The capital injection includes USD 55 million in equity and over USD 200 million in debt. Following the USD 75 million in equity the Kenyan-based fintech announced in March 2023, M-KOPA has raised USD 245 million in equity funding since its inception in 2011.
Underbanked customers in emerging markets face challenges due to low-income, limited credit histories, and lack of collateral. Strong identity and credit scoring infrastructure in developed markets enables various credit options, allowing individuals to make large purchases through post-paid methods. However, in sub-Saharan Africa, where 85% of the population lives on less than USD 5.50 per day, making major purchases without credit is difficult, while access to credit remains limited, as per the press release. Also, in these markets, individuals have limited pre-existing financial identities and conventional collateral.
M-KOPA’s business revolves around using debt to finance customers’ purchase of products and services it sells, such as smartphones and solar power systems, as well as loans and health insurance across four markets: Kenya, Uganda, Ghana, and Nigeria. With its flexible credit model, the business allows individuals to pay a small deposit for the two products above and pay off through micro-instalments, helping build their credit history over time. Default rates are little above 10%.
Until now, M-KOPA had received a little over USD 100 million in working capital financing for this repayment cycle. It has doubled that amount with this new financing. Standard Bank, one of Africa’s largest bank in terms of assets, provided half of the USD 200 million+ ‘sustainability-linked’ debt financing. Development financial institutions — the IFC, FMO and BII and funds managed by Lion’s Head Global Partners, Mirova SunFunder, and Nithio — supplied the rest.
Company officials stated that this funding will allow M-KOPA to double the size of its now 3-million-strong customer base in existing markets (a metric which already witnessed an 85% CAGR from 2020 to 2022.)
The asset financier also intends to extend its financial services offerings and product sets and reduce greenhouse gas emissions in Kenya and Uganda, where its solar product is more prominent. However, what remains a top priority for the company is to continue to drive women’s financial inclusion across its operations (in 2020, when M-KOPA sold smartphones in Kenya, about 30% of its customers were women. Two years later, it stands slightly over 40% but the objective is to reach over 60%, company executives noted.)
In addition, in 2022, M-KOPA claimed to have provided over USD 600 million in cumulative credit for its underbanked customers via a network of over 10,000 agents, of which 52% are women, and the credit figure now touches over USD 1 billion.
Given its success in East and West Africa, where it has sold over a million solar home systems and helped avoid 2 million tonnes of carbon dioxide emissions, M-KOPA will now set its sights on South Africa, where the company is ready to open a pilot operation in the near future. Electric mobility is also a category the 10-year-old asset financier, which directly employs nearly 2,000 people across Africa, plans to test out, starting in Nairobi.
M-KOPA’s representatives said that there’s a large demand for life-enhancing products like smartphones and solar systems, which are difficult to afford, but they’ve made them affordable and accessible to their customers. Their next category in R&D right now is electric motorcycles. They’re excited about electric mobility and they’re sure that in the next couple of decades, there will be a big switch in ownership where electric motorbikes will scale when there’s financing to go with them.
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