Solar start-up raises $250 million in one of Africa’s largest tech fundraisers

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M-Kopa, who pioneered a pay-as-you-go model for solar panels and smartphones in East Africa, has raised more than $250 million in debt and equity in one of the largest fundraisers ever of an African tech start-up.

The money will allow the company, founded in Kenya in 2011, to acquire up to 100,000 new customers a month, according to Jesse Moore, chief executive officer of M-Kopa.

Standard Bank is lending $100 million of the $202 million in debt, which can be drawn as M-Kopa attracts new customers. Other lenders include International Finance Corporation, with $65 million; Lion Head’s Group, a front-market investment bank; and British International Investment, the UK’s development finance institution.

Sumitomo Corporation, which acquired a $5 million stake in 2018, is investing an additional $36.5 million, the first in a $55 million equity component of the total fundraising package.

M-Kopa expanded from its base in East Africa to Nigeria in 2021 and most recently set up operations in Ghana. It is testing the market in South Africa and is also conducting pilot projects to finance electric motorcycles as part of a new e-mobility strategy.

The firm extends credit to customers who are underbanked or have little or no credit history. Customers pay a small deposit and repay loans via micropayments, often per day, using mobile money technology also pioneered in Kenya.

Non-refunding customers’ equipment can be disabled remotely. Those who pay back on time can switch to other financial products, including digital loans and health insurance.

Moore said default rates were around 10 percent — high by banks’ standards, but low enough to run the business at or near profit, though he admitted economic conditions had been tough recently. .

“We are clearly in a difficult moment right now,” he said. “We have high levels of inflation. And then there’s the currency devaluation.” However, she added, credit quality has actually improved over the past 15 months.

“In this current environment, it’s no longer a growth-at-all-costs mindset,” he said. “It’s important for investors to see a clear path to profitability and profitable growth, which we are definitely on the road to.”

Aubrey Hruby, co-founder of the Africa Expert Network and early-stage investor in African companies, said most tech start-ups on the continent gravitated towards financial products where securing affordable credit was the name of the game. “Debt or access to cheap credit is jet fuel for . . . their growth,” he said.

The new money would allow M-Kopa to retire existing debt and bring its loans into a streamlined structure, said Nick Riley, corporate finance solutions at Standard Bank.

The debt was being extended on a “sustainably linked basis,” he said, as part of Standard Bank’s ESG pledges.

Under the loan agreement, interest payments go down if M-Kopa meets certain goals on reducing carbon emissions through replacing kerosene with solar energy and empowering women by providing smartphones to women, Riley said.

While M-Kopa has described itself as an asset finance platform, it is also tentatively moving into hardware, opening its first smartphone production line in Kenya in January after the government hiked tariffs on imported phones.

The company gets its electric motorcycles from a variety of suppliers including Roam, a Swedish manufacturer based in Nairobi.

M-Kopa says it has served more than 3 million clients and has extended cumulative credit of more than $1 billion.

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