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FairMoney, a leading digital bank headquartered in Paris and operating in Lagos, is reportedly in preliminary talks to acquire Umba, a digital bank specializing in credit services in Nigeria and Kenya. The potential acquisition, valued at $20 million in all-stock, underscores FairMoney’s strategic intent to broaden its reach, particularly in the Kenyan market. However, it also underscores the challenges confronting African fintech firms, with the proposed deal matching Umba’s total external funding.
Umba, founded in San Francisco in 2018 by Tiernan Kennedy and Barry O’Mahony, initially positioned itself as a credit-centric digital bank targeting emerging markets. Its product lineup includes loans, current accounts, savings accounts, fixed deposits, and bill payments, catering to clients in Nigeria and Kenya. The company has secured around $20 million in funding, with investors like Costanoa Ventures, Tom Blomfield (co-founder of Monzo), and Lux Capital contributing to its growth.
FairMoney, renowned for its lending services in Nigeria, has been exploring avenues for expansion beyond its home turf. With previous backing from investors such as Tiger Global and DST, FairMoney raised over $57 million, achieving a valuation of $400 million to $500 million following a recent bridge round. While it ventured into India in 2020, updates on its progress there have been scarce.
The potential acquisition of Umba aligns with FairMoney’s growth agenda, with a focus on leveraging Umba’s presence in Kenya. Negotiations are at an early stage, with both companies declining to comment. FairMoney’s expansion strategy has previously involved acquisitions, such as PayForce, a sub-brand of YC-backed Nigerian merchant payment service CrowdForce.
Umba, transitioning from a consumer-oriented digital bank to offering merchant financing and business banking products, recently secured a microfinance license in Kenya through its majority stake in Daraja Microfinance Bank. This license could prove pivotal for FairMoney, facilitating its entry into the Kenyan market by circumventing the complex licensing process.
While the potential acquisition of Umba may not solely hinge on user numbers, product offerings, or financial metrics, FairMoney could find strategic value in Umba’s microfinance license and established infrastructure in Kenya. Sources suggest that while Umba isn’t actively seeking a sale, it may find FairMoney’s offer compelling, given its financial strength and potential synergies between the two fintech firms.
As discussions progress, the outcome of the acquisition remains uncertain. However, it represents a significant development in the African fintech landscape, highlighting the evolving strategies of digital banks in the region. The synergy between FairMoney and Umba could pave the way for enhanced financial services and market presence in Nigeria and Kenya.
Source: Innovation Village