M-KOPA, the UK-headquartered fintech that finances smartphones and electric motorbikes for Africa’s “Every Day Earners,” reported a sharp deterioration in the profitability of its core product business in 2025, according to its annual financial report. Revenue from contracts with customers rose 45 per cent to $363.4m, but cost of sales surged 66.6 per cent to $305.6m, leaving gross profit from the sale of goods at $57.9m — down from $67.9m in 2024. The gross margin on product sales fell from 27.0 per cent to 15.9 per cent.

The finding is significant for a company that has built its reputation on the proposition that informal earners are creditworthy. M-KOPA, founded in 2011 to finance solar home systems, now operates across Kenya, Uganda, Nigeria, Ghana and South Africa. It had 3.4 million active customers at the end of 2025, up 49 per cent year on year. It has disbursed over $2bn in credit and processes more than 2 million payments daily. It has been named to the Financial Times’ Africa’s Fastest Growing Companies list for five consecutive years.

But the 2025 accounts reveal that the business of selling devices on credit has become considerably less lucrative, even as the group returned to a modest net profit of $4.8m, compared with a restated loss of $21.2m in 2024. The operating profit that M-KOPA does generate is increasingly coming not from the margin on a handset or a motorbike, but from the interest earned on financing those purchases — and from the digital services layered on top.

Interest income as the engine

Interest income calculated using the effective interest rate method rose 45 per cent to $236.3m. After deducting expected credit losses of $90.9m, the risk-adjusted contribution from lending was $145.4m — more than twice the $57.9m gross profit from product sales. In other words, M-KOPA’s lending book, not its trading operation, is now the primary source of gross profit.

The shift is not necessarily a problem in itself. M-KOPA has always described itself as a fintech company that happens to sell devices, rather than an electronics retailer that offers credit. Jesse Moore, co-founder and chief executive, told ImpactAlpha in 2023: “We became known as an off-grid energy company, and we didn’t reject that moniker. But our part of solar has always been financing the solar. We have always fashioned ourselves as a fintech company”. The same logic applies to smartphones and e-bikes: the device is the hook, and the financial relationship is the product.

But the margin compression in device sales raises questions about how far the company can rely on hardware revenue to cover the fixed costs of distribution, logistics and customer acquisition. M-KOPA reaches customers through what it describes as Africa’s largest direct sales distribution network, with more than 40,000 agents across five countries. It also operates a smartphone assembly facility in Nairobi that has produced over 3.3 million devices. Those are significant fixed and variable costs that must be absorbed somewhere in the value chain.

The credit loss overhang

The more pressing issue is credit. M-KOPA’s expected credit loss provision stood at $155.5m at the end of 2025, covering gross trade receivables, loans, advances and lease receivables of $328.4m. That equates to an ECL coverage ratio of approximately 47 per cent. In plain terms, M-KOPA expects to lose nearly half of what it is owed.

That is an extraordinarily high loss rate by the standards of conventional consumer lending. It reflects the nature of M-KOPA’s customer base: people who lack formal credit histories, conventional collateral and salaried employment. The company’s model is designed around this. Customers pay a deposit and then make daily or periodic instalments. M-KOPA can remotely lock devices if payments are missed, a mechanism that gives it a form of collateral that traditional lenders do not have. In March 2026, the group acquired for $8 million KilpiTek Oy, a Finland-based software business that provides device-locking and related technology, in a move to control a critical component of its technology stack.

Even so, the 47 per cent coverage ratio suggests that device-locking and daily repayment schedules are not fully mitigating the risk. The group’s ECL charge for the year was $90.9m, equivalent to 38.5 per cent of interest income. That is a substantial drag on profitability, and it explains why a business with $599.8m in gross income generates only $4.8m in net profit.

The credit risk environment across M-KOPA’s markets has deteriorated. Nigeria’s banking industry non-performing loan ratio stood at about 7 per cent in 2025, above the regulatory threshold of 5 per cent. Ecobank Transnational, the pan-African banking group, recorded a 28 per cent increase in impairment charges to N613.3bn in the same year, citing pressure on borrowers amid high interest rates, currency volatility and weaker macroeconomic conditions in several African economies. M-KOPA is not immune to those conditions.

