An African fintech that has grown with a team of 30,000 direct sellers is marching toward profits in country after sub-Saharan country. Now, M-KOPAThe pay-as-you-go asset financing platform that serves 5 million unbanked Africans, is moving towards a major milestone: surpassing an annual revenue rate of $400 million 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 notable given the tough economic backdrop. With currencies plummeting against the dollar and consumer purchasing power reduced by inflation, maintaining dollarized growth in African markets has been an uphill battle. However, M-KOPA has not only withstood these conditions: it is thriving.
The 13-year-old company offers smartphones and other “productive assets” through flexible digital micropayments, where users pay daily based on the total cost of the item divided over 365 days. It claims to have achieved profitability since last year in four countries: Kenya, Uganda, Nigeria and Ghana. South Africa, where it opened about a year ago, is its fastest-growing market, chief commercial officer (CCO) Mayur Patel told britcommerce in an interview.
M-KOPA’s growth comes with a caveat. Non-payment rates, he stated, are around 10%, slightly lower than the regional bank averages but higher than US Consumer Lending Benchmarks. This raises questions about long-term sustainability. However, after a decade in Africa’s growing credit market, fintechs believe they have shown how they will benefit from those rates.
“Our loss rates have been remarkably stable over the past 4 years as the company has grown rapidly, regardless of changes in the macro environment. “This is a testament to the fact that financed phones are a productive asset in people’s lives and a key part of how everyday earners generate their income and participate in the digital economy,” the company said in a statement.
However, from the perspective and narrative of Africa’s financial inclusion, M-KOPA’s metrics are noteworthy. They demonstrate that startups can build profitable models while serving the 90% of adults in Africa’s emerging markets who earn daily incomes rather than regular salaries.
Patel said M-KOPA’s revenue growth and profitability is due to several factors. These include better pricing, expansion into higher value markets with stronger local currencies, such as South Africa, and reaching more unbanked people (1 million added in the last six months).
The company has also found success by consistently meeting their payment plans (~12 payments per second) and upselling or cross-selling higher-value products, such as microloans, e-bikes, data packages, and health insurance, in based on consumer payments. Companies including MAX and Tugende offer similar services.
“We are proud of the type of business continuity. The first million customers we acquired were achieved in eight years. The fifth million that we have just incorporated arrived in just over six months. Therefore, the business is now on a very strong expansion trajectory,” commented the CCO.
Meanwhile, the acceleration of user growth is driven by the fintech’s optimization of its sales and distribution network. Patel says M-KOPA now runs the largest direct sales force in sub-Saharan Africa, with more than 30,000 active agents going door-to-door, selling financed phones in their local communities, providing access to products people would otherwise have difficulties to achieve. .
Just four years ago, its sales force was only 3,000 people. These agents are central to the company’s business model: they not only sell and distribute the devices, but they also set up payment schemes on those devices, collecting the initial deposit for the product in the process.
M-KOPA’s extensive agent network and its recent foray into smartphone assembly have significantly boosted its smartphone sales in recent years. Since launching its Nairobi-based assembly plant, which it touts as the largest in sub-Saharan Africa, mid-last year, the company has sold more than 1.5 million of its M-KOPA -Series, which customers use to access other integrated digital services provided through third-party providers.
It started with a ray of sunshine
However, M-KOPA didn’t start with smartphones. It initially made a name for itself with solar energy systems, a vertical that achieved over a million units sold as of last year. More recently, Patel said, it phased out this product line to focus on electric vehicles and use its operational know-how to set up its smartphone assembly operations.
“Solar energy remains ingrained in our DNA and is partly why we were able to venture into local assembly of smartphones, which is unusual for many fintechs, as our experience in refurbishing solar-powered televisions and similar products provided the operational expertise to set up our assembly plant,” Patel said. “And although we have phased out the solar lighting segment of our business, we are channeling our efforts into electric vehicles, which we believe is very promising.”
In sub-Saharan Africa, where 85% of the population earns less than $10 a day, limited financial profiles and debt histories, coupled with a lack of collateral, make access to credit nearly impossible, leaving many unable to make essential purchases. M-KOPA’s daily payment model allows customers to build credit histories over time.
Smartphone customers pay $25 to $30 upfront and 50 to 60 cents per day for 12 months. Meanwhile, the argument for higher value products is in terms of overall economic impact on the buyer. M-KOPA claims that its customers save around 30% of their income daily when purchasing their electric bikes.
M-KOPA’s financing model underlines its role in expanding Africa’s credit market, as does the cumulative credit it has deployed: $1.5 billion.
Backed by Sumitomo, Standard Bank and several development financial institutions, M-KOPA raised $250 million last year, including approximately $200 million in debt financing. Earlier this year, it took on an additional $15 million in debt. While it remains uncertain whether the company plans to raise a round of capital, one that could potentially push it into unicorn territory, its $400 million run rate places it among Africa’s largest fintechs by revenue.
“Part of our story throughout that 10-year revolution is of a company trying to find ways to better serve customers, eliminate additional costs and deliver value. The other type of broader story has to do with emerging markets and everyday earners, where the successful companies in our markets are those that have really figured out how to play a sophisticated game, both through incredible online technology of class worldwide as well as incredible offline distribution. and capabilities,” Patel commented.