Latvian finds fortune in local boda boda financing venture

Watu Credit staff at work in Mombasa. Inset: Andris Kaneps, founder of the firm. courtesy photo   By Adelaide Changole

Andris Kaneps is making better returns financing motorbike sales on Kenya’s coast than he ever did arbitraging gold and silver.

The 34-year-old Latvian swapped his chilly hometown of Riga for the tropical beach city of Mombasa two years ago to start Watu Credit, which finances the purchase of at least 10 vehicles a day.

Watu Credit, which charges interest of as much as five per cent a month, can grant a loan within two hours, a turnaround time that Kaneps says is key to their success.

“We’re successful because of the efficiency and speed people are getting loans from us,” Kaneps said in an interview in Nairobi. “If someone is ready and they have the deposit, and they meet requirements, they can get the bike in a couple of hours.”

Watu is operating in an environment where Kenyan banks, having come under pressure from the capping of interest rates, have shied away from lending to SMEs. Annual growth in credit to the private sector is currently at the weakest pace in a dozen years. Some local banks can take several months to assess borrowers’ creditworthiness before issuing loans.

Kaneps tested the system himself by applying for funding from a local bank. Six months later, he’s still waiting for a response.

Thus far, Kaneps said, the Watu Credit platform has recorded 98 per cent repayment rate with customers repaying their loans through their preferred mobile money services.

The motorbikes and automated-rickshaws Kaneps is financing are mainly used as taxis — nown locally as boda bodas and tuk-tuks. The two-wheelers are set to become the main means of transport for the majority of Africa’s population.

A report by US-based consultancy firm TechSci Research estimates that this market will grow at an average of 3.2 per cent per year by 2022 to more than $10 billion (Sh1 trillion).

The Motorcycle Assemblers Association of Kenya estimates that eight million Kenyans use an estimated 400,000 motorcycles already on the roads, generating Sh401.7 million revenue daily. Watu Credit has 1,500 clients and is adding an average of 300 new customers per month.

Kaneps plans to process as many as 1,000 a month by expanding his operation to Nairobi and the western cities of Nakuru and Kisumu.

The company, which posted full-year profit of Sh473,800 in 2016, is on track to increase that to Sh30.9 million by end of 2017.

“Next year, we should make $1 million (Sh103 million),” he said. Watu Credit recently raised $1.5 million (Sh154.5 million) in its first round of funding since its launch and expects $3.25 million (Sh334.75 million) in a second round planned over the next 12 months.

Its model attracted a Los Angeles-based investor to buy more than half of its $1.7 million (Sh175.1 million) loan book in a deal arranged by Lendable Inc, a Nairobi-based company.

“You have people who are looking at attractive places, but it must become a good investment that can withstand scrutiny,” said Alan Syder, founder of Los Angeles-based investment firm Shinnecock partners and an investor in Watu.

Lendable arranged the financing by reaching out to a pool of 57 investors based in Europe and the US.

“I think investors are recognising Africa as a viable frontier market,’’ Sharon Arungu-Olende, Lendable’s East African head, said in an interview.