M-KOPA accused of racial discrimination in share structure, court petition reveals

M-KOPA, a UK-headquartered fintech company operating across Africa, is embroiled in a legal battle following allegations of embedded racism in its employee share structure.

A former employee, Elizabeth Njoki, who worked at M-KOPA Kenya from 2012 to 2023, has filed a petition in Kenya’s Employment and Labour Relations Court, accusing the company of systematically disadvantaging African staff while favouring expatriate and white employees.

The case, detailed in court documents obtained by Kenya Insights, has raised questions about the practices of “impact investors” and corporate accountability in Kenya’s tech sector.

According to the petition, M-KOPA restructured its employee share ownership in 2019, introducing “Growth Shares” with significant benefits, including buyback rights, preferential pricing at $1 per share, access to company information, and guaranteed exits at fair market value.

Of the first 48 recipients, only seven were of African descent, and a subsequent round excluded Kenyan employees entirely. African staff reclassified as “Minor Holders,” were denied voting rights and access to shareholder meetings, with their Ordinary Shares diluted from 27% to 7% without their knowledge or consent.

The restructuring allegedly stemmed from a 2019 board decision to protect major investors, including British International Investment (BII) and Generation Investment Management, from share dilution after Treehouse Investments converted debt into new shares.

Court documents reveal that Growth Shares increased from zero to over 3.3 million between 2019 and 2022, while Preferred Shares grew from 3.4 million to 12.6 million.

A 2021 recapitalisation, described as a “sham” in the petition, used outdated benchmarks to suppress M-KOPA’s valuation, rejecting comparisons with competitors like Tala. This enabled further share reallocations favouring Growth Shareholders.

Njoki alleges she faced threats when seeking clarification about her share options, including being labelled a “bad leaver,” which would disqualify her from receiving shares.

“I was silenced for asking questions,” Njoki stated in her petition.

M-KOPA, represented by Anjarwalla & Khanna LLP, has sought to dismiss the case, arguing that shareholder disputes should be heard in English and Welsh courts and that no employment relationship exists between Njoki and M-KOPA Holdings. The company has declined to comment on the allegations, citing ongoing legal proceedings, according to Kenya Insights report.

M-KOPA, founded in 2011 by Jesse Moore, Nick Hughes, and Chad Larson, has raised $411 million and extended over $1.5 billion in credit to 5 million customers across Kenya, Nigeria, Ghana, Uganda, and South Africa.

Its pay-as-you-go model for smartphones and solar kits has earned it recognition, including a ranking among Africa’s fastest-growing companies by the Financial Times. However, the petition challenges the company’s image as a socially responsible fintech, accusing it of perpetuating inequity under the guise of financial inclusion.

Potential consequences if M-KOPA is found guilty

If the court rules against M-KOPA, the company could face significant repercussions. A guilty verdict on charges of racial discrimination and unfair share practices may require M-KOPA to pay substantial compensation to affected employees, potentially in the millions, alongside legal fees.

The court could mandate a restructuring of the share scheme to grant equitable access to African staff, diluting existing investors’ stakes and straining ties with BII and other backers.

Financially, M-KOPA’s $750 million annual revenue and $411 million in funding could come under pressure, and investors could withdraw support due to reputational damage.

In Kenya, where M-KOPA serves a significant portion of its 5 million customers, public backlash could erode trust, impacting sales of smartphones and solar kits. Regulatory scrutiny from bodies like the Central Bank of Kenya may intensify, with potential fines or stricter oversight.

The case could also trigger similar lawsuits in M-KOPA’s other markets, including Nigeria, Ghana, Uganda, and South Africa, amplifying legal and financial risks.

Globally, a guilty verdict would tarnish M-KOPA’s partnerships with Safaricom and Mastercard, undermining its standing in the fintech ecosystem.

The outcome of the case, still pending in court, could set a precedent for how African startups address equity and accountability, forcing M-KOPA to reform its practices or risk losing its market position.