The restatement factor

The 2025 accounts were the first to be audited by PricewaterhouseCoopers, following the group’s appointment of PwC as external auditor. As part of PwC’s first-year review, M-KOPA restated prior-period comparatives, principally to reflect a change in the accounting for expected credit losses, refinements to the recognition of interest income on credit-impaired loans, and corrections to the completeness of the loan population recorded in the group’s loan accounting system.

The restatements were treated as corrections of prior-period items under IAS 8. Opening equity at 31 December 2023 was restated downward by approximately $7.6m. The 2024 loss was restated from the originally reported figure to $21.2m. The 2024 ECL provision was restated to $129.7m. These are not trivial adjustments. They suggest that the group’s previous accounting for its loan book was not fully robust — a concern that M-KOPA itself acknowledges in the strategic report, stating that it has strengthened the models, data and supporting documentation underpinning these judgements “so that they are applied consistently in future periods.”

PwC issued an unqualified opinion and concluded there was no material uncertainty over going concern. But the restatements are a signal that the transition to a new auditor brought greater scrutiny to the group’s most critical accounting estimates.

The cash flow reality

Despite reporting a net profit of $4.8m, M-KOPA generated a net cash outflow from operating activities of $69.0m in 2025, compared with an outflow of $61.7m in 2024. The gap between accounting profit and cash generation reflects the capital-intensive nature of the lending model: cash is tied up in receivables and inventories, and interest payments on borrowings consume a significant portion of operating cash flow. The group paid $37.9m in interest on borrowings during the year.

M-KOPA therefore remains dependent on external financing. In 2025, it raised $61.8m in new borrowings and $59.6m in equity proceeds, while repaying $41.0m of debt. Total borrowings stood at $237.7m at year-end, against total equity of $118.4m. Net debt, using balance-sheet cash of $80.5m, was approximately $157.2m.

The group’s going concern assessment depends on its ability to refinance maturing facilities. The directors state that they are in advanced negotiations with existing and prospective lenders to renew, extend and refinance those facilities, and have secured a number of approvals and commitments. PwC accepted that conclusion, but the reliance on continued lender support is a structural feature of the business that is unlikely to change in the near term.

A capital-intensive model in a competitive market

M-KOPA operates in a competitive asset-financing market. Its rivals include Sun King, d.light and EasyBuy, all of which use consumer electronics and solar products to extend credit to first-time borrowers. In Kenya and Nigeria, it competes with a range of digital lenders and buy-now-pay-later providers. The broader African BNPL market is projected to grow from approximately $15.5bn in 2024 to $33bn by 2029, according to FT Partners research, attracting new entrants and intensifying competition.

That competition may be contributing to the margin pressure on device sales. If M-KOPA is cutting prices or absorbing higher device costs to win customers, the gross margin on product sales will suffer. The alternative interpretation is that input costs — handsets, batteries, logistics — have risen faster than the company can pass them on, particularly in markets where currency depreciation has increased the local-currency cost of dollar-denominated imports.

The group’s e-mobility business is a case in point. M-KOPA Kenya Mobility, established in 2023, finances electric motorbikes from manufacturers including Ampersand, Roam and Spiro, and has partnered with Bolt to expand access for ride-hailing drivers. It has financed more than 10,000 electric motorbikes in Kenya and is expanding into electric tuk-tuks. The Dutch development bank FMO is preparing a $30m senior debt facility to support the e-mobility portfolio. Electric motorbikes are a higher-ticket item than smartphones, and the unit economics of financing them — including battery-swapping infrastructure, insurance and maintenance — are still being proven.

What the numbers mean

M-KOPA’s 2025 results present a business in transition. The company has achieved impressive top-line growth and a return to profitability. It has strengthened its balance sheet through a substantial equity raise — $70.5m in share issues during the year — and has attracted continued support from development finance institutions and impact investors.

But the economics of the core business are shifting. The margin on selling devices has halved. The lending book is now the primary source of gross profit, but it carries a 47 per cent expected loss rate. Operating cash flow remains deeply negative. And the group depends on refinancing to meet its obligations as they fall due.

For a company that has built its identity around the idea that “informal has never meant unviable,” the challenge is to demonstrate that the lending model can generate returns that justify the risk — and that the product business can be more than a customer acquisition channel. The 2025 accounts show that M-KOPA is profitable, but only just. Whether that profitability is durable will depend on its ability to manage credit losses, refinance its debt, and find a way to make the device business work at a margin that covers its costs.