According to a 2019 World Bank report, 85 per cent of Africans live on less than $5.50 per day. Many of these adults are unbanked or underbanked, which means they don’t have access to credit and can’t afford major purchases outright.
Since its inception as an energy provider in 2011, M-financing KOPA’s platform has proven beneficial to this group of users. The company, which allows underbanked customers in select African markets to access a wide range of products and services without the need for collateral or a guarantor, announced today that it had raised $75 million.
M-fifth KOPA’s equity round is referred to as the “growth equity round” in its press release (it has raised similar rounds of debt, too). M-KOPA also raised a total of $190 million in equity.
Previous backers such as the CDC Group, LGT, Lightrock, LocalGlobe’s Latitude Fund and HEPCO Capital Management participated in this round. Generation Investment Management and Broadscale Group led the growth equity round.
Jesse Moore, co-founder and CEO, leads the company. M-KOPA is best known for its pay-as-you-go (PAYG) financing model, allowing customers to gradually acquire ownership of appliances by making an initial deposit followed by flexible micro-payments.
M-KOPA began with solar-powered home systems aimed at low-income and rural customers in Kenya, Tanzania, and Uganda who lacked access to electricity. It has, however, expanded its pay-as-you-go model to include other needs, such as smartphones (which were introduced in Kenya two years ago), TVs, refrigerators, solar lighting, and digital financial services such as cash loans and health insurance.
The geographical scope of the company has also shifted. M-KOPA was heavily focused on East Africa six years ago, but after pulling out of Tanzania, it is now present in Kenya, Uganda, Nigeria, and Ghana.
Customers in the company’s more established markets, Kenya and Uganda, have access to the full suite of M-offerings. KOPA’s Customers in the company’s other two newer markets, however, are currently only eligible for smartphone financing, executives told TechCrunch. The simple reason is that people need smartphones more than solar systems, as evidenced by M-numbers KOPA’s as of July last year, which had already sold 500,000 smartphones in 18 months, half the units solar systems managed in ten years.
“At the moment, when we launch in new markets, we begin with a single product, smartphone financing.” We have a broader portfolio of products in our more mature markets, but to enable rapid scale-up and early execution in a new market, we start with device financing,” M-KOPA COO Mayur Patel explained.
M-KOPA has over 50,000 customers in Nigeria since its launch, according to the company’s executives. They claim that Ghana, its newest market, “has grown twice as fast as any of its previous markets.”
M-KOPA intends to launch in one new market this year and in 2023 as part of its growth plans, supported by this recent funding. The ten-year-old company wants to expand its offerings in Nigeria in the second half of this year and Ghana in the first quarter of 2023.
The platform matches fractional payment terms with customers’ daily or weekly earning and spending cycles to provide financing and digital financial services to underbanked consumers across four markets.
Its customers range from ride-hailing drivers to small kiosk owners who run their businesses using smartphones. However, in a market where a sizable number of adults earn less than $5 per day, a $100 smartphone is a luxury.
With M-KOPA, these customers can get the smartphone for a low-down payment or a small deposit of $30. Consumers’ earnings vary depending on the type of business they are in; however, they are all required to pay between 30 cents and $1 (or its equivalent across all markets) daily to offset the remaining costs at an average monthly interest rate of 3.1 per cent.
“Another important aspect of our model is that it is very inclusive in terms of who can qualify.” As you know, most credit instruments have several restrictions in terms of screening, collateral, or a guarantor, and this is a limiting factor for so many people when it comes to financial inclusion,” said Moore, the CEO.
“Everyone is welcome with M-model.” KOPA’s There is no upfront scoring; if you can pay the deposit, that is all we ask. And then you’re in a relationship where consumers can get solar systems or smartphones that, regardless of the market, whether you’re in Lagos or semi-urban Nairobi, they can use right away to improve their businesses.”
The pandemic boosted M-business KOPA’s and, when combined with a shift in strategy that included the introduction of smartphone financing, drove customer base and hiring to new heights.
While it took M-KOPA about eight years to reach its first million customers, it only took 18 months to get its second million, which it recently surpassed. CEO Moore stated that the company’s customer base is expected to reach 3 million in the next nine months, after nearly doubling from 2020 to 2021.
M-KOPA claims that it has created thousands of “income-earning jobs” in the last two years while adding over 500 full-time positions across its four markets.
Its on-the-ground team, which M-KOPA refers to as its sales force, has also more than doubled. M-KOPA had 2,500 active sellers at the start of 2020, before COVID. By 2020, that figure will have more than doubled to 5,000. Then, in 2021, to 10,000. Moore stated that his company intends to double that number to 20,000 by the end of this year.
M-KOPA claims to have secured more than $600 million in financing for its 2 million underbanked customers across its markets to date.
“We are enabling customers who would not otherwise be able to access that kind of support to then plough that backs into productive assets that are helping them generate more income in their lives,” Patel explained.
“When we go back to our customers, which we do regularly, and ask them how they use the products or services, more than 30 per cent of them tell us they use it to generate additional income and support their livelihoods.”
M-KOPA operates in a tense pay-as-you-go market. Yes, other companies, such as PEG Africa and Bboxx, offer this model for solar systems; however, few cross-sell other services to customers in the same way that M-KOPA does. However, companies like SafeBoda, Asaak, and Tugende (like M-KOPA except for the solar systems) are very active in niche cases, providing smartphone and motorcycle financing to riders.
However, there is a bigger picture for the Kenya-based company than asset financing. The new investment will enable M-KOPA to scale financial services products such as health insurance, cash loans, and BNPL merchant partnerships, allowing it to expand its flexible daily and weekly payment model. In addition, M-KOPA intends to spend heavily to strengthen its customer relationships and technology.