Umba, formerly Mkopo Kaka has raised an undisclosed equity financing round led from ACT Venture Capital, Frontline Ventures and Bloom Equity to lend up to €1 million a month to consumers in Kenya where it operates.
The Nairobi-based fintech startup founded former Irish rugby professional Barry O’Mahony and his co-founder Tiernan Kennedy also aims to use the funds to expand to more markets in Africa to provide micro-loans to Africa’s unbanked population.
According to the World Bank, there are about 440 million unbanked adults in developing economies with over 125 million in Sub-Saharan Africa and 105 million in South Asia. The report also adds that up to 2 billion poor adults remain excluded from the financial system, with unmet needs and untapped market potential.
With over 170,000 customers in East Africa, Umba, which offers loans between $2.5 to $700 via its smartphone app aims to solve this problem. Umba allows users to apply, drawdown and repay loans directly from their smartphone or desktop computer. Once an individual is verified, it makes lending decisions based on an assigned risk rating.
“We are attempting to solve one of the biggest problems in the world. Over 2.4bn people are currently either underserved by the banking system or completely unbanked. Many have no regular income and no access to legitimate financial products,” the firm says on its website. “Developing markets are going through a huge amount of change, much of which is being driven by increased technology availability. We are seeing unprecedented uptake in smartphone penetration in Africa. This growth is largely driven by the increased availability of low end cheap Android phones. This increased smartphone penetration brings a huge amount of possibilities with it. “
With smartphone penetration growing by leaps and bounds in Africa due to the presence of cheap Android smartphones going for as little as $50, and the increasing use of mobile money in Kenya, Uganda, and Tanzania, Umba aims to grow its user base and offer them cheaper loans than the competition.
Umba aims to expand across Africa and help the next 2 billion people in emerging markets to build their creditworthiness and join the formal financial world.
“At Umba, we’re breaking new ground – which means we’re part of a financial revolution in emerging markets – traditional banking doesn’t work – move over for the next generation of financial services,” said the firm. “With Umba, we have recognized that traditional banks can’t serve the majority of emerging markets. With no formal credit score, many people have an inability to raise credit – until now. We are committed to helping the people the banks ignore.”
The firm uses smartphone data to risk model users creating a new opportunity for the worlds unbanked to move towards safe, formal sources of credit. The firm uses machine learning to understand its customers’ needs and applies an algorithmic approach to determine credit worthiness using smartphone data. This enables customers with no credit history to get a foot on the financial ladder and start building for the future.
Umba loans vary from $2.5 to $700. The app has zero late or rollover fees and a monthly interest of between 1% – 15% for repayment between 4 – 68 weeks.
Umba is not operating in a vacuum as East Africa has companies such as Tala, Branch Safaricom’s M-Swhari, KCB M-Pesa among others.