Tugende Secures $3.6 Million Series A Extension

Ugandan technology-driven asset finance provider, Tugende, has announced the successful completion of a $3.6 million Series A extension round of funding.

The investment agreement was finalized and structured in 2020, following a $6.3 million raise in November of the same year, which was spearheaded by Mobility 54, the investment arm of Toyota Tsusho. This latest funding brings Tugende’s total Series A financing to $9.9 million.

Investment Details and Participants

Partech, a venture capital firm with offices in San Francisco and Paris, led this funding round. Enza Capital also participated, alongside contributions from several undisclosed angel investors.

Founded in 2012 by Michael Wilkerson, Tugende leverages asset finance, technological solutions, and a dedicated customer support system to empower micro, small, and medium-sized enterprises (MSMEs) to acquire income-generating assets.

Addressing the African Credit Gap

The company is focused on addressing the substantial $331 billion credit gap experienced by businesses across the African continent. Its primary offering centers around motorcycle riders in Kenya and Uganda, providing lease-to-own or hire-purchase arrangements.

These riders receive comprehensive support, including training, medical and life insurance coverage, essential safety equipment, and ongoing assistance throughout their journey from initial motorcycle use to full ownership.

CEO Wilkerson’s initial experience with motorcycle transport, or “Boda bodas,” in East Africa between 2006 and 2010, highlighted the need for accessible financing options. He developed a network of reliable riders, recognizing the limitations of existing transport options before the advent of ride-hailing services.

From Informal Beginnings to Technological Advancement

Wilkerson initially launched “Own Your Own Boda” in 2010, a for-profit initiative aimed at facilitating motorcycle ownership for riders. Starting with informal, handwritten contracts, the enterprise evolved and rebranded as Tugende in 2013, integrating technology to scale its operations.

The transition to a technology-driven platform in 2013 enabled Tugende to implement digital payment systems, establish its own interoperable payment gateway in 2017, and introduce an in-house credit scoring system in 2019, providing clients with transparent performance feedback.

Impact and Growth

Tugende currently serves over 43,000 clients across Kenya and Uganda, with 16,000 having successfully achieved full ownership of at least one asset.

Despite challenges posed by the pandemic in the previous year, Tugende has consistently experienced year-on-year team expansion, excluding 2020. The company now employs over 520 individuals, operating from 20 branches in Uganda and four in Kenya.

The pandemic also attracted a new investor, Partech. Tidjane Deme, a partner at the firm, stated that their investment decision was made during the height of the pandemic, recognizing Tugende’s ability to combine technology and robust operations to support the growth of millions of professionals and drive economic progress.

Expanding Asset Financing

Beyond motorcycle taxis, Tugende has diversified its financing offerings to include boat engines, automobiles, retail shop equipment, refrigerators, and other income-generating assets. The company is also currently testing financing solutions for e-mobility assets.

Tugende’s growth has been largely driven by word-of-mouth referrals, a strategy that Wilkerson acknowledges the company has struggled to fully accommodate. The new investment is intended to address this demand and facilitate continued portfolio expansion in Uganda and Kenya.

Fueling Growth with Debt and Equity

Since its founding, Tugende has secured over $20 million in debt financing from partners such as Partners Group Impact Investments and the U.S. Development Finance Corporation.

The decision to pursue equity financing at this stage stems from the company’s substantial waiting list of potential clients. Tugende aims to secure capital quickly enough to meet this growing demand.

Traditional lenders often require a certain level of equity as a safeguard. While Tugende has been profitable for much of the past five years, its internally generated equity was insufficient to support the level of debt needed to satisfy client demand. Expanding into new geographies and asset classes further necessitates this equity infusion.

“Debt is Tugende’s fuel for growth, but good equity financing is like upgrading the engine, getting a top-notch mechanic and driving coach thrown in on top to help you handle the speed,” Wilkerson explained.

Looking Ahead

Strengthening the balance sheet and securing more favorable debt terms are also key objectives. Furthermore, the equity investment will provide access to valuable hands-on support.

Wilkerson emphasizes that Tugende’s focus on long-term value, rather than solely on individual credit transactions, will foster customer loyalty and sustain growth within the Tugende ecosystem.

Mike Mompi, a partner at Enza Capital, added, “We are particularly enthused by the team’s innovative application of technology, which incorporates a range of social considerations to build a new type of credit score, and which will increase access to capital across a range of African markets where entrepreneurs currently have a limited credit history or access to collateral.”