Umba, a Nairobi-headquartered digital financial institution with operations in Kenya and Nigeria, has raised a $5 million debt facility to develop its secured lending operations in Kenya, concentrating on car financing and small and medium enterprises (SME) loans. The transfer is a part of a broader shift by Kenyan neobanks from short-term, high-interest digital loans to focus extra on sustainable, long-term secured lending.
Star Robust Capital, a US-based asset administration agency, is the one participant within the deal, with Gahigiro Capital performing as transaction advisor. The deal is structured as debt reasonably than fairness (non-dilutive capital). The debt facility brings the corporate’s complete funding to $20 million.
Umba will use the contemporary capital to broaden merchandise which might be already revenue-generating, CEO Tiernan Kennedy instructed TechCabal. “That is revenue-generating capital, reasonably than runway-extending capital,” he mentioned.
Based in 2018, Umba launched in Kenya in January 2023 after buying a 66.6% stake in Daraja Microfinance in 2022, a deal that gave it a microfinance banking licence from the Central Financial institution of Kenya. Daraja targets SMEs and holds lower than 1% of the microfinance market share as of 2024.
In 2022, Umba raised $15 million in Collection A funding, led by Nubank executives, to assist enlargement to Kenya, Egypt, and Ghana. Up to now, it has solely launched in Kenya.
The corporate mentioned car financing has turn out to be a key a part of its Kenyan operations resulting from rising demand for autoloans in a rustic with over 5 million registered automobiles—up from 3.9 million in 2021.
“The car financing market is valued at round $17 billion,” Kennedy mentioned. “It’s now the biggest a part of our mortgage ebook in Kenya.”
In contrast to conventional banks, which depend on guide processes and paperwork, Umba provides digital onboarding, real-time verification, and quicker disbursement. Whereas the corporate hasn’t disclosed present figures, it claims its income grew sixfold in 2024 and expects to report a revenue in Kenya this yr.
Though unsecured digital loans have outlined a lot of the fintech sector, Umba is leaning into asset-backed merchandise. Different gamers within the logbook mortgage house embody Autochek, which additionally targets car house owners in Kenya with asset-backed credit score.
“Whereas many fintechs deal with high-interest, short-term unsecured loans, we’re constructing long-term buyer relationships by means of asset-backed merchandise,” Kennedy mentioned.
Umba has accomplished its senior management hiring in each Kenya and Nigeria, though it declined to call its incoming Kenya CEO forward of the official begin date. Co-founder Barry O’Mahony left the corporate in 2023.
Regardless of a rising development of fintechs which might be pursuing full banking standing after reaching key income milestones, Umba has no plans to use for a business banking licence in 2025. Moniepoint, a Nigerian fintech unicorn, is searching for such a licence from Nigeria’s central financial institution.
However Umba says it would proceed to function inside its present microfinance framework, which it sees as ample for scaling secured lending merchandise like car and SME loans in Kenya. “This [commercial banking licence] isn’t one thing we’ll be prioritising in 2025,” he mentioned.