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Umba Secures a $5 Million Debt Facility to Expand its Lending Operations in Kenya
Umba, a credit-led digital bank, has secured a $5 million debt facility from Star Strong Capital to expand its lending operations in Kenya. The fintech startup has experienced rapid overgrowth ever since its inception in Kenya, so this funding comes as a major boost. Umba wants to use the money to grow their loan capacity to meet the demand for financial services. This is especially so for vehicle financing and loans for small and medium-sized enterprises (SMEs).
Founded by Tiernan Kennedy and Barry O’Mahony, Umba launched operations officially in Kenya in 2022 after taking over Daraja Microfinance Bank. The acquisition gave Umba a competitive advantage as it holds one of the 14 microfinance bank licenses in Kenya, where new banking licenses have been stopped. Umba began operating as a full digital bank in April 2023 after transitioning from being a credit-focused platform. Now, it is offering fixed deposits, savings accounts and business savings accounts, making it an alternative to banks.
Tiernan Kennedy, the CEO of the company said that the launch of Umba has exceeded expectations for the Kenyan market. “Umba has exceeded expectations since it opened in April 2023. We are the only pure-play digital bank in the market trying to offer a better way to bank for Kenyans through speed, accessibility and tailored financial solutions.” Umba intends to grow its lending in Kenya with a fresh fund raise from Star Strong Capital.
Umba’s banking vision stands out in Kenya’s banking framework, which has embraced a dominance of mobile payments via M-PESA but lacks widely available digital banking. Umba operates a fully digital business through its mobile app, unlike conventional banks that have expensive branch networks. People can go to any of the agents to make deposits or withdraw money. This makes it easy for people to get banking services without the high costs of legacy banks.
To get more customers, Umba has over 5,000 agents in Kenya. These agents are also customers of Umba as they onboard new customers for Umba. For example, car dealership agents who help customers get financing for their vehicles receive their commissions in Umba accounts and are de facto customers of the bank. Most of Umba’s loans are for productive use such as vehicle financing and SME development. The financed vehicles belong to the company enabling it to reclaim them in default cases.
Umba’s credit is tied to the cars and vans they finance, unlike other loan providers in Africa who offer unsecured loans which lead to default. This helps Umba keep its default rates low. They also help cover the credit gap in Africa as new-age startups struggle to hold defaulters accountable. Umba maintains a model where their cars are co-owned with customers.
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Star Strong Capital founder and CEO Spring Hollis said, “We believe Umba is well-positioned with the innovative product and customer-oriented model to become a leading player in Kenya’s vibrant fintech economy. The fund will support their further growth and keep them at the forefront of enabling accessible and affordable financial solutions to underserved markets.”
While initially planning to expand to other African countries like Ghana and Egypt, Umba has now finalized its decision to only strengthen its presence in Kenya and Nigeria. There is still demand for its lending services which exceeds capacity and this makes the $5 million debt facility important to help scale operations. The company hopes to further its expansion in financing operations and increase its leading position in the African fintech sector through the raise and digital banking model.
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