Verdant Capital, a financial firm, recently announced the completion of a significant investment by its Verdant Capital Hybrid Fund. The fund has provided a dual-tranche investment of USD 7 million to Mogo Auto Limited, a subsidiary of Eleving Group operating across Europe, Asia, and Africa.
The investment from the Fund, which marks its third investment to date, will support Mogo Kenya in expanding its portfolio of vehicles, including fuel-powered and electric motorcycles (known locally as “boda-bodas”), tuk-tuks (three-wheelers), cars, and car logbook or leaseback financing services throughout the country.
This investment holds great importance for Mogo Kenya, as it represents the largest asset financing business within the Eleving Group, established in 2018. In May 2023, Mogo Kenya received a social rating grade of SBB from MicroFinanza, demonstrating its commitment to client protection principles. The funding for the social rating was primarily facilitated through the Fund’s technical assistance facility.
Mogo Kenya is a leading fintech asset financing company in Kenya, focusing on motorcycles, tuk-tuks, and cars, which play a vital role in transportation and commerce in the country. In the realm of electric motorbike financing, Mogo Kenya collaborates with suppliers such as Stima and Gecss, as well as ride-hailing platforms like Bolt and Jumia, to promote the adoption of eco-friendly e-mobility solutions that produce zero carbon dioxide emissions and reduce noise pollution.
The electric motorbikes provided by Mogo Kenya offer cost-effective consumption and maintenance, enabling riders to save on operating expenses. The company’s business model caters to self-employed entrepreneurs and small business owners who are unbanked, providing them with an avenue for income generation and increased take-home earnings through asset ownership. Mogo Kenya leverages technology extensively, utilizing automated processes, GPS tracking tools for financed vehicles, and digital payments via mobile money wallets.
With the investment from the Fund, Mogo Kenya will have additional funding to expand its vehicle financing services, encompassing motorcycles (fuel and electric), tuk-tuks, cars, and car leaseback arrangements across the country. These financed vehicles typically serve as the primary income source for clients. Mogo Kenya’s business model offers an affordable pathway for clients to achieve financial stability, participate in the economy, and, in many cases, experience their first opportunity to accumulate tangible wealth through vehicle ownership.
The Fund’s subordinated loan will strengthen Mogo Kenya’s financial position and attract more senior debt funding, allowing for further growth of its balance sheet. The Fund was drawn to Mogo Kenya’s business model due to its alignment with the Fund’s mission of empowering clients at the bottom of the economic pyramid while benefiting from effective credit risk mitigants.
The investment made by the Fund is expected to yield returns that align with its target. The Verdant Capital Hybrid Fund focuses on investing in inclusive financial institutions across Africa, emphasising digitally enabled institutions serving micro, small, and medium-sized enterprises.
The Fund deploys capital through various hybrid instruments, including subordinated debt, mezzanine instruments, preference shares, and stapled investment structures. As of December 2021, the Fund has a size of USD 36 million at its first close and aims to reach a target of USD 100 million at its final close in 2024.