Six years ago, the idea was novel and often perplexed many.
The allure of sidestepping big financial institutions to give loans to everyday people and receive high returns was enticing. But it also came at a price: invasive scrutiny and outrageous demands.
Babatunde Akin-Moses, Mayowa Adeosun, and Onyinye Okonji, co-founders of Peer-to-peer lending platform Sycamore, experienced this firsthand when a potential lender made an absurd demand for their cars as collateral.
“We pitched our business to a wealthy oil and gas worker, who ended up wanting to offer a ₦5 million loan via our platform,” Akin-Moses recalls.
“But the deal took a bizarre turn when he asked about the collateral. He demanded our cars which at first we thought he was asking for the documents. To our surprise he wanted us to leave our actual vehicles with him as collateral.”
The unusual request brought the negotiation to an abrupt halt. The trio, then newly minted business school graduates, faced similar obstacles selling the idea of their bootstrapped peer-to-peer lending platform to Nigerians. But against all odds, they defied expectations and six years later have built a thriving business.
In six years, Sycamore has disbursed loans of over ₦40 billion ($40 million*) to over 300,000 users. With a nationwide team of over 100 people supporting the business, Sycamore is betting on its ability to reinvent itself. It is taking a step further to become a financial powerhouse with the launch of Sycamore Investment and Asset Management Limited (SIML), a new arm offering investment access to local and international stocks and bonds.
*matching each year of disbursement with the exchange rate
“We’re launching a portfolio of investment options as an asset management licensed company,” says Gbenga Magbagbeola, SIML Managing Director and seasoned investment banker. “With this, we can offer customers all sorts of varieties and help them build wealth.”
In a conversation with Akin-Moses, CEO; Adeosun, CFO; and Okonji, CCO, the Sycamore co-founders talk about the company’s first six years, its evolution and ambitious plans, including the launch of its asset management arm with over ₦10 billion in assets under management.
An idea born in business school
Sometime in 2018, Adeosun, Akin-Moses, and Okonji, then MBA students at Lagos Business School (LBS) bonded over discussions on the barriers to financing for Nigerian Small and medium-sized enterprises (SMEs).
The trio who had quit their jobs to do a full-time MBA, came from different backgrounds. Adeosun was a risk underwriter who had spent the last four years at Leadway Assurance, Akin Moses, a Chartered Accountant, had spent the last five years as a tax consultant at PwC, while Okonji had worked at budding digital lenders RenMoney and Page Financials.
But their vision was singular: to create a financial ecosystem that empowered Nigerian individuals and businesses.
“We were inspired by peer-to-peer models like Lending Club in the UK and wondered if a similar model could work in Nigeria,” recalls Adeosun, reflecting on the early days. A PwC survey would later confirm their observations, revealing that 22% of small businesses struggle to secure funding, with many relying on friends and family.
Fueled by their passion, they registered the business while still in school and sought out internships that would provide more hands-on experience needed to bring their vision to life. Okonji, for instance, returned to Page Financials while Adeosun spent six months at Accenture as a business strategy consultant. This experience solidified their understanding of the lending market, helping them commence business in their final semester.
“During our final semester, a classmate approached us about our loan offerings,” Okonji says. “That’s when it hit us—we were ready to extend our first loan.”
The company’s name, Sycamore, was inspired by the immense, durable tree known for its rapid growth and expansive root system. It symbolises the company’s commitment to fostering financial growth and shared prosperity.
Sycamore version 1.0 and Bootstrapping
In 2019, with funds from family, friends and their LBS classmates, they launched a minimum viable product: a simple website powered by a white-labelled lending solution.
The big idea was to create a platform that matches individuals and businesses needing funds (borrowers) with people who had extra money to invest (lenders), bypassing traditional financial institutions like banks. Sycamore generates revenue through two primary channels: interest sharing from repaid loans and fees from facilitated transactions, including bill payments and transfers.
Akin-Moses’ living room doubled as the company’s first office for the first year. So when potential lenders asked to see the Sycamore office, they had to resort to using conference rooms in co-working spaces.
“Initially, we were barely scraping by, paying ourselves a meagre ₦50,000 stipend,” Okonji says. “We started very small with ₦50,000 and ₦100,000 transactions. But we knew that with each loan, we were making a difference.”
