M-Kopa, which pioneered a pay-as-you-go-model for solar panels and smartphones in east Africa, has raised more than $250mn in debt and equity in one of the largest fundraisings by an African technology start-up.
The cash will allow the company, founded in Kenya in 2011, to acquire up to 100,000 new customers a month, according to Jesse Moore, M-Kopa’s chief executive.
Standard Bank is lending $100mn of the $202mn in debt, which can be drawn down as M-Kopa attracts new customers. Other lenders include the International Finance Corporation, with $65mn; Lion Head’s Group, a frontier market investment bank; and British International Investment, the UK’s development finance institution.
Sumitomo Corporation, which took a $5mn stake in 2018, is investing a further $36.5mn, the lead in a $55mn equity component of the total fundraising package.
M-Kopa expanded from its east African base to Nigeria in 2021 and has more recently started operations in Ghana. It is testing the market in South Africa and also running pilot projects to finance electric motorbikes as part of a new e-mobility strategy.
The company extends credit to customers who are underbanked or have little or no credit history. Customers pay a small deposit and repay loans through micropayments, often daily, using the mobile money technology also pioneered in Kenya.
The equipment of customers who do not repay can be deactivated remotely. Those who pay back on time can graduate to other financial products, including digital loans and health insurance.
Moore said default rates were about 10 per cent — high by banks’ standards, but low enough to run the business at or near profit, although he conceded that business conditions had been difficult recently.
“We’re clearly in a tough time right now,” he said. “We’ve got high levels of inflation. And then you’ve got currency devaluation.” Still, he added, credit quality had in fact improved over the past 15 months.
“In this current environment, it is no longer a growth-at-all-cost mentality,” he said. “It is important to investors to see a clear path to profitability and profitable growth, which we are very much on the pathway towards.”
Aubrey Hruby, co-founder of the Africa Expert Network and an investor in early stage African companies, said most tech start-ups in the continent gravitated towards financial products where the name of the game was to secure affordable credit. “Debt or access to cheap credit is jet fuel to . . . their growth,” she said.
The new money would allow M-Kopa to retire existing debt and bring its borrowings under a simplified structure, said Nick Riley, corporate finance solutions at Standard Bank.
Debt was being extended on a “sustainably linked basis”, he said, as part of Standard Bank’s ESG commitments.
Under the loan agreement, interest payments fall if M-Kopa meets certain targets on carbon reduction through replacement of kerosene fuel with solar power, and female empowerment by supplying smartphones to women, Riley said.
Although M-Kopa has described itself as an asset finance platform, it is also moving tentatively into hardware, opening Kenya’s first smartphone production line in January after the government raised duties on imported phones.
The company gets its e-motorbikes from a variety of suppliers including Roam, a Swedish manufacture based in Nairobi.
M-Kopa says it has provided services to more than 3mn customers and has extended cumulative credit of more than $1bn.
