Digital bank Umba raises $5 million to grow vehicle and SME lending in Kenya

Umba, a Nairobi-headquartered digital bank with operations in Kenya and Nigeria, has raised a $5 million debt facility to grow its secured lending operations in Kenya, targeting vehicle financing and small and medium enterprises (SME) loans. The move is part of a broader shift by Kenyan neobanks from short-term, high-interest digital loans to focus more on sustainable, long-term secured lending.

Star Strong Capital, a US-based asset management firm,  is the only participant in the deal, with Gahigiro Capital acting as transaction advisor. The deal is structured as debt rather than equity (non-dilutive capital). The debt facility brings the company’s total funding to $20 million.

Umba will use the fresh capital to expand products that are already revenue-generating, CEO Tiernan Kennedy told TechCabal. “This is revenue-generating capital, rather than runway-extending capital,” he said.

Founded in 2018, Umba launched in Kenya in January 2023 after acquiring a 66.6% stake in Daraja Microfinance in 2022, a deal that gave it a microfinance banking licence from the Central Bank of Kenya. Daraja targets SMEs and holds less than 1% of the microfinance market share as of 2024.

In 2022, Umba raised $15 million in Series A funding, led by Nubank executives, to support expansion to Kenya, Egypt, and Ghana. So far, it has only launched in Kenya.

The company said vehicle financing has become a key part of its Kenyan operations due to rising demand for autoloans in a country with  over 5 million registered vehicles—up from 3.9 million in 2021.

“The vehicle financing market is valued at around $17 billion,” Kennedy said. “It is now the largest part of our loan book in Kenya.”

Unlike traditional banks, which rely on manual processes and paperwork, Umba offers digital onboarding, real-time verification, and faster disbursement. While the company hasn’t disclosed current figures, it claims its revenue grew sixfold in 2024 and expects to report a profit in Kenya this year.

Although unsecured digital loans have defined much of the fintech sector, Umba is leaning into asset-backed products.  Other players in the logbook loan space include Autochek, which also targets vehicle owners in Kenya with asset-backed credit.

“While many fintechs focus on high-interest, short-term unsecured loans, we’re building long-term customer relationships through asset-backed products,” Kennedy said.

Umba has completed its senior leadership hiring in both Kenya and Nigeria, although it declined to name its incoming Kenya CEO ahead of the official start date. Co-founder Barry O’Mahony left the company in 2023.

Despite a growing trend of fintechs that are pursuing full banking status after reaching key revenue milestones, Umba has no plans to apply for a commercial banking licence in 2025. Moniepoint, a Nigerian fintech unicorn, is seeking such a licence from Nigeria’s central bank.

But Umba says it will continue to operate within its existing microfinance framework, which it sees as sufficient for scaling secured lending products like vehicle and SME loans in Kenya. “This [commercial banking licence] is not something we’ll be prioritising in 2025,” he said.