KAFENE, a lease-to-own company that caters to underbanked consumers without access to conventional financing, has made $18 m in Series B financing.

Neal Desai, CEO of Kafene, explains that his company’s model differs from the buy now, pay later (BNPL) approach. The CEO claims that Kafene’s BNPL approach is debt-free. In his opinion, BNPL is more beneficial for “luxury” purchases, and lease-to-own is primarily used for “essential” purchases.

According to Kafene’s model, the main consumer will likely choose BNPL, while the credit-challenged consumer will typically opt for lease-to-own.

The model chosen by Kafene aims to provide financially-constrained customers with a choice to make more significant purchases. Kafene collaborates with small and medium retailers to offer them lease-to-own options.

Here’s how Kafene’s model works: Kafene purchases a product on behalf of consumers and provides it on a twelve-month rental basis. If the consumer makes all the payments, they get to own the product. Kafene encourages earlier payments with discounts and reclaims the product when the consumer fails to make payments.

The customer’s credit score increases when they pay off the loan before the 12-month period, and Kafene notes that the customers are good payers. If they return the item mid-agreement, their credit score will not be affected. However, the customer’s credit will suffer if they stop making payments without returning the item.

When a consumer returns an item, Kafene pays infrastructure and delivery companies to collect it nationwide. The company will later deploy its resale and disposal mechanisms to monetize or write off the item.

Kafene plans to use the amount raised to increase the number of employees to reach out to more customers. Headquartered in New-York, Kafene currently has 100 employees and does business with about 1,000 retailers across the US.

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