An African fintech, M-KOPA, has been on an extraordinary journey. With a team of 30,000 direct salespeople, it has been expanding its reach across sub-Saharan Africa. Now, it is moving into profit territory and aiming for a major milestone of surpassing an annual revenue rate of $400 million by year-end.

Unlocking Profitability in African Fintech

Expanding Customer Base and Revenue

Last year, M-KOPA ended with 4 million customers and $248 million in ARR. Despite the harsh economic backdrop with currencies plummeting and consumer purchasing power squeezed, the fintech has not only weathered the storm but thrived. It has achieved profitability in four countries - Kenya, Uganda, Nigeria, and Ghana. South Africa, where it opened about a year ago, is its fastest-growing market.The company offers smartphones and other "productive assets" through flexible digital micropayments. Users pay daily based on the total cost divided by 365 days. This model has allowed M-KOPA to reach a wider audience and build a profitable business.

Managing Default Rates

Default rates at M-KOPA are around 10%, slightly lower than regional bank averages but higher than U.S. consumer loan benchmarks. However, the company has shown stability in its loss rates over the past 4 years as it rapidly scaled. Financed phones are a productive asset in people's lives, helping them generate income and participate in the digital economy.

Optimizing Sales and Distribution

The fintech's growth is fueled by the optimization of its sales and distribution network. It now has over 30,000 active agents going door-to-door in local communities, selling financed phones and providing access to other digital services. Just four years ago, its sales force was only 3,000 strong.M-KOPA's extensive agent network and its venture into smartphone assembly have significantly boosted smartphone sales. Since the launch of its Nairobi-based assembly plant, it has sold over 1.5 million M-KOPA X-Series branded smartphones.

From Solar to Smartphones

M-KOPA did not start with smartphones. Initially, it made a name for itself with solar power systems, achieving over one million units sold last year. Recently, it phased out this product line to focus on electric vehicles, using its operational know-how from refurbishing solar-powered TVs.In sub-Saharan Africa, where 85% of the population earns less than $10 per day, M-KOPA's daily payment model allows customers to build credit histories. For example, smartphone customers pay between $25 and $30 upfront and around 50 to 60 cents daily over 12 months.

Financing and Growth

Backed by Sumitomo, Standard Bank, and various development financial institutions, M-KOPA raised $250 million last year, including $200 million in debt financing. Earlier this year, it secured an additional $15 million in debt. With a $400 million run rate, it is among the largest fintechs in Africa by revenue.The company's financing model plays a crucial role in expanding Africa's credit market. It has deployed a cumulative credit of $1.5 billion, helping customers access essential products and services.