FairMoney explores $20m all-stock acquisition of Umba to expand presence in Nigeria and Kenya

FairMoney, a fintech credit-led in Nigeria acquires PayForce in a retail-merchant banking acquisition

FairMoney, a digital digital bank headquartered in Paris and based in Lagos, is in early-stage discussions for a $20 million all-stock acquisition of Umba, a credit-focused digital bank operating in Nigeria and Kenya. This move shows FairMoney’s interest in expanding its customer base, particularly in Kenya, amid the challenges faced by fintechs in Africa.

The potential deal closely mirrors the amount Umba previously raised from external investors. Both companies have yet to comment on the ongoing negotiations.

Umba, founded in 2018 in San Francisco, has garnered approximately $20 million in funding from investors like Costanoa Ventures, Monzo co-founder Tom Blomfield, and others. FairMoney, known for its lending services in Nigeria, aims for growth and diversification after entering India in 2020.

FairMoney’s evolution

FairMoney has also been expanding its product. The company’s app was originally launched as a digital lender in Nigeria six years ago. Since then, it has added other financial services, such as debit cards, transfers and payments. It says that it has over six million retail customers.

Its previous acquisitions have included PayForce, a sub-brand of YC-backed Nigerian merchant payment service CrowdForce, which it picked up in a cash-and-stock deal worth $15-20 million.

“We see ourselves as a retail bank, but the line between merchants and retail is often blurry,” FairMoney CEO Laurin Hainy told TechCrunch in an interview last year around the PayForce acquisition. “We’ve thought about the merchant space more and more, and we see a lot of potential synergies between what PayForce and we have built independently.”

Read More: PayForce by FairMoney, a new addition to the FairMoney family of financial solutions

Umba’s evolution

Umba, originally a retail-focused digital bank in Nigeria, expanded its services to include merchant financing and business banking in both Nigeria and Kenya. While Google Play shows over 1 million app installs, actual registered and active user figures remain undisclosed.

FairMoney’s potential acquisition of Umba might not hinge solely on user metrics or product range. Given Umba’s recent introduction of merchant and business-facing products, it’s unlikely to have gained substantial traction in a short period. The startup may be more interested in Umba’s microfinance license, acquired in 2022 through a majority shareholding in Daraja Microfinance Bank, enabling banking services in Kenya.

FairMoney eyes streamlined entry into Kenya through potential Umba acquisition

Navigating the stringent microfinance licensing process in Kenya, where only 14 licenses exist compared to Nigeria’s 600, FairMoney is considering the acquisition of Umba. This move could enable the startup to utilize Umba’s established infrastructure, potentially sidestepping the time-consuming licensing procedures that took Umba three years to complete.

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

Umba, after securing a $15 million Series A funding round at a $60 million valuation in February 2022, sought additional funding in December, concluding with a $1.55 million bridge round at a $25 million valuation, aligning with the startup’s offer.

Amid a tightening venture capital landscape in the fintech sector, mergers and acquisitions are becoming more prevalent. This potential acquisition of Umba could be its second deal in two years, following the trend of consolidation in the African digital banking space.

Read More: MyCredit Investments LTD (Fairmoney Nigeria) successfully completes N2.5b series 1 commercial paper issuance

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