African Financing Platform, M-KOPA, Secures $75 Million

M-KOPA, a financing platform that gives Africans access to financial products and services without having a strong credit history, collateral or guarantor, has raised $75 million from investors. M-KOPA highlighted the round as its “growth equity round” in its press statement. The round which is its fifth equity round brings the total equity raise of the company to $190 million.

This recent round was led by Generation Investment Management and Broadscale Group and saw previous backers – CDC Group and LGT Lightrock, alongside LocalGlobe’s Latitude Fund and HEPCO Capital Management, participate in the round.

M-KOPA when it started offered solar-power home systems which were mostly targeted to low-income earners and people living in rural areas without electricity in Kenya, Tanzania and Uganda. Over the years, the platform has extended its offerings to include smartphones, TVs, Refrigerators, solar lighting and digital financial services including credit facilities and health insurance. Its pay-as-you-go (PAYG) financing model allows customers to pay an initial deposit to acquire appliances and pay the rest via instalments.

When it started, it was mainly focused on East Africa but today it is present in Kenya, Uganda, Nigeria, Ghana and pulled out of Tanzania where it once operated.

While users in Kenya and Uganda can access M-KOPA full range of products and services, users in Nigeria and Ghana can only access financing for smartphones. While these markets are newer, M-KOPA’s executives explain that there is a huge need for smartphones in these countries.

M-KOPA’s COO Mayur Patel explained that “At the moment when we launch in our new markets, we start with one product which is our smartphone financing. We obviously have a broader portfolio of products in our more mature markets, but to enable a rapid scale-up and to facilitate the early execution in a new market, we start just on the device financing”.

The company is recording impressive numbers in its newer markets. In Nigeria, it has acquired more than 50,000 customers since its launch and says its Ghanaian market “has grown two times as fast as any of its previous markets”.

M-KOPA focuses on underbanked people in rural areas. Its payment plans are dependent on how customers earn and spend.

The company is looking at expanding its offerings in Nigeria and Ghana, as well as launching in one new market this year and next year. Its customers include ride-hailing drivers and small business owners who are requiring smartphones to run their businesses.

Speaking on the company’s business model, Chief Executive Officer Jesse Moore said that “With M-KOPA’s model, everybody is welcome. There’s no upfront scoring; if you can pay the upfront deposit, that’s all we require. And then you’re into a relationship where consumers can get the solar system or smartphones which irrespective of the market, whether you’re in Lagos or semi-urban Nairobi, can immediately put those to enhance their businesses”.

 “The other thing that is important to know about our model is it’s very inclusive in terms of who can qualify. So as you know, most credit instruments have a number of restrictions in terms of screening or collateral or a guarantor, and that’s the limiting factor for so many people when it comes to financial inclusion”, he added.

Between 2020 and 2021, M-KOPA recorded growth of 2.5x in its user base. The company’s CEO forecasts reaching its first 3 million users in the next nine months. While it took the company about eight years to hit its first 1 million users, it took 18 months to get to its second and now, it forecasts getting to its third at a lesser time.

M-KOPA says it has created thousands of jobs and currently has 500 full-time positions across its four markets. It now has an active seller base of 10,000 from 2,500 pre-covid to 5,000 at the end of the year and 5,000 from 2021.

The funds will be pushed into expanding its offerings and strengthening its position in its existing market.