M-KOPA shifts focus to financing EVs

From the newsletter

A leading African fintech company, M-KOPA, known for providing financing for solar home systems and smartphones is now strategically shifting its focus to electric vehicles, according to Mayur Patel, chief commercial officer at M-KOPA. This comes as the company is projecting its annual revenue to exceed $400 million by year-end.

• The company entered into electric motorcycle financing in 2023, starting with Kenya, and has so far financed more than 1,500 electric motorcycles.

• M-KOPA wants to build on its successful history of providing accessible financing options for essential products to underbanked communities across Africa with electric motorbikes.

More details

• M-KOPA has been in operation since 2013, starting in Kenya. It currently operates in five countries and recently entered South Africa. Initially focused on financing solar home systems, the company has broadened its product offerings to include mobile phones and electric motorbikes. So far, it has provided $1.5 billion in credit to 5 million customers across those five African countries.

• In 2023, the company secured $250 million in funding—$50 million in equity and $200 million in debt. This was pivotal for the company to expand its product offerings and begin financing electric motorcycles. M-KOPA is leveraging its experience with solar power systems to venture into the electric vehicle market, believing that electric vehicles hold significant promise in sub-Saharan Africa. 

• There are currently over 27 million fuel-powered motorcycles in Africa. About 80% of motorcycles in Africa are used for passenger taxis or delivery services—a segment where income is essential. Research shows that electric bikes offer riders potential daily savings of around 30% on their income. But electric motorbikes are expensive, and at the same time, the majority of Africans are unbanked and lack access to financing. M-KOPA's financing model makes electric vehicles accessible to those who may not otherwise be able to afford them.

• The company has an extensive network of 30,000 direct sales agents that will likely play a crucial role in distributing electric vehicles. As the company has mainly been focusing on providing "productive assets" that improve livelihoods, this aligns well with their business.

• M-KOPA has partnered with several electric motorcycle companies, including Roam and Ampersand and ride-hailing company Bolt. The partnership seeks to introduce 5,000 electric motorcycles in Kenya within three years.

• But there are other competitors in the market, including Mogo, Watu Credit, and 4G Capital, who have also partnered with electric motorcycle companies to provide financing to consumers.

• One advantage that M-KOPA enjoys is its market experience and large capital base, which is heavily needed to finance the expensive electric motorcycles. Its revenue growth projections are an added advantage as it means more capital is coming.

Our take

• M-KOPA has a proven track record in providing financing solutions to underbanked communities. They have a vast network of agents, a deep understanding of the African market, and expertise in microfinance. They can replicate their success in solar home systems in the electric motorbike market by leveraging these existing strengths. 

• EVs are capital-intensive, but M-KOPA has a huge capital base that can be put to work. Any competitor looking to enter this market will need to raise significant capital to succeed. In this industry, substantial capital leads to large-scale sales and economies of scale, allowing companies to offer more competitive pricing and expand their reach.

• M-KOPA has a large sales team spread across the continent. They can leverage this existing network for expansion into new markets and to increase their customer base. This will give them a significant advantage over competitors who need to build their salesforce from scratch.