The Financial Struggles of Watu Holdings: A Deep Dive

Watu Holdings, a Kenyan startup operating in the Buy-Now-Pay-Later (BNPL) sector, has reported a staggering 84% decline in profits, falling to $1.2 million (KES 157 million) for the year 2024, as highlighted in documents from Car & General, which holds a 29% stake in the company. This marks a notable decrease from $7.6 million (KES 985 million) in 2023, indicating a worrying trend of increasing loan defaults and weakened repayment models in key markets such as Kenya, Uganda, and Sierra Leone.

Target Market and Growing Competition

Watu’s business model primarily targets informal transport operators and low-income workers, particularly Boda Boda riders, who often lack access to traditional credit. While this strategy has spurred rapid growth, it has also exposed the company to income volatility, financial risks, and intensified competition from emerging players like M-Kopa, Aspira, and Ampersand.

Product Offerings and Variability in Performance

The company has established five main product verticals:

• Watu Boda – flagship motorcycle financing
• Wau Simu – mobile phone loans
• Wau Gari – vehicle financing
• Wau Shule – educational loans
• Electric vehicle financing targeting the emerging transport market

However, performance varies significantly across regions.

Strong Performance in Tanzania

In Tanzania, where operations are conducted through Watu Tuu Limited, profits have nearly doubled, reaching $5 million (KES 650 million), reflecting an impressive 93% annual increase. Although Watu has not disclosed financial data at the market level, these results suggest a more favorable lending environment in Tanzania compared to Kenya.

Challenges Facing Non-Banking Lenders

Watu is part of a growing trend of non-banking lenders expanding microcredit in East Africa. However, rising interest rates and increasing repayment pressures are beginning to challenge the sustainability of this business model, especially in Kenya, where many informal income sources remain under economic strain.

The Role of Car & General

Car & General, a Nairobi-listed company known for assembling and distributing motorcycles, significantly benefits from the funding demands of Watu. As Watu’s financial results become increasingly integrated into Car & General’s overall profits, the dependency between the two entities raises questions about long-term viability. Notably, Watu does not publish its standalone financial statements since it is a private firm.

Future Outlook for Watu Holdings

Founded in 2015 by Latvian entrepreneur Andris Kaneps, Watu has raised over $20 million across five rounds of investments from notable firms like FMO, Passerelle Partners, Green Capital, and AHL Venture Partners. Its most recent funding round was a Series B in February 2024, indicating continued investor interest. Watu remains one of the few tech startups in Kenya managing to maintain profitability amidst a challenging economic landscape.

Lessons from Lipa Later’s Shutdown

In March 2025, the BNPL startup Lipa Later faced administration after failing to secure necessary funds for operations, further emphasizing the significant challenges fintech companies face in the region. This situation reflects a broader trend affecting many startup ventures in Kenya, highlighting the critical need for access to capital for growth and sustainability.

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