M-KOPA Raises $250 Million+ in Debt and Equity to Strengthen its Asset Financing Platform
M-KOPA, the African asset financing platform that provides access to “productive assets” and enables customers to pay for them through digital micropayments, has raised over $250 million in new funding.
The funding includes $55 million in equity and over $200 million in debt, a significant amount for a growth-stage company in the current venture capital market.
M-KOPA has raised $245 million in equity funding since its establishment in 2011, including the $75 million in equity raised in March 2020. Sumitomo Corporation, a Japanese-based trading company, led the growth equity capital, investing $36.5 million.
M-KOPA’s CEO described Sumimoto as an investor whose long-term vision aligns with the company’s aspirations.
Blue Haven Initiative, Lightrock, Broadscale Group, and Latitude participated in the equity round alongside Sumimoto.
The firm expects that the partnership will have a positive impact on the financial and telecommunications sectors and enrich the lives of people across the continent.
In emerging markets, customers who are underbanked face a multitude of challenges due to their low-income, limited credit histories, and lack of conventional collateral. In developed markets, individuals have access to various credit options, thanks to the strong identity and credit scoring infrastructure.
This enables them to make large purchases through post-paid methods. However, in sub-Saharan Africa, where the majority of the population lives on less than $5.50 per day, making significant purchases without credit is challenging, and access to credit remains restricted.
Additionally, individuals in these markets have limited pre-existing financial identities and conventional collateral.
M-KOPA’s business model revolves around using debt to finance customers’ purchases of products and services such as smartphones and solar power systems, as well as loans and health insurance in Kenya, Uganda, Ghana, and Nigeria.
The business allows individuals to pay a small deposit for the two products mentioned above and then pay off their debt through micro-installments, which helps to build their credit history over time.
M-KOPA had previously received slightly over $100 million in working capital financing for this repayment cycle.
However, they have now doubled this amount with the new financing obtained. Standard Bank, which is Africa’s largest bank in terms of assets, provided half of the sustainability-linked debt financing of over $200 million.
The rest of the funding came from development financial institutions, including the IFC, FMO, and BII, and funds managed by Lion’s Head Global Partners, Mirova SunFunder, and Nithio.
In a TechCrunch interview, Moore mentioned that M-KOPA, with the help of the funding, which is one of the largest funding in African tech, will be able to double its customer base, currently at 3 million, in the existing markets.
The customer base has already seen an 85% CAGR from 2020 to 2022. M-KOPA is an asset financier that aims to extend its financial services offerings and product sets in addition to reducing greenhouse gas emissions in Kenya and Uganda, where its solar product is more widely used.
However, the company’s top priority is to continue promoting women’s financial inclusion in all its operations.
In 2020, when M-KOPA sold smartphones in Kenya, only about 30% of its customers were women. Two years later, the number has slightly increased to over 40%, but the company aims to reach over 60% women customers.
M-KOPA, a company dedicated to providing financial services to underbanked customers, has claimed to have given over $600 million in cumulative credit to its clients through a network of more than 10,000 agents.
During a call, Moore revealed that 52% of these agents are women, and the credit figure has now reached over $1 billion. M-KOPA’s pay-as-you-go model is unique because it starts by providing assets on a credit sale basis and then uses that relationship to cross-sell financial services via partnerships.
This approach has proven to be highly scalable, commercially sustainable, and has a significant impact on the financial inclusion problem in Africa.
Although there are other models aimed at tackling the financial inclusion problem, such as agency banking and community-based finance, M-KOPA’s approach stands out. According to Moore, the company’s success in East and West Africa, where it has sold over a million solar home systems and prevented 2 million tonnes of carbon dioxide emissions, speaks to the effectiveness of the pay-as-you-go model.
M-KOPA plans to expand its operations to South Africa, where it will open a pilot operation in the coming weeks.
Additionally, the company plans to explore electric mobility, starting in Nairobi. M-KOPA employs nearly 2,000 people across Africa.