A selfie of the trio in Akin-Moses’ living room which doubled as the company’s first office for the first year. | Credit: Sycamore
As Sycamore gained traction, they received their first external investment of ₦10 million in 2020, a moment Okonji vividly remembers: “It was a Zenith Bank cheque! I took a picture with it and my cup of wine—it was a whole thing!”
This capital injection allowed Sycamore to secure its first office space in Surulere and expand its team.
In November 2020, Sycamore launched its USSD loan feature enabling users to obtain loans with USSD shortcodes, a valuable feature as its customer base expanded to include government workers.
Sycamore’s growth has been propelled by a dual strategy of scaling its operations and solidifying its underlying infrastructure.
The following year, the team recognised the limitations of their existing tech setup. “It felt like trying to weather a storm with a tiny umbrella,” Akin Moses says. “We needed a more flexible and scalable solution.”
After trying two core banking applications which weren’t satisfactory, Sycamore embarked on a journey to build their own core banking application, Sprout.
Launched in just five months, Sprout improved Sycamore’s operations, providing a tailor-made platform for loan management, customer profiling, and investment management.
2022 was a pivotal year for Sycamore. In March, the company launched its mobile app and virtual accounts, empowering users with greater flexibility and convenience. Soon after, the ‘Loan Friends’ feature was introduced, transforming the app into a social lending platform where users could seamlessly manage and track loans made to friends.
Loan defaults can pose a significant threat to lending institutions. However, Sycamore has maintained a remarkably low default rate by employing a rigorous risk analysis process. This process leverages advanced automation tools in conjunction with the insightful judgment of human analysts to effectively assess and mitigate risk.
As the company’s users grew, Sycamore expanded its footprint across Nigeria, establishing branches in over six states and creating workspaces and “hubs” as Okonji fondly calls them, for their growing team.
Over the past six years, Sycamore’s approach to customer acquisition has slowly evolved, Akin-Moses points out.
“We’ve seen our customer acquisition strategy transition from a traditional sales-led model to a more product-led approach. Leveraging our robust product offering, we’re now able to attract and retain customers through word-of-mouth referrals, targeted marketing campaigns, and self-service onboarding.” Akin-Moses says. “As we continue to enhance our product and brand reputation, we expect these channels to become even more significant drivers of future growth.”
SIML and the future
September 2024 marked a historic shift in the Nigerian stock market. For the first time in five years, retail investors outperformed institutional investors for three consecutive months.
It marked the culmination of domestic retail investors’ domination of the Nigerian stock market in 2024, trading ₦1.739 trillion as of September, a 96% surge from the previous year. In contrast, institutional investors experienced a 4.6% decline, trading ₦1.53 trillion.
Despite a rebound in the trading volume of institutional investors in the final quarter of last year, this rising tide of retail investor interest validates Sycamore’s strategic move into retail investment. A move that has been in the works since 2022 as a direct response to the increasing demand from its user base.
“As we successfully onboarded more High-Net-Worth Individuals (HNIs), we noticed a recurring theme in their requests: they wanted to invest in a broader range of assets, such as treasury bills, stocks, and bonds, beyond traditional lending options,” Akin-Moses says. “Some HNIs, looking to make substantial loans, even requested we had an investment [SEC] license before they could do business with us.”
Recognising the pressing need, Sycamore intensified its efforts to secure an SEC license, completing the requirements in the first quarter of 2023. Unfortunately, a subsequent change in government led to unforeseen delays, postponing the license issuance until July 2024.
Almost a year later, it’s opening its doors to the public with this new product offering that allows them access to local and international stocks and bonds. Sycamore is entering a crowded market, where it will compete with fintech upstarts like Risevest, Bamboo, and Piggvest, and traditional asset management powerhouses like Stanbic IBTC Asset Management, ARM, and Merristem. Despite the intense competition, the five-year-old startup remains confident in its ability to carve out a niche and succeed.
“We’re taking a deliberate, step-by-step approach to our entry into the asset management space. Rather than diving headfirst, we have a well-defined strategy to ensure a smooth and successful rollout of our offerings,” Magbagbeola says.
