From their origins as Lulalend, a pioneering digital lender, the fintech founded by CEO Trevor Gosling and CTO Neil Welman has evolved into a comprehensive digital business banking platform (Lula), consistently demonstrating innovation, agility, and a deep understanding of the unique challenges and opportunities faced by South African SMEs.
“We have evolved in leaps and bounds over the past 10 years. At heart though, our North Star has remained constant – to connect small businesses with the financial support and resources they need to thrive. SMEs drive our economy but they have lacked proper servicing by traditional lenders and this was the gap we identified when our company was first founded,” says Gosling.
Looking back
When Lulalend first began operating in 2015, it set about addressing the significant SME credit gap in South Africa that was estimated by the International Finance Corporation (IFC) at the time to be over $20bn annually. SMEs were underserved by traditional banks due to stringent criteria, lengthy approval processes, high hidden costs, and impersonal service.
“Our solution was a simplified and fully digital funding application process. Our AI-driven credit scoring algorithm leveraged alternative data sources for quicker and more accurate assessments of a business's health. This gave us the ability to disburse funds in hours which was a significant differentiator from traditional lenders,” says Gosling.
The Series A funding round in 2019 was a significant milestone and secured US$6.5 million from the IFC and Quona Capital. This early investment enabled growth and customer base expansion. Further scaling was made possible by a series B funding round in early 2023 with US$35m to use towards addressing the SME credit gap and increasing the size of the loan book.
“The funding was a sign that investors had confidence in our model and our potential to make an impact on the SME sector in South Africa. The capital helped us to invest in technology and talent, specifically to accelerate the rollout of our new digital business banking platform,” says Gosling.
In September 2023, the Lula banking platform was launched after the South African Reserve Bank (SARB) granted regulatory approval for the partnership (with Access Bank). This alliance was a strategic move, allowing Lula to evolve beyond just lending. This was South Africa's first all-in-one digital business banking solution dedicated to SMEs and gave small businesses the ability to open a business account online in minutes.
Gosling says it is important to understand the role that small businesses play in the South African economy and to grasp the enormity of the financial support they need.
“SMEs employ up to 60% of the private sector workforce and generate approximately 40% of the country's GDP. Our services directly support this vital sector,” he says.
Looking ahead
“South Africa's economy is poised for significant growth, offering a crucial boost for SMEs. However, to capitalise on this upturn, SMEs must adapt to emerging business trends, or risk reduced competitiveness, inefficient operations, and limited access to capital. This is where we come in,” says Gosling.
Despite recent economic headwinds like high interest rates and inflation, projections indicate a potential doubling of economic growth for SMEs in 2025.
Gosling says that to thrive, businesses need to focus on five key trends:
- Flexibility in financial services: Traditional banking is evolving. New financial tools and AI-driven insights offer smarter cash flow management and flexible services that scale with business growth, such as adaptable office spaces and logistics. SMEs should evaluate their processes to leverage these scalable solutions.
- Personalised funding options: Increased access to data is enabling lenders, including alternative funders and embedded finance providers, to offer tailored financing. This will make it easier for businesses, especially those historically underserved, to secure appropriate funding for growth and resilience. Maintaining financial records is crucial for securing these options.
- Mobile-first digital commerce: The digital economy is booming, projected to account for 15-20% of South Africa's GDP by 2025, driven by increased internet and mobile penetration. SMEs must invest in user-friendly, mobile-optimised e-commerce platforms to expand their reach nationally and internationally.
- Smoother digital payments: South Africa is moving towards a cashless economy by 2035. Adopting mobile wallets, QR code payments, EFT services, and contactless terminals is essential for SMEs to meet consumer demands and fully participate in the growing digital market.
- Investment in digital infrastructure and tech: Digital transformation is set to significantly contribute to GDP and job creation. Technologies like IoT, AI, and cloud computing offer SMEs opportunities to enhance efficiency, and customer experience, and automate tasks, increasing competitiveness. Assessing current digital capabilities and addressing skills gaps are vital steps, with cloud services offering a cost-effective entry point.
Ultimately, digitalisation is the driving force behind these trends. For SMEs to effectively capitalise on these opportunities, robust financial management and strategic investment in new technologies are paramount.
The future, says Gosling, will see an increased focus on more personalised funding options. For him, this indicates the rise in platforms such as Lula that leverage transaction and payment data to offer tailored financing solutions and move beyond rigid traditional bank criteria.
“Banks and fintechs will expand beyond conventional services to include digital tools for smart cash flow management, AI-driven insights, and flexible services. While cash is still used, more SMEs are adopting digital financial services to simplify checkout processes in both e-commerce and brick-and-mortar settings. The SARB's roadmap towards a cashless economy by 2035 reinforces this,” he says.
"Traditional lenders have historically underserved the SME market, unfairly hindering the growth of companies that make up the backbone of South Africa's economy. They require proactive support now more than ever.”
Gosling says the past 10 years has seen major shifts in the needs and demands of small business owners, and Lula has grown to keep pace with the changes.
“When we started Lula 10 years ago, funding for small businesses was slow and frustrating and mostly in the hands of traditional banks. Everything was paper-based, and it often took weeks to get an answer. Today it is completely different – access is faster and digital first, and companies like ours make alternative lending no longer just an option but rather the norm.
“Technology, APIs and smarter data have allowed for more accurate and fair credit decisions, and Lula has been at the forefront of that shift of using tech to open opportunities for businesses who were previously overlooked.”
As Lula celebrates 10 years of purpose-driven impact, we want to thank our customers and partners for being part of the Lula journey, says Welman. “Your trust has helped shape what Lula is today. Here’s to the next decade of impact together with you.”
Watch the 10th birthday story here:
