Banking on Phone Loans: Kenya’s Watu Targets $340M Revenue in 2025
Watu, a prominent Pan-African buy-now-pay-later (BNPL) platform, is setting an ambitious revenue target of KES 44 billion ($340 million) for 2025, driven by a strategic pivot towards smartphone lending. This innovative approach has quickly surpassed motorbike financing to become the company’s most rapidly expanding product. The firm’s focus on phone financing, particularly in markets like Kenya, highlights the immense potential of digital lending to provide access to essential technology and financial services across Africa.
Navigating Rapid Growth and Emerging Challenges in Digital Lending
Watu’s recent financial performance illustrates this significant shift. The company reported impressive gross revenues of KES 29.9 billion ($231.4 million) in 2024, marking a substantial 67% increase from KES 17.9 billion ($138.5 million) recorded the previous year. This surge was primarily fueled by the rapid adoption of phone financing, which now constitutes the majority of new loans disbursed. However, this growth narrative is not without its complexities. Despite the robust increase in gross revenues, Watu’s net profit saw a sharp 85% decline, settling at $1.2 million in 2024. This significant drop points to escalating pressures from loan defaults and repayment challenges in core markets such as Kenya and Uganda, alongside rising operational costs. Such trends underscore the inherent risks involved in rapidly scaling microlending services that cater to low-income borrowers in emerging economies. Looking ahead, Watu outlined its strategic vision in its 2024 sustainability report, stating, “We’re targeting the financing of 5,000 electric vehicles, expanding our smartphone financing to over two million devices, and continuing our geographic expansion while deepening our impact in existing markets.”
Watu’s aggressive pursuit of smartphone financing underscores the vast potential of digital lending to foster financial inclusion across Africa, empowering individuals with access to critical mobile technology. However, the recent contraction in net profit serves as a crucial reminder of the intricate challenges and elevated risks associated with rapid expansion in the microlending sector. Effective credit risk management and operational efficiency remain paramount for sustainable growth in dynamic African markets. Watu’s journey exemplifies the balancing act faced by many African fintech companies striving for ambitious growth while navigating the complexities of profitability and impact.
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