FairMoney, a digital bank headquartered in Paris and operated in Lagos, is in early talks to acquire Umba, a credit-focused digital bank that operates in Nigeria and Kenya, for $20 million in shares. This initiative demonstrates FairMoney’s desire to grow its customer base, notably in Kenya, despite the hurdles that fintechs confront in Africa.
Both firms have yet to comment on the continuing conversations. Umba, started in 2018 in San Francisco, has raised around $20 million from investors including Costanoa Ventures, Monzo co-founder Tom Blomfield, and others. FairMoney, recognized for its loan services in Nigeria, plans to expand and diversify after entering India in 2020.
FairMoney has also been increasing its offerings. Six years ago, the business launched its app in Nigeria as a digital lender. It has since expanded its financial offerings to include debit cards, transfers, and payments. It claims to have more than six million retail customers.
Its earlier acquisitions included PayForce, a sub-brand of YC-backed Nigerian merchant payment firm CrowdForce, which it acquired for $15-20 million in cash and stock. Umba, a retail-focused digital bank in Nigeria, has expanded its offerings to include merchant financing and commercial banking in both Nigeria and Kenya.
While Google Play displays more than 1 million app installs, actual registered and active user numbers are unknown. FairMoney’s potential acquisition of Umba may not be based exclusively on user stats or product range.
Given Umba’s recent rollout of merchant and business-facing goods, it’s unlikely that it has achieved significant traction in such a short period. The firm may be more interested in Umba’s microfinance license, which was obtained in 2022 through a majority stake in Daraja Microfinance Bank, providing banking services in Kenya.
FairMoney is considering acquiring Umba while navigating Kenya’s onerous microfinance licensing process, which has only 14 licenses compared to Nigeria’s 600. FairMoney is considering acquiring Umba. This move may allow the business to leverage Umba’s existing infrastructure, thereby avoiding the time-consuming licensing procedures that took Umba three years to complete.
While Umba was not actively pursuing a sale, FairMoney’s offer could be appealing, especially given Umba’s recent financial performance, which saw $335,000 in income but $1.54 million in expenses between January and June 2023. Umba, which had secured a $15 million Series A fundraising round at a $60 million valuation in February 2022, sought further funding in December, finishing with a $1.55 million bridge round at a $25 million valuation, which was consistent with the startup’s offer.
Mergers and acquisitions are becoming increasingly common in the fintech sector as the venture capital market tightens. This proposed acquisition of Umba might be its second in two years, continuing the trend of consolidation in the African digital banking sector.
