Spiro to pilot interest free financing in Kenya

From the newsletter

Spiro, Africa’s largest EV manufacturer, has partnered with BodaBoost, Kenya’s boda boda finance company, to introduce zero-interest financing for electric motorcycles in the country. The agreement will benefit the first 5,000 customers in Kenya’s capital, Nairobi. The partnership will also offer a flexible payment plan.

• BodaBoost Limited is a Kenyan company dedicated to providing boda boda riders with access to electric bikes, interest-free loans, and medical coverage. Its financing model adheres to Islamic financial principles.

• In Kenya alone, there are 1.5 million riders, making it one of the largest markets for motorcycle taxis in Africa. The country has multiple key financing players such as Mogo, M-KOPA, Watu Credit and 4G Capital who offer interest loans to their customers. Therefore, the zero interest model could offer tangible competition to them leading to lower interest rates in the future.

More details

• Boda riders in Africa often face exorbitant interest rates, sometimes exceeding 40%, due to several factors. Many asset financing companies borrow in foreign currencies (e.g., USD or EUR), exposing them to exchange rate risks. Additionally, African financiers often face higher borrowing costs purely because of their geographic location, even when sovereign credit ratings are comparable to other regions. This creates a ripple effect, pushing interest rates higher for end-users like boda riders.

• Financing is the backbone of electric motorcycle adoption in Africa, where upfront costs remain a significant barrier. With the average price of an electric motorcycle ranging between $1,000 and $2,000, most riders cannot afford to pay outright. Innovative financing models like pay-as-you-go (PAYG) and instalment plans are essential to making EVs accessible to the mass market.

• The African electric motorcycle market is projected to grow to $1.5 billion by 2030, offering a high return on investment for early entrants. With operational costs 50-70% lower than petrol bikes, electric motorcycles are increasingly attractive to riders. Investors who leverage innovative financing models and partnerships can achieve significant returns while driving sustainable development.

• Pay-as-you-go (PAYG) and lease-to-own models are proving successful as they are the preferred financing options employed by most electric motorcycle companies in Africa. These models often leverage mobile money platforms for flexible repayments. Additionally, they align with the income patterns of riders, making EVs more affordable.

• Battery leasing and swapping significantly reduce the upfront cost of electric motorcycles. Companies such as Spiro in Uganda, Max in Nigeria, Ampersand in Rwanda and Kenya, and Ecobodaa in Kenya separate the cost of the battery from the motorcycle, allowing riders to pay for the bike upfront and lease the battery. This model cuts the initial cost by 30-40%, making EVs more affordable.

• Key risks include default rates, battery degradation, and lack of consumer awareness. To mitigate these, investors can use data analytics to assess creditworthiness, offer maintenance packages, and educate consumers about the long-term savings of EVs. For example, Ampersand uses IoT technology to monitor battery performance and reduce risks.

Our take

• The interest-free loan model can accelerate EV adoption by lowering financial barriers, fostering partnerships between manufacturers and financial institutions, and driving demand for charging infrastructure. 

• It also attracts government incentives and impact investors while encouraging alternative financing models like lease-to-own and subscriptions. However, sustainability remains a challenge, as such models may strain cash flow, requiring creative revenue streams or subsidies to remain viable.

• Local financiers can stay competitive by offering lower interest rates, faster loan approvals, and transparent ownership terms. Leveraging their local expertise and relationships, they can build trust with boda boda riders and better meet their financial needs