Nairobi-based fintech firm Umba has secured $5 million in debt financing from Star Strong Capital to expand its operations across Africa, amid claims that its Kenyan division is approaching profitability. The digital banking startup, founded in 2018 by Irish entrepreneurs Tiernan Kennedy and Barry O’Mahony, provides financial services in Nigeria and Kenya through a mobile app, offering loans, current accounts, savings products, and bill payments.
The new funding comes as Umba navigates a challenging fintech landscape, where venture capital has tightened and growth targets have become harder to meet. The company previously raised $15.5 million in a Series A round in 2022, backed by investors including Monzo founder Tom Blomfield and Brazilian neobank Nubank. However, its valuation has since declined — a $1.55 million bridge round in late 2023 valued the company at $25 million, down from $60 million in early 2022.
Umba’s Kenyan operations claim they are nearing profitability, a significant milestone given the broader struggles of digital lenders in Africa. The company acquired a microfinance license in Kenya in 2022 by taking a majority stake in Daraja Microfinance Bank, allowing it to offer regulated banking services. This license, one of only 14 in Kenya, provides a competitive edge in a market where regulatory approvals are difficult to secure.
The fintech’s app, which has over 1 million downloads on Google Play, enables users to access loans disbursed directly to mobile money platforms like M-Pesa. Lending decisions are based on a risk assessment algorithm tied to user verification.
Last year, reports emerged that Paris-headquartered FairMoney, a digital lender operating primarily in Nigeria, was in early discussions to acquire Umba in an all-stock deal worth $20 million. While neither company confirmed the talks, industry sources suggest FairMoney’s interest lies in Umba’s Kenyan microfinance license, which could expedite its expansion into East Africa.
Umba’s situation reflects wider trends in Africa’s fintech sector. After a surge in venture capital funding between 2020 and 2022, many digital lenders are now grappling with slower growth, regulatory hurdles, and investor skepticism. Mergers and acquisitions have increased as startups seek consolidation — earlier this year, Nigerian neobank Carbon acquired SME-focused Vella Finance.
For now, Umba’s latest debt financing provides a lifeline to continue operations. Whether it achieves long-term success independently or through acquisition will depend on its ability to stabilize finances and capitalize on its Kenyan foothold.