Umba, Kenya's Digital Bank, Raises $5M to Expand SME and Loan Growth

Barry O’Mahony and Tiernan Kennedy, Umba Co-Founders

Umba, a credit-led digital bank, has raised a $5 million debt facility from Star Strong Capital to accelerate its loan book growth in Kenya. The four-year-old fintech experienced a remarkable sixfold increase in revenue last year, driven by a surge in demand for vehicle financing and loans for small and medium-sized businesses in Kenya.

Founded by Tiernan Kennedy and Barry O’Mahony, Umba launched in Kenya in 2022 after acquiring Daraja Microfinance Bank. Although O’Mahony exited the company in 2023, Umba has experienced significant growth under CEO Kennedy’s leadership, expanding its product offerings and establishing itself as a leading digital banking solution in the region.

Kennedy expressed confidence in Umba’s ability to leverage the new funding to expand its market presence. “Our Kenyan launch has exceeded expectations, with excellent lending performance. As the only pure-play digital bank in the market, we’re delivering a better way to bank for Kenyans through speed, accessibility, and tailored financial solutions,” he said.

Initially entering the market with a credit-led model, Umba has evolved into a full-service digital bank offering loans, fixed deposits, savings accounts, and business savings accounts, making it a competitive alternative to traditional banks. “We are solving almost all your financial problems and continuously adding products to our offering,” Kennedy explained.

The startup also partners with over 5,000 agents in Kenya, who not only acquire customers but also use Umba’s services themselves, creating a flywheel effect that drives further customer acquisition. For example, agents at car dealerships help customers secure vehicle financing, and their commission payments are deposited into Umba accounts, turning the agents into customers.

Despite the challenges of Africa’s credit gap, where many startups face high impairment rates, Umba has succeeded by focusing on productive lending. Its loans primarily fund vehicle and SME financing, with vehicles co-owned by Umba, allowing the company to reclaim them in case of defaults.

The debt facility is crucial for Umba, as the demand for its lending services currently exceeds the company’s capacity. Spring Hollis, Founder and CEO of Star Strong Capital, expressed confidence in Umba’s potential, noting that their customer-centric model positions them to be a key player in Kenya’s fintech revolution.

While Umba had initially planned to expand into other African countries, the company has paused these plans to focus on strengthening its position in Kenya and Nigeria.

Source: MSME Africa