FairMoney eyes $20m all-stock Umba acquisition to expand - TechGyant

FairMoney eyes $20m all-stock Umba acquisition to expand in Nigeria, Kenya.

FairMoney-eyes-$20m-all-stock-Umba-acquisition-to-expand-in-Nigeria,-Kenya.

FairMoney, a digital bank based in Lagos and headquartered in Paris, is reportedly in talks to make an all-stock acquisition of Umba, a credit-focused digital bank operating in Nigeria and Kenya, for $20 million. This move demonstrates FairMoney’s interest in expanding its customer base, particularly in Kenya, amidst the challenges faced by fintechs in Africa.

Umba, founded in San Francisco in 2018, has already raised approximately $20 million in funding from investors such as Costanoa Ventures, Monzo co-founder Tom Blomfield, and others. However, both companies have yet to comment on the ongoing negotiations.

FairMoney has been expanding its product offerings since launching its app as a digital lender in Nigeria six years ago. It now offers other financial services, such as debit cards, transfers, and payments, in addition to its lending services and claims to have over six million retail customers. The company aims to continue its growth and diversification after entering the Indian market in 2020.

Previous acquisitions by FairMoney include PayForce, a sub-brand of YC-backed Nigerian merchant payment service CrowdForce, which it acquired in a cash-and-stock deal worth $15-20 million.

Umba, on the other hand, began as a retail-focused digital bank in Nigeria before expanding its services to include merchant financing and business banking in both Nigeria and Kenya. Although Google Play shows over 1 million app installs, the actual number of registered and active users remains undisclosed.

FairMoney’s potential acquisition of Umba might not entirely hinge on user metrics or product range. Given Umba’s recent introduction of merchant and business-facing products, it’s unlikely to have gained substantial traction in a short period. The startup may instead be interested in Umba’s microfinance license, acquired in 2022 through a majority shareholding in Daraja Microfinance Bank, enabling banking services in Kenya.

Navigating the stringent microfinance licensing process in Kenya, where only 14 licenses exist compared to Nigeria’s 600, FairMoney is considering the acquisition of Umba. This move could enable the startup to utilize Umba’s established infrastructure, potentially sidestepping the time-consuming licensing procedures that took Umba three years to complete.

Amid a tightening venture capital landscape in the fintech sector, mergers and acquisitions are becoming more prevalent. This potential acquisition of Umba could be its second deal in two years, following the trend of consolidation in the African digital banking space.

 

Also read: OX Delivers secures $1.5M grant for electric OX4 trucks in Rwanda.

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