Kenyan tech-led consumer credit provider Lipa Later has been placed under administration not long after it secured at least Sh1.998 billion in equity and debt financing over three rounds for expansion into new African markets.
The announcement, which extends a worrying trend of local startups going under after gobbling up investor resources, has seen accounting firm Joy Vipinchandra Bhatt of Moore JVB Consulting appointed as the administrator to take over control of the besieged startup.
“The Administrator takes control over the business, assets, and the management of the affairs of the company without personal liability,” reads the notice published by Moore.
“By virtue of the administration, the powers of the directors of the company in terms of dealing and/or transacting with the company’s assets have ceased, unless with the express permission of the Administrator.”
Creditors owed by Lipa Later have been given up to April 23, 2025 to lodge their claims with the appointed administrator.
“The Administrator is engaging all key stakeholders of the company to elicit their cooperation in order to achieve the best possible outcome for the company,” the notice adds.
Founded in 2018 in Nairobi, Lipa Later offers hire purchase services to consumers by paying the retailer upfront and then collecting instalment payments from the buyer.
The firm raised its first seed round of $40,000 (Sh5.2 million at current conversion rates) in April 2019, before bagging yet another seed funding of $12 million (Sh1.6 billion) in January 2022 and a $3.4 million (Sh440.1 million) conventional debt in September 2023.
The company employs a digital-based credit scoring system that assigns credit limits to users on its app, allowing them to access goods at partnering merchants including retailer Carrefour, Apple, Techno, and Samsung.
It then earns interest on the credit just like a normal lender would.
The insolvency disclosures come at a time when the number of shoppers on the buy-now-pay-later (BNPL) financing model has tripled in three years, reflecting the surge in innovative hire-purchase schemes and the impact of a tough economy.
Findings from the 2024 FinAccess Survey published by the Central Bank of Kenya (CBK), the Kenya National Bureau of Statistics (KNBS), and the Financial Sector Deepening Trust (FSD) Kenya estimated that about 1,751,994 Kenyans used hire purchase or lipa mdogo mdogo services last year compared to 579,242 Kenyans in 2021.
The Lipa Later insolvency also extends a trend witnessed since 2021 where notable homegrown tech startups have shut down, shining a spotlight on the biting woes that the newbies continue to face.
Last year alone, sector startups that included Copia, Gro-Intelligence, iProcure, and MarketForce bowed out of the market, either in full or in part, pointing to the continued deterioration of the landscape.
The shutdowns in 2024 came after a flurry of startup collapses witnessed in the preceding two years, with a Business Daily analysis in September 2023 showing that at least eight Kenyan-born tech newbies had closed down within two years despite having raised close to Sh35 billion in collective investor funding.
