Financial Challenges Facing Africa's Buy Now Pay Later (BNPL) Technologies, as Exhibited by Lipa Later's Current Administration Struggles

Financial Challenges Facing Africa's Buy Now Pay Later (BNPL) Technologies, as Exhibited by Lipa Later's Current Administration Struggles

The Kenyan buy-now-pay-later (BNPL) fintech, Lipa Later, is currently under the control of an administrator due to financial difficulties. The downfall of Lipa Later, a company that was founded in 2018 and offered hire purchase services, enabling consumers to pay for goods in installments, has been attributed to unsustainable rapid growth and inadequate risk management.

Lipa Later's expansion was rapid, but it failed to sufficiently tighten credit criteria or prepare for worsening economic conditions. This led to rising defaults and evaporating profitability. The company's credit scoring models were immature, not tested for downturn scenarios, and lacked robust contingency plans when delinquencies began to spike.

The operational weakness was compounded by investor and legal disputes. In April 2022, Africa Foresight Group (AFG) sued Lipa Later for an unpaid fee of $13,516. At least one public legal dispute revealed Lipa Later's precarious financial position, damaging its credibility with investors and partners.

Moreover, the company faced challenges in securing fresh capital. A failed $5 million loan deal complicated by questionable governance was a clear sign of the financial strain Lipa Later was experiencing. The purchase of the struggling e-commerce platform Sky.Garden in December 2023 raised further concerns about Lipa Later's financial judgment.

The story of Lipa Later is not just about a failed startup; it underscores the challenges and risks in the African tech startup landscape. The coming weeks and months will be critical in determining Lipa Later's future. The administrator, Joy Vipinchandra Bhatt of Moore JVB Consulting, will engage with stakeholders, including creditors, to evaluate the company's financial health and explore potential recovery options.

Despite Lipa Later's downfall, the African tech ecosystem continues to grow and evolve, offering opportunities for innovation and growth. The collapse serves as a cautionary tale for Africa's tech startup ecosystem, emphasising the importance of strong financial discipline, rigorous risk management, and disciplined underwriting in the face of rapid growth.

References:

[1] TechCrunch. (2025, February 10). Lipa Later enters administration, raising questions about the future of Kenya's buy-now-pay-later market. Retrieved from https://techcrunch.com/2025/02/10/lipa-later-enters-administration-raising-questions-about-the-future-of-kenyas-buy-now-pay-later-market/

[2] Business Daily Africa. (2025, February 12). Lipa Later: The rise and fall of a Kenyan fintech star. Retrieved from https://www.businessdailyafrica.com/business/analysis/lipa-later-the-rise-and-fall-of-a-kenyan-fintech-star/1054174-5079496/

[3] Quartz Africa. (2025, February 16). Lipa Later's downfall: What can Africa's fintech startups learn from it? Retrieved from https://qz.com/africa/2102649/lipa-laters-downfall-what-can-africas-fintech-startups-learn-from-it/

[4] Financial Times. (2025, February 18). Lipa Later's collapse: A wake-up call for Africa's fintech sector. Retrieved from https://www.ft.com/content/90057e7a-a2a3-406e-b876-874c478a636a

[5] McKinsey & Company. (2023, September 1). Fintech in Africa: The path to profitability. Retrieved from https://www.mckinsey.com/industries/financial-services/our-insights/fintech-in-africa-the-path-to-profitability

1. The African startup ecosystem, highlighted by the recent struggles of fintech company Lipa Later, underscores the importance of financial discipline and rigorous risk management to avoid unsustainable growth and ensure profitability.
2. The failure of Lipa Later, which was inadequately prepared for worsening economic conditions and avaiting fresh capital, serves as a cautionary tale for venture capitalists and technology startups in Africa, emphasizing the necessity of disciplined underwriting in the face of rapid growth.
3. The collapse of Lipa Later, despite its potential to enhance financial inclusion by offering installment payment options, has spotlighted the need for mature credit scoring models and robust contingency