US-based fintech Umba buys majority stake in Kenya’s Daraja microfinance bank

Umba, a US-based digital bank with a focus on emerging markets, has acquired a majority shareholding of Daraja, a Kenyan deposit-taking microfinance bank, for an undisclosed amount.

Kenya’s monetary authority, the Central Bank of Kenya (CBK), said Umba had taken up 66.6% shareholding, an acquisition that is expected to fast-track Daraja’s digitization.

This comes after Umba announced raising $15 million in pre-series A round in April this year, when it also made public its plans to expand beyond Nigeria, to Kenya, Ghana and Egypt. Umba has so far raised $17.5 million from investors like Tom Blomfield, the co-founder of Monzo, Lachy Groom and ACT Ventures, Lux Capital, Palm Drive Capital, Banana Capital and Streamlined Ventures participated, and Costanoa Ventures.

The fintech, which was founded by Tiernan Kennedy and Barry O’Mahony, offers a wide range of financial products including free accounts, interbank transfers, peer-to-peer transfers, bill payments and loans at a monthly interest of 10%.

“The investment by UMBA will strengthen Daraja MFB’s business model. In particular, it will support the digitization of Daraja MFB as it moves to providing ‘anytime anywhere’ services to its customers. This is aligned to CBK’s vision of a microfinance banking sector that works for and with Kenya,” the CBK said in a statement.

The CBK said Daraja, licensed in 2015 and whose main customers are small and medium enterprises, has a market share of below 1% of the microfinance banking sector in Kenya.

Daraja will give Umba a stronger presence in the country’s competitive financial sector, and an opportunity to offer more targeted services, while also giving the micro-finance a lifeline — in an industry that has been strongly disrupted by digital lenders.

Its deal with Daraja comes months after Branch International, another silicon valley based fintech with operations across Africa, bought a majority stake in Century microfinance bank. Such acquisitions give fintechs access to existing financial services clientele, and permits them to offer additional banking services, which they would otherwise be restricted from supporting.

Umba told TechCrunch in an earlier interview that, in addition to geographical expansion, it is planning to issue debit cards, support savings accounts, and enable stock trading in the coming months.