Olufemi Adeyemi
Pivo, the Nigerian fintech that offered banking services to small supply chain businesses, is shutting down after raising a $2 million seed round.
The two-year-old Nigerian fintech startup Pivo has shut down one year after raising $2 million in a seed round that had Y Combinator and VestedWorld participating.
Founded by Nkiru Amadi-Emina (CEO) and Ijeoma Akwiwu (COO),
Pivo was billed as a neobank for supply chain businesses in Africa.
Nigerian fintech startup, Pivo, raises $2 million seed
funding to provide banking services for African SMEs.
According to TechCabal, the startup hasn’t provided any
further details about the shutdown.
The $2 million it raised back in November 2022 after a
$550,000 pre-seed round completed the same year, was to expand its product
offerings.
At the time, it disclosed seeing business accounts grow by
400% and planned to develop solutions for supply chain anchors. Techpoint
Africa reached out to the founders, to learn more about the shut down, but
there was no response from them at the time of this publication.
Possible reasons behind Pivo’s shutdown
While Amadi-Emina declined to comment on the startup’s
shutdown, a few reasons could be responsible for this development. Given
Nigeria’s heavy dependence on imported products and its broken transport
infrastructure, providing financing for supply chain businesses was always a
smart move.
However, the last year has been particularly tough for
Nigerian businesses.
In October 2022, the Central Bank of Nigeria announced that
it would be redesigning the country’s ₦100, ₦200, ₦500, and ₦1,000 notes.
Such decisions are often accompanied by a long implementation time, but
Nigerians had roughly three months to comply.
Coupled with a botched rollout of the newly designed notes,
many businesses and individuals struggled to access cash.
PoS agents were obvious casualties but many other businesses
were significantly affected by the ensuing cash crunch. While it encouraged the
adoption of digital payments, it also forced many businesses to close shop.
Ninety-one per cent of businesses had to renegotiate payment
structures or dip into their savings to meet obligations as demand for goods
dropped, according to a report by research outfit, SBM Intelligence.
Although the currency redesign was halted in 2023, the
country has only gotten worse since then. Floating of the naira by the newly
elected president has negatively impacted the value of the naira against the
dollar, driving up the cost of production for many businesses.
Another possible reason for its demise could be its business
model. Having built and worked with businesses in the supply chain sector,
Amadi-Emina and Akwiwu discovered that these businesses had irregular payment
cycles. This often caused them to miss out on business opportunities and
stunted their growth.
In response, they launched Pivo to provide loans to tide
these businesses over. Its lending service was intended to be a customer
acquisition tool, with the ultimate aim of becoming the neobank for Africa's
supply chain businesses.
However, this approach may have been its undoing. For one,
it would require a capital source for the loans. Commercial banks give out
loans but are helped by customer deposits.
Although Pivo did not disclose how it got the money it lent
to the businesses, we can make a few deductions. Pivo Capital, its lending
service, was the main product, which means users did not necessarily have
deposits with them before they accessed loans.
As such, they would have to get capital from other financial
institutions or high net worth individuals. At a time when Nigeria's interest
rates have increased, both options would increase their costs, which would
naturally be passed on to the user in the form of interest. If the interest was
higher than they would get at a bank, these businesses may decide against
taking the loans.
On the other hand, high demand could also stretch them and
leave them sourcing for funds. When Techpoint Africa first spoke to them in
2022, the then one-year-old startup shared that it had received loan requests
of more than $2 million and disbursed $1 million at the time.
Finally, it may have struggled to convince users to see it
as their main banking provider. While digital banks in Nigeria have quickly
gained customers, many people remain wary of using them as a primary banking
service provider.
Either way, Pivo's shutdown could simply be a case of good
product but bad timing.