exporters to engage in more transactions.

READ ALSO - Waspito Secures $2.5M Seed Extension for Offline Patient Expansion and Scaling

While initially focused on lending, FrontEdge has evolved into a comprehensive platform. It has integrated diverse databases to gain insights into cross-border trading dynamics, facilitating the underwriting of offshore credits for buyers. The fintech also supports exporters in setting up overseas offshore accounts, addressing challenges related to capital controls and high banking fees within the system.

FrontEdge functions as a vertical bank, encompassing financing, cross-border payments, and offshore accounts tailored to African traders' needs. In addition to financial services, the company provides software tools like logistics management, cargo insurance, and document management to exporters. Notable partners include JP Morgan and Providus Bank.

The company has observed a 20% month-on-month growth among its SME exporter customers, with many tripling their sales on the platform. Revenue for FrontEdge primarily stems from a spread on the transactions it finances. Alli emphasizes the company's focus on avoiding losses and showcasing successful repayments, boasting a zero default rate after handling over 50 contracts, each comprising multiple trades and invoices.

Looking ahead, FrontEdge plans to leverage its funding from lead investor TLG Capital and others, including Flexport, to expand its team, scale its financing product across multiple African countries, and diversify its revenue streams beyond financing. The startup aims to further empower African SMEs, enabling them to effectively engage in global trade.