US credit fintech for minorities Esusu lands £2.3m
Esusu, a US-based digital savings app serving immigrant and minority groups, has landed $2.3 million in a seed round.
Bringing its total financing to date to nearly $4 million, the round adds to the $1.6 million co-founders Wemimo Abbey and Samir Goel landed exactly a year ago.
The latest round includes backers such as Impact America Fund, Zeal Capital Partners, and Next Play Ventures – the fund led by LinkedIn chairman and former CEO, Jeff Weiner.
What is Esusu?
The start-up, founded in 2018, initially helped users save and build their credit. Debt obligations made via savings from the app are then reported to credit bureaus to build up users’ credit.
Esusu has since expanded its offering into the rental market, serving both tenants and landlords.
It helps tenants and landlords report rental payments, and for landlords only, it predicts risk and reduces late payments.
“We’re trying to address the fact that millions of people have a thin credit score or no credit score at all, while the average debt is around $135,000,” Abbey tells Forbes.
Applicants are vetted based on their need for the service and can pay back interest-free loans within 12 months.
More than 5,000 renters in the US have applied for Esusu. About 85% of applicants are Black, 7% are non-Black people of colour, whilst the remaining 6% are Caucasian.
Esusu makes its money from rent reporting. It charges landlords $2 per unit each month. In return, landlords are promised a 25% uptick in timely rental.
Credit climate for America’s underserved
Black Africans are still far more likely to be denied a mortgage than other applicants. This was proved most recently by Zillow, a US online real estate database firm.
When immigrants move to America, they will likely have no credit score. That means they have to build up a credit history from scratch.
These are vulnerable groups, and many lenders take advantage of them by inflicting discriminatory policies such as redlining and predatory lending.
It can become a vicious cycle, whereby those with a need for credit can’t access the resources to boost it. This then fences them off from accessing mortgages or other large-ticket loans.
But the country is trying to change this – sparked by the recent George Floyd and Black Lives Matter protests which started in Minneapolis.
The Office of the Comptroller of Currency (OCC) announced Project Reach on 10 July. The initiative looks to promote greater access to capital and credit for underserved populations.
This includes reducing the number of “credit invisibles” in the US. As well as increasing affordable housing numbers, and the promotion of minority-owned depository institutions.
Equalising the wealth field
As a vendor, unaffected by the bureaucracy of government, Esusu may be able to make incremental differences to the wealth balance a lot faster than the OCC.
It currently operates in more than 30 states, covering 200,000 rental units. These span the likes of New York, Los Angeles, Minneapolis, and Portland.
With plans to be in all 50 states within the next year, it estimates roughly $1 million in revenue by year-end. The 24-person team will also be adding new hires as part of the new investment.
“People have succeeded economically in the US through access to cheap debt,” fellow founder, Goel, tells Forbes.
“So, the essential redress to that problem is helping Black folks get access to good credit so that they can get cheap loans and invest in homes and other products.
“Social justice will take a lot of time but we can focus on economic justice and begin to help equalise wealth building.”