Back in 2015, Andris Kaneps, co-founder of Watu Credit, personally handed over a small cash loan to a women’s cooperative in Mombasa, Kenya. Though the amount was modest, it marked the beginning of a bold vision. Fast forward ten years, and this buy-now-pay-later (BNPL) fintech has expanded beyond Africa, entering Latin America with a model it claims has proven profitable, aiming to serve a similarly underserved population.
Watu Credit’s recent launch in Brazil, following its entry into Mexico, is a key part of an ambitious strategy to reach $340 million in revenue by 2025. This target builds on a remarkable 67% revenue increase in 2024, which saw earnings climb to $230 million.
“We often say that if you can succeed in Africa, you can succeed anywhere,” remarked Kaneps, who serves as Watu’s CEO, alongside deputy CEO Paras Patel in a joint discussion.
“Operating in Africa is challenging-from navigating regulations to overcoming logistical hurdles and daily operational realities. That experience has toughened us, and we bring that resilience to Latin America.”
Profit-Driven Growth
Kaneps and Patel emphasize that Watu’s growth philosophy has always been rooted in profitability. Unlike many African fintechs that chased rapid expansion through venture capital, Watu chose to reinvest its own profits to fuel its growth across eight African countries.
This prudent approach, they argue, has enabled the company to withstand funding shortages and currency fluctuations while continuing to scale aggressively.
“Many startups reliant on venture capital faltered when funding dried up,” Patel explained. “Being profitable from the outset guarantees sustainability, and scalability ensures we reach more people.”
Watu’s strategy balances growth and profitability, with some years prioritizing expansion and others focusing on improving margins. “This year, our emphasis is on profit,” Patel noted, signaling a more measured phase following rapid growth.
Yet, this focus on profitability hasn’t dampened Watu’s enthusiasm for innovation or market entry. In fact, it has spurred new initiatives like Watu Simu, a smartphone financing product that now anchors the company’s growth plans.
Strategic Shift
Watu’s innovation has been largely shaped by the economic realities of its primary markets. The company, which employs 3,000 people across eight African nations, initially built its reputation by financing motorcycle taxis, known locally as “boda-bodas.”
However, the economic turmoil triggered by the 2022 Russian invasion of Ukraine-leading to a sharp drop in the Kenyan shilling and rising fuel costs-exposed the risks of relying on a single product line.
“The period between 2022 and 2023 was turbulent,” Kaneps reflected. “We realized that to sustain growth and stability, we needed to expand geographically and diversify our product offerings.”
Smartphone financing emerged as the natural next step. While the boda-boda market in Kenya serves roughly one million people, the potential smartphone market encompasses 30 to 40 million economically active individuals.
“The idea originated from our customers,” Patel shared. “Drivers for ride-hailing apps requested phone financing. We piloted it, and it proved successful.”
With smartphone adoption rates in key markets like Tanzania, Uganda, and the Democratic Republic of Congo hovering between 20% and 30%, the opportunity far exceeds the saturated mobile money sector.
“The gap is enormous. Saturation isn’t a concern because there’s still so much room to grow,” Kaneps affirmed.
Entering Latin America
Watu’s confidence in Latin America stems from data-driven insights revealing parallels with African markets. Latin America’s population of 650 million mirrors Africa’s 1.4 billion in terms of the proportion lacking access to formal credit. Informal economies outside urban centers dominate both regions, necessitating the grassroots, relationship-based lending model Watu has perfected.
“If you can navigate Africa’s complexities, you can handle Latin America,” Kaneps stated, a view Patel supported. “Our decade of experience has been invaluable.”
The company’s competitive advantage lies not only in its technology but also in its extensive network. Watu Simu is backed by over 10,000 commission-based agents, a distribution framework that competitors would find difficult and time-consuming to replicate. This network provides critical insights as Watu explores new markets.
Nonetheless, the Latin American market presents distinct challenges. Credit bureaus are more established, competition is fiercer, consumer protection laws are stricter, and currency volatility requires sophisticated hedging strategies. Success demands adapting through local partnerships and compliance-focused onboarding.
Despite these hurdles, the potential is vast. According to the World Bank, over 120 million adults in Latin America remain unbanked, with informal employment exceeding 50% in countries like Colombia and Peru.
Risk Management Approach
In an industry often criticized for pushing low-income borrowers into debt traps, Watu differentiates itself from traditional BNPL models by emphasizing flexibility tailored to clients’ income fluctuations.
Regarding boda-boda loans, Kaneps acknowledged that while many clients occasionally delay payments, the company responds with leniency rather than penalties. For example, riders can “park” their loans temporarily without accruing interest, akin to a grace period during financial hardship.
The smartphone financing product operates differently and carries less risk. It uses a pay-as-you-go system that locks the device if daily payments are missed, encouraging timely repayment. Many customers extend their repayment over two years or more without incurring penalties, with the cost of this flexibility factored into the product’s pricing.
Watu’s leadership views its asset financing model as a powerful tool for unlocking economic opportunities for millions. The company’s sustainability report highlights the creation of 3,000 direct jobs, a dealer network, and over 10,000 agents who onboard customers, reaching millions more indirectly.
Adapting to a Shifting Market
As Watu embarks on its next growth phase, the competitive landscape is evolving. Banks that once overlooked informal sector lending are now entering the space, encouraged by Watu’s demonstration that asset financing can scale sustainably. New fintech startups, armed with fresh capital and advanced technology, are also emerging.
However, Watu’s executives believe their true strength lies elsewhere.
“Banks are collaborators, not adversaries,” Patel explained. “Many banks that were skeptical initially now provide the debt that powers our lending. As for fintech competitors, we’ve built this ecosystem from scratch over ten years. The loyalty of our dealers and agents is a formidable barrier to entry.”
The company remains cautious about revealing its next product beyond boda-bodas and smartphones. When asked about future offerings, both Kaneps and Patel declined to provide specifics.
“We’re still listening to our customers,” Kaneps said. “We have many ideas but aren’t ready to disclose them.” Patel added, “Our approach is bottom-up, starting with what customers need to improve their lives.”
This customer-centric philosophy will guide Watu as it navigates the complexities of rapid expansion across three continents, maintaining profitability in a capital-intensive sector, and fending off competition.
For Kaneps, who began this journey in a modest Mombasa office, the company’s growth is deeply rewarding.
“The greatest joy comes from meeting our clients and hearing their stories,” he reflected. “Money and profit are important, but what truly matters is the impact we create.”
The coming years will reveal whether Watu’s vision can extend as far as its ambitions.
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