Nigerian fintech startup Rivy, formerly known as Payhippo, has raised $4 million in a pre-Series A round to focus on its clean energy financing business. The funding, split evenly between $2 million in debt and $2 million in equity, will help the company expand its clean energy financing solutions for businesses beyond Nigeria.

The equity round was co-led by EchoVC, a Nigerian venture capital firm, through its $2.5 million Eco fund, which focuses on climate, energy, agriculture, and mobility solutions, alongside Shell's All On, a climate-focused impact investment organization. Debt was provided by local debt providers.

Rivy's shift towards clean energy financing underscores a growing trend among African fintechs looking beyond traditional lending to tackle structural challenges. In recent years, other fintechs such as Aella Credit and Branch have expanded their services to include healthcare, insurance, and bill payments, demonstrating the industry's willingness to adapt and innovate.

Rivy operates a dual marketplace, connecting over 250 solar vendors and installers with businesses while offering loans to spread the cost of solar systems over time. According to Dami Olawoye, CEO of Rivy, the company's underwriting engine remains central to its business, with a non-performing loan (NPL) ratio below 1%, signaling strong credit risk management.

The company's decision to shift towards clean energy financing was driven by the recurring theme of small businesses lacking access to electricity. Rivy expanded to an asset financing solution in June 2023 to allow these small businesses to buy solar systems and spread the costs over a period of time. Since then, the company has seen strong demand from businesses despite the high cost of solar systems, disbursing $2 million in loans to businesses and growing its loan book at an average of 15% per month.

Rivy's loan terms are structured based on the electricity demand, logistics, and solar installation service charges. The loan interest rate typically starts at around 12% for a three-month term and increases as the term lengthens. However, businesses must make an initial deposit of at least 30% of the full loan amount before they can access the loans.

Beyond individual businesses, Rivy also finances micro-grids – large-scale solar installations that serve business clusters, communities, and households. While businesses remain its core focus, the company has expanded to include consumer financing as well.

Olawoye explained that the company raised a mix of debt and equity because debt is better suited to its lending model. However, to raise debt, it had to raise equity funding alongside. "Equity is expensive," said Olawoye. "We can't keep raising equity to lend money because everybody [shareholders] will keep getting diluted. If we want to raise future rounds, a structure we're most likely to use will be one where we raise a combination of debt and equity."

Rivy plans to deepen its presence in Nigeria while exploring expansion into other markets. As the company looks to keep the lights on in households and businesses, it is poised to play a significant role in Africa's clean energy revolution.