Kenya's Watu Holdings profits drop 85% to $1.2mn as loan defaults rise

Watu Holdings, a Kenyan buy-now-pay-later startup, reported a crisp 85% driblet successful nett to $1.2 cardinal (KES157 million) successful 2024, according to disclosures by Car & General, which holds a 29% involvement successful the business. The diminution from $7.6 cardinal (KES985 million) a twelvemonth earlier points to rising indebtedness defaults and deteriorating repayment behaviour successful Watu’s halfway markets of Kenya, Uganda, and Sierra Leone.

Watu has built its exemplary astir lending to informal transport operators and different low-income earners, chiefly boda boda riders, who deficiency entree to ceremonial credit. While that has helped it standard quickly, the concern has go exposed to income shocks, currency swings, and contention from rivals similar M-KOPA, Aspira, and Ampersand.

Watu has 5 main merchandise lines, anchored by its halfway motorcycle lending unit, Watu Boda, which finances two- and three-wheelers. It besides offers mobile telephone loans nether Watu Simu, car financing done Watu Gari, and schoolhouse interest loans via Watu Shule. More recently, the institution entered the electrical conveyance space, a tiny but increasing conception to seizure aboriginal request for cleanable transport.

However, the downturn was not azygous crossed markets. In Tanzania, wherever Watu operates done a abstracted subsidiary, Watu Tuu Limited, profits astir doubled to $5 cardinal (KSh650 million)—up 93% from the erstwhile year. The institution did not interruption down show by market, but it signals favourable conditions successful Tanzania.

The startup is 1 of respective non-bank lenders that person moved aggressively into asset-backed microcredit crossed East Africa successful caller years. But arsenic borrowing costs emergence and repayment accent grows, the limits of the exemplary are starting to show, peculiarly successful Kenya, wherever informal assemblage incomes stay nether pressure.

Car & General, a Nairobi Securities Exchange-listed institution that assembles and distributes motorcycles successful the region, is simply a large beneficiary of Watu’s demand, and the lender’s show has progressively featured successful its net reports. Watu remains privately held and does not people standalone fiscal statements.

Founded successful 2015 by Andris Kaneps, a Latvian national, Watu has raised implicit $20 cardinal crossed 5 rounds led by FMO, Gateway Partners, Verdant Capital, and AHL Venture Partners. Its latest backing circular was a Series B circular successful February 2024. It is among the fewer startups successful Kenya that person achieved accordant profitability.