FairMoney pursues entry into Kenya and Nigeria through potential Umba acquisition

The potential acquisition comes amid a tightening venture capital landscape in the fintech sector, reflecting the trend of consolidation in the African digital banking space. This could be FairMoney’s second deal in two years, following the broader industry trend of mergers and acquisitions.
Image credit: Fairmoney

FairMoney, a digital bank headquartered in Paris and operating in Lagos, is currently in preliminary talks for an all-stock acquisition of Umba, a credit-focused digital bank in Kenya and Nigeria. The potential $20 million deal aligns with FairMoney’s strategy to expand its customer base, especially in Kenya, amidst challenges faced by fintechs in Africa.

Umba, founded in 2018 in San Francisco, has raised around $20 million from investors like Costanoa Ventures and Monzo co-founder Tom Blomfield. FairMoney, known for its lending services in Nigeria, is seeking growth and diversification after venturing into India in 2020.

FairMoney, initially launched as a digital lender in Nigeria six years ago, has evolved by adding financial services like debit cards, transfers, and payments. With over six million retail customers, FairMoney sees itself as a retail bank, emphasizing potential synergies in the merchant space.

Umba, originally a retail-focused digital bank in Nigeria, expanded its services to include merchant financing and business banking in Kenya and Nigeria. While the number of app installs exceeds one million on Google Play, actual registered and active user figures remain undisclosed.

FairMoney’s interest in acquiring Umba may extend beyond user metrics, possibly focusing on Umba’s microfinance license acquired in 2022 through a majority shareholding in Daraja Microfinance Bank, facilitating banking services in Kenya.

Navigating the stringent microfinance licensing process in Kenya, where only 14 licenses exist compared to Nigeria’s 600, FairMoney could benefit from acquiring Umba to leverage its established infrastructure, potentially avoiding time-consuming licensing procedures.

Although Umba wasn’t actively seeking a sale, FairMoney’s offer might be attractive, considering Umba’s recent financial performance, generating $335,000 in revenue but incurring $1.54 million in expenses between January and June 2023.

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