FairMoney, a prominent digital bank headquartered in Paris with operations in Lagos, is reportedly in early-stage discussions to acquire Umba, a credit-focused digital bank providing financial services in Nigeria and Kenya. The potential $20 million all-stock deal highlights FairMoney’s strategic interest in expanding its footprint, especially in the Kenyan market. However, the move also reflects the challenges faced by African fintechs, with the proposed deal amounting to the total funds Umba raised from external investors.
Umba, founded in San Francisco in 2018 by Tiernan Kennedy and Barry O’Mahony, initially positioned itself as a credit-led digital bank targeting emerging markets. Its offerings include loans, current accounts, savings accounts, fixed deposit accounts, and bill payments, catering to customers in Nigeria and Kenya. The company has raised approximately $20 million in funding, with investors such as Costanoa Ventures, Tom Blomfield (Monzo co-founder), Lux Capital, and others contributing to its growth.
FairMoney, known for its lending services in Nigeria, has been exploring avenues for expansion beyond its home country. With previous backing from investors like Tiger Global and DST Global Partners, FairMoney raised over $57 million, reaching a valuation of $400 million to $500 million following a bridge round in the previous year. Seeking to diversify its services, FairMoney expanded into India in 2020, but updates on its progress have been limited.
The potential acquisition of Umba aligns with FairMoney’s growth strategy, aiming to leverage Umba’s presence in Kenya. Negotiations are still in the early stages, and both FairMoney and Umba have refrained from commenting on the matter. FairMoney’s expansion efforts have previously included acquisitions, such as PayForce, a sub-brand of YC-backed Nigerian merchant payment service CrowdForce.
Umba, having transitioned from a retail-focused digital bank to include merchant financing and business banking products, recently obtained a microfinance license in Kenya through its majority shareholding in Daraja Microfinance Bank. This license could serve as a crucial asset for FairMoney, streamlining its entry into the Kenyan market by bypassing the intricate licensing process.
While Umba’s potential acquisition may not solely hinge on user numbers, product offerings, or financials, FairMoney could find strategic value in Umba’s microfinance license and established infrastructure in Kenya. Sources suggest that Umba, while not actively seeking a sale, might consider FairMoney’s offer compelling, particularly given its financial standing and the potential synergies between the two fintech entities.
As discussions progress, the outcome of the acquisition remains uncertain, but it represents a significant move in the African fintech landscape, showcasing 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.
