Nigerian fintech startup BFREE has closed a growth funding round to accelerate the expansion of its pan-African distressed credit buying business, the company confirmed this week. The Lagos-based firm, which acquires and manages non-performing loan portfolios from lenders and other financial institutions, intends to use the capital to deepen its operations in Nigeria, Kenya, and Uganda while exploring entry into new markets.

The company did not disclose the exact amount raised in this round. Founded in 2018, BFREE has built a platform that uses artificial intelligence and machine learning to price, purchase, and service distressed consumer credit. Its model involves buying portfolios of delinquent loans at a discount and then employing what it describes as ethical digital collection strategies to recover amounts owed.

BFREE's expansion comes at a time when many African economies are grappling with rising levels of consumer debt and non-performing loans. The company argues that its approach provides a necessary service for financial institutions seeking to clean up their balance sheets while offering borrowers more flexible and humane repayment options compared to traditional collection agencies. The fintech says it has serviced over 4.5 million customers across its markets to date.

The move into Kenya and Uganda represents a strategic push into East Africa, a region with a mature mobile money ecosystem led by M-Pesa but also facing challenges with credit default rates. Nigeria, BFREE's home market, has seen a rapid expansion of digital lending in recent years, accompanied by regulatory scrutiny and public concern over aggressive recovery tactics employed by some lenders.

BFREE's growth round coincides with continued investor interest in African fintechs addressing specific market gaps, even as overall venture funding on the continent has moderated from peak levels. In recent weeks, other announcements have included the International Finance Corporation's consideration of a $25 million financing package for mobility platform Gozem and Sabou Capital securing an anchor investment to scale its SME-focused growth fund across Africa.

For BFREE, the capital will be directed towards technology development, portfolio acquisition, and team growth. The company's model relies on sophisticated algorithms to assess the potential recovery value of distressed debt, a process that requires continuous refinement as it enters new markets with differing credit behaviors and regulatory frameworks.

The success of such a specialized business depends on navigating complex financial regulations across multiple jurisdictions. Central banks in Nigeria, Kenya, and Uganda each have their own rules governing debt purchase and collection practices. BFREE's stated commitment to ethical collection will be tested as it scales, particularly in markets where consumer protection around digital lending remains a work in progress.