FairMoney, a digital bank based in Lagos and headquartered in Paris, is reportedly in discussions to acquire Umba, a credit-led digital bank providing payroll and financial services to customers in Nigeria and Kenya, in a $20 million all-stock deal, according to sources familiar with the matter.
Key Takeaway
FairMoney, a Nigerian digital bank, is in talks to acquire Umba, a credit-led digital bank operating in Nigeria and Kenya, in a $20 million all-stock deal. The acquisition could facilitate FairMoney’s expansion into Kenya and leverage Umba’s microfinance license to offer banking services in the country.
Potential Expansion into Kenya
The potential acquisition of Umba by FairMoney signals the latter’s interest in expanding its customer base by venturing into more countries, particularly Kenya. This move comes amidst the challenges faced by fintechs in Africa, where a $20 million all-share deal would be approximately equivalent to the amount Umba raised from external investors.
Acquisition Negotiations and Company Background
According to sources, the acquisition discussions are still in the early stages, and both FairMoney and Umba have not provided comments on the matter. Umba, founded in San Francisco in 2018, offers various banking services to customers in Nigeria and Kenya and has secured approximately $20 million in funding from investors such as Costanoa Ventures, Monzo co-founder Tom Blomfield, and others. On the other hand, FairMoney, known for its lending services in Nigeria, has raised over $57 million and has been backed by investors including Tiger Global and DST.
Potential Synergies and Market Challenges
For FairMoney, the potential acquisition of Umba may not solely depend on user numbers or product offerings. Umba’s recent expansion into merchant and business-facing products, as well as its microfinance license in Kenya, could be key factors driving FairMoney’s interest in the acquisition. Additionally, the tightening of VC funding and the challenges faced by fintech companies in meeting growth targets have led to increased M&A conversations in the African fintech space.
Conclusion
If the acquisition of Umba by FairMoney materializes, it could facilitate FairMoney’s entry into the Kenyan market and enable the leveraging of Umba’s existing infrastructure and microfinance license to offer banking services in the country. This potential deal reflects the evolving landscape of fintech in Africa and the strategic moves being made by digital banks to navigate market challenges and pursue growth opportunities.
