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Date: 8 October 2020

Verdant Capital Completes a USD 10 million Debt and Equity Financing for Tugende

Verdant Capital

Tugende has raised USD 10 million in debt and equity capital from a consortium of investors arranged by Verdant Capital. This capital raise includes a strategic equity investment by Mobility 54, the Africa-focused investment fund of Toyota Tsusho Corp. This adds further strength to Tugende’s balance sheet and pushes the total balance sheet size above USD 30 million. Additional details on the equity raise can be found here.

Tugende’s business has rebounded robustly after the lockdowns imposed in Uganda to help stem the spread of the COVID-19 virus. Since the relaxation of the lockdowns, Tugende’s client payments have recovered to close to pre-lockdown levels and it has resumed serving new clients. During the crisis, Tugende proactively addressed its clients’ needs by waiving penalties and interest and by providing unconditional cash grants. The completion of this major fundraising milestone, notwithstanding the turbulent operating environment in 2020, is a testament to the strength of the company’s team and business model and underlined the investors’ motivation to complete the investment in a best-in-class high-impact innovative credit business.

Using asset finance, technology and a high touch customer model, Tugende is tackling part of the USD 331 billion credit gap MSMEs face across Africa. Since its launch in 2010, Tugende has financed 35 000+ clients and processes (pre-COVID crisis) 500+ applications per week across their 17 branches in Uganda with a market leading low default/write-off rate. Through expansion into new markets and increased product offerings, Tugende aims to continue along its steep growth curve to have a net portfolio value in excess of USD 100 million by the end of 2022.

Tugende has 23 000+ active clients, with 12 000+ completed (now owning the asset) clients as at the end of Q3 2020. More than 32,000 customers have benefited from Tugende’s lease-to-own package which includes training, safety gear, insurance and a clear path to ownership. The economic impact has a much larger ripple effect, with 156 795 household members having benefitted from the increased income, job stability, and health and life insurance coverage for one of the key earners of the household. In total, assets worth more than USD 11 million have been transferred into the hands of its customers through a relatively simple process. Clients make lease payments through a 100% electronic, cashless method on a weekly basis, allowing the driver to double their daily income from the onset of the lease. Full ownership of the asset is gained after 24 months (or less), allowing the owner-driver to achieve financial freedom through the ownership of an asset worth USD 700. Growth is driven by word-of-mouth and customer satisfaction. Operational and financial discipline reign supreme: by maintaining a robust hands-on approach, Tugende ensures exceptionally low default rates and significant repeat client business.

Tugende kick-started its geographic expansion with the launch of its Kenyan operations in November 2019 with the opening of its maiden branch in Kisumu. Tugende plans to diligently scale up in Kenya while evaluating an entry into other attractive markets which have been identified and screened, benefitting from support of the M54/TTC group in market entry. Additional growth and scale will be provided through product diversification into 4-wheel vehicles, appliances, and agricultural equipment.

Tugende is building a digital ecosystem through which its clients can access a variety of services such as a fully transparent digital credit profile, insurance renewal, working capital, and the acquisition of new assets, to name a few. These investments in technology will enhance customer satisfaction and facilitate access to life enhancing products, while allowing Tugende to further optimise origination, data analytics and credit appraisal as the business scales. Thus, by leveraging technology, the company will remain at the forefront of providing affordable, realistic, yet innovative solutions to all its clients across Africa, current and future.

The transaction is Verdant Capital’s second completed transaction in Uganda in 2020, following advising on the sale of plantation forestry business Global-Woods.

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