An African fintech that has grown on the strength of a 30,000 strong team of direct sellers is heading to the lucrative sub-Saharan country. Now, M-KOPA, a pay-as-you-go financing platform serving 5 million Africans, is racing toward a milestone: surpassing $400 million in annual revenue by the end of the year.
The London-based fintech ended last year with 4 million customers and $248 million in ARR, making this jump particularly noteworthy given the difficult economic climate. With currencies depreciating against the dollar and consumer purchasing power squeezed by inflation, maintaining dollar growth in African markets has been an uphill battle. However, M-KOPA has not only met these conditions – it is thriving.
The 13-year-old company offers smartphones and other “productive goods” through flexible digital micropayments, where users pay daily based on the total cost of the item divided over 365 days. It says it has been profitable since last year in four countries: Kenya, Uganda, Nigeria and Ghana. South Africa, where it opened about a year ago, is the fastest growing market, chief commercial officer (CCO) Mayur Patel told TechCrunch in an interview.
The growth of M-KOPA comes with a caveat. Default rates, it said, are about 10% – slightly lower than regional bank rates but higher than US consumer lending rates. That raises questions about long-term sustainability. However, after ten years in the growing credit market in Africa, fintech believes it has shown how to benefit from those levels.
“Our loss rates have been remarkably stable over the past 4 years as the company has rapidly declined, with no change in the capital. “This is a testament to the fact that subsidized phones are a productive asset in people’s lives, and are an important part of how everyday earners generate income and participate in the digital economy,” the company said in a statement.
From an African financial inclusion and narrative perspective, however, M-KOPA’s metrics are notable. They prove that startups can create profitable models while catering to the 90% of adults in all of Africa’s emerging markets who earn daily income rather than regular wages.
Patel said M-KOPA’s revenue and profit growth depended on several factors. This includes improving pricing, expanding high-value markets with strong local currencies, such as South Africa, and reaching out to the unbanked (one million added in the last six months).
The company has also seen success because customers experience consistent payment plans (~ 12 payments per second) and products with the highest selling or best-selling value, such as microloans, electric bicycles, data bundles, and health insurance, based on the payment of consumers. Companies, including MAX and Tugende, offer similar services.
“We are proud of the nature of the business continuity. The first million customers we got were done in eight years. The fifth million we just logged in is just over six months old. Therefore, the business is now at a very strong level,” noted the CCO.
Meanwhile, the acceleration of user growth is fueled by the fintech’s optimization of its sales and distribution network. Patel says M-KOPA is now the largest direct sales company in Sub-Saharan Africa, with more than 30,000 active agents who go door-to-door, selling subsidized phones in their local communities, providing access to products that would otherwise be hard for people to access. .
Just four years ago, its sales force was only 3,000 strong. These agents are essential to the company’s business model: they not only sell and distribute devices, but set up payment schemes for those devices, taking the initial deposit of the product during the process.
M-KOPA’s extensive agent network and its recent smartphone integration business have significantly increased its smartphone sales in recent years. Since the launch of its assembly plant in Nairobi—the largest in sub-Saharan Africa—mid last year, the company has sold more than 1.5 million M-KOPA X-Series smartphones, which customers use to access other embedded digital services offered by third party providers.
It started with sunlight
However, M-KOPA did not start with smartphones. Initially, it made a name for itself with solar power systems, a vertical that has achieved over a million units sold since last year. Recently, Patel said, it ended this product line to focus on electric vehicles and use its experience to establish its smartphone assembly operations.
“Solar is always ingrained in our DNA and that’s part of the reason why we entered the local smartphone convention – something that many fintechs don’t normally do as our experience in renovating solar TVs and other similar products has provided the technology to get them off the ground. our assembly plant,” said Patel. “And although we have given up the solar lighting part of our business, we are putting our efforts into electric vehicles, which we think are very promising.”
In sub-Saharan Africa, where 85% of the population earns less than $10 a day, limited financial profiles and credit history, as well as a lack of collateral, make access to credit almost impossible, leaving many unable to make essential purchases. M-KOPA’s daily payment model allows customers to build credit history over time.
Smartphone customers pay between $25 and $30 upfront and around 50 to 60 cents daily over 12 months. The rise of high value products, on the other hand, is about the overall economic impact on the consumer. IM-KOPA says its customers save about 30% of their daily income when they buy electric bikes.
M-KOPA’s financial model emphasizes its role in expanding the African credit market, as well as the amount of debt used: $1.5 billion.
Supported by Sumitomo, Standard Bank, and various financial development institutions, M-KOPA raised $250 million last year, including nearly $200 million in debt financing. Earlier this year, it secured another $15 million loan. Although it is not yet certain whether the company plans to raise an equity round – which may lead to a single one – its $400 million operating valuation puts it among Africa’s largest fintechs by profitability.
“Part of our history during those 10 years of transformation is a company trying to find ways to serve customers better, squeeze more costs and deliver value. Another kind of broader story is about emerging markets and the daily earners where the companies that succeed in our markets are the ones who have figured out how to play the complex game, both with a lot of amazing world-class technology online but also with amazing offline distribution. and skills,” noted Patel.
