Nigerian fintech company Risevest has made a significant move by acquiring Kenyan investment startup Hisa, marking its formal entry into the East African market. This strategic acquisition enables Risevest to expand its operations without needing to secure new licenses in Kenya, thanks to Hisa’s existing regulatory approvals. As a result, Risevest can leverage Hisa’s local market expertise and regulatory framework to build its presence in East Africa more rapidly.

Risevest’s Expansion Strategy

This acquisition is a key part of Risevest’s broader expansion strategy, particularly within the African continent. Founded in 2020, Risevest has quickly become one of the leading fintech players in Nigeria, offering wealth management services to its approximately 600,000 users. The company allows users to invest in dollar-denominated assets, such as U.S. stocks, from the comfort of their mobile devices. Its growth has been driven by a robust platform that provides retail investors access to international financial markets, which were previously inaccessible or difficult to navigate.

Hisa, on the other hand, was also established in 2020 by Eric Asuma, and has carved out a niche for itself in Kenya’s investment landscape. Hisa allows its users to buy and sell U.S. stocks through its app, democratizing access to international investment opportunities for Kenyans. The platform was valued at $5 million after raising $250,000 in pre-seed funding, with backing from notable investors such as Faida Investment Bank and Estonia-based Startup Wise Guys.

By acquiring Hisa, Risevest positions itself to take advantage of the growing digital investment sector in Kenya, which is projected to reach a transaction value of $2.7 billion by the end of 2024. The deal is significant for Risevest as it not only accelerates its expansion into East Africa but also provides the company with the opportunity to tap into a burgeoning market with a strong appetite for digital financial products.

Strategic Importance of the Acquisition

The deal marks Risevest’s second acquisition in less than a year, following its purchase of Nigerian fintech company Chaka in September 2023. Chaka is known for providing access to global investment options for Nigerian users, much like Hisa’s model in Kenya. With both acquisitions, Risevest is building a pan-African fintech operation that spans multiple regions and leverages local market knowledge in each country.

One of the standout aspects of this deal is that Hisa will continue to operate under its existing brand. The decision to maintain the Hisa brand, as well as keep its current leadership team, signals a careful approach to the integration of the two companies. Eric Jackson, who was previously Hisa’s CEO, will transition to the role of Chief Technology Officer (CTO). Meanwhile, Eric Asuma, Hisa’s co-founder, will assume the role of Strategy Advisor, ensuring continuity in the company’s strategic direction. Additionally, Leah Njoroge, Hisa’s Finance Associate, has been promoted to Head of Operations, reporting directly to Eke Urum, the CEO of Risevest.

The retention of the leadership team highlights Risevest’s commitment to understanding the nuances of the Kenyan market before making significant operational changes. In a statement, Urum emphasized that no major changes are planned for now, as it is crucial to “understand the company, culture, context, and market” before implementing any large-scale transformations. This cautious approach is often seen in successful mergers and acquisitions, where the goal is to preserve the acquired company’s strengths while gradually integrating its operations with the parent company.

Kenya’s Growing Digital Investment Landscape

Kenya’s investment market has been on a growth trajectory, with the digital finance and investment sector gaining particular momentum. The country has a young, tech-savvy population that is increasingly turning to digital platforms for investment opportunities. Mobile banking and digital wallets are widely used, and the rise of fintech companies offering investment services has contributed to the diversification of financial products available to Kenyan consumers.

According to estimates, Kenya’s digital investment market is expected to reach a transaction value of $2.7 billion by the end of 2024, reflecting the significant potential for companies like Risevest and Hisa to capture a growing share of the market. This acquisition allows Risevest to enter Kenya at a time when demand for digital investment platforms is surging, positioning it well to grow its user base in the region.

Challenges and Opportunities

Despite the promising outlook, the acquisition is not without its challenges. While Hisa’s regulatory approvals allow Risevest to bypass the lengthy process of obtaining new licenses, the company will still need to navigate Kenya’s complex regulatory environment. Financial technology companies in Kenya, like elsewhere, must comply with strict anti-money laundering (AML) and know-your-customer (KYC) regulations, as well as data protection laws. Ensuring that Hisa remains fully compliant with these regulations while scaling operations will be a key challenge for Risevest.

Another potential challenge lies in competition. Kenya’s fintech sector is highly competitive, with multiple players vying for dominance. Companies such as Safaricom, Equity Bank, and M-Pesa have established strong footholds in the digital finance space, and new entrants must offer unique value propositions to capture market share. However, Risevest’s focus on providing access to international investment opportunities through a user-friendly platform may give it an edge in attracting a segment of the market that seeks more diversified investment options.

On the other hand, the acquisition presents numerous opportunities. By integrating Hisa’s platform with its own, Risevest can offer Kenyan users a broader range of financial products, including access to U.S. stocks, ETFs, and other international investment vehicles. This diversification will likely appeal to Kenyan investors looking to hedge against local currency risks by investing in foreign assets.

Additionally, Risevest’s entry into Kenya through the acquisition of Hisa may pave the way for further expansion into other East African markets. Countries such as Uganda, Tanzania, and Rwanda are also seeing growing interest in digital financial products, and Risevest could potentially expand its services to these markets in the future. The acquisition, therefore, positions Risevest for regional growth beyond Kenya, as it can leverage Hisa’s platform to scale across multiple markets in East Africa.

Industry Reactions and Market Impact

The acquisition has generated significant interest in the fintech and investment community, with industry experts noting that the deal signals a broader trend of consolidation in the African fintech sector. As fintech companies expand across borders, mergers and acquisitions are becoming more common as a way to gain market entry, secure regulatory approvals, and scale rapidly.

The deal has been praised for its strategic alignment, with Risevest benefiting from Hisa’s local market knowledge and licenses, while Hisa gains access to Risevest’s resources and expertise in wealth management. The acquisition is expected to have a positive impact on both companies, enabling them to offer enhanced services to their users while accelerating their growth.

However, some analysts have raised concerns about the lack of transparency regarding the financial terms of the deal. While it has been reported that the acquisition involved a mix of stock and cash, specific details have not been disclosed, and independent confirmation of the financials is still pending. This lack of transparency may raise questions among investors and regulators, particularly if further details about the deal are not forthcoming.

Conclusion

The acquisition of Hisa by Risevest is a significant milestone for both companies, as well as for the broader fintech landscape in Africa. By entering the Kenyan market, Risevest is positioning itself to capitalize on the growing demand for digital investment platforms in East Africa, while Hisa stands to benefit from Risevest’s resources and expertise.

As the deal progresses, it will be important to monitor how the two companies integrate their operations and navigate the regulatory challenges in Kenya. The success of the acquisition will ultimately depend on their ability to maintain compliance, scale operations, and offer compelling value propositions to Kenyan investors. If successful, the acquisition could serve as a model for other fintech companies looking to expand across Africa’s rapidly growing digital finance sector.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

13th August, 2024