Kenyan digital bank Umba has raised a $5 million debt facility to expand its secured lending operations in Kenya, marking a significant shift towards sustainable, long-term lending in the country's fintech sector. The debt facility, provided by US-based asset management firm Star Strong Capital, will be used to grow Umba's revenue-generating products, particularly in vehicle financing and small and medium enterprises (SME) loans.

The deal is structured as debt rather than equity, meaning it is non-dilutive capital that will not affect Umba's ownership structure. This brings the company's total funding to $20 million, following a $15 million Series A funding round in 2022 led by Nubank executives. According to Umba's CEO Tiernan Kennedy, this fresh capital is "revenue-generating capital, rather than runway-extending capital," indicating the company's focus on scaling its existing products.

Umba's expansion into Kenya's secured lending market is driven by rising demand for autoloans in the country, which has over 5 million registered vehicles. The vehicle financing market is valued at around $17 billion, and Kennedy noted that it has become the largest part of Umba's loan book in Kenya. Unlike traditional banks, Umba offers digital onboarding, real-time verification, and faster disbursement, making it an attractive option for customers seeking asset-backed loans.

The company's shift towards secured lending is a deliberate move away from short-term, high-interest digital loans that have characterized much of the fintech sector. Instead, Umba is building long-term customer relationships through asset-backed products, a strategy that sets it apart from other players in the market. Other companies, such as Autochek, are also targeting vehicle owners in Kenya with asset-backed credit.

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. The company has no plans to apply for a commercial banking licence in 2025, opting instead to operate within its existing microfinance framework, which it believes is sufficient for scaling secured lending products like vehicle and SME loans in Kenya.

The news comes as the fintech sector in Kenya continues to evolve, with companies like Moniepoint seeking full banking status after reaching key revenue milestones. However, Umba's decision to focus on secured lending and microfinance suggests a different path forward, one that prioritizes sustainable growth and long-term customer relationships over rapid expansion and high-interest lending.

As the Kenyan fintech sector continues to mature, Umba's $5 million debt facility and strategic shift towards secured lending are likely to have significant implications for the industry as a whole. With its focus on revenue-generating products and long-term customer relationships, Umba is well-positioned to capitalize on the growing demand for sustainable, asset-backed lending in Kenya.