Partech Africa, a member of the Partech Group, a global technology venture capital fund, and Enza Capital have invested in the $3.6m extension round in Tugende, a technology enabled MSME lender in East Africa.

“In Tugende, we are backing a company solving a fundamental African problem – that is, access to finance – in a sustainable manner. What we see is a non-predatory "win win" approach to lending to high-risk clients. The product is well-designed and is aligned to the cashflows of their customers. The system of co-guaranteeing each other (that has long existed in formal and informal credit on the continent) is utilized and creates a social responsibility that we think is the reason for the lowest NPL rates we have seen in the fintech space.” 

“With operations expanding outside the home market of Uganda and into Kenya, we also see a clear Pan-African opportunity that is replicable and scalable,” said Partech.

The deal was agreed and structured in 2020, bringing the total Series A volume to $9.9 m.

This adds to the first close which was led by Mobility 54, an Africa-focused venture capital entity backed by the Toyota Group, as well as $12m of debt financing raised over the last 18 months, through institutional investors from the UK, Germany, Switzerland, the Netherlands and South Africa.

Verdant Capital served as Tugende’s financial advisor and arranger for its equity and debt capital raises.

Edmund Higenbottam, MD at Verdant Capital (pictured), said: “The MSME credit gap across sub-Saharan Africa amounts to more than $331bn per year, with a gap of $37bn in East Africa alone. The growth of innovative and technology enabled business models, such as Tugende’s, are helping fill the credit gap left by traditional banks.” 

The capital raises for Tugende strengthen its balance sheet and allow the expansion of its loan portfolio.

Having built its leading position financing boda bodas (motorcycle taxis) in Uganda, Tugende launched its Kenyan operations in late 2019, kick-starting its regional expansion, while continuing to add new asset products for other types of informal sector clients.

The equity investments and partnerships with leading equity firms will also accelerate Tugende’s technology development and organisational growth.
Tugende uses asset finance, technology, and a high touch customer support model to help micro, small and medium enterprises (MSMEs) own income-generating assets.

Tugende has served over 43,000 clients with more than 16,000 having achieved ownership of at least one asset.

Its core asset finance packages include medical and life insurance, training, safety equipment and digital credit profiles in addition to affordable asset finance.

Tugende has broadened the productive assets it finances to include fishing boat engines, cars, refrigerators and other income generating equipment and is also currently piloting financing for e-mobility assets. All payments are digital and Tugende provides proprietary credit scores automatically to all clients to help them monitor their performance and unlock new opportunities like discounts and new products. 

Tugende’s Series A transaction cements Verdant Capital’s track record in raising capital for high impact emerging financial technology leaders and bringing these businesses to a broad range of global investors. Verdant Capital successfully completed transactions in the sector with a total value of $40m in 2020.

The capital raises included businesses such as Tugende, Retail Capital, a South African SME-credit tech player, and Planet42, a South African car-subscription business. 

“2020 saw a period of record deal volumes in Africa, with some $500m of capital raising and M&A in the Fintech sector in 2020. Verdant Capital successfully completed transactions in the sector with a total value of $40m in 2020.  Based on the growth in its own pipeline, Verdant Capital expects sector-wide deal volumes in 2021 to exceed the levels set in 2020,” Higenbottam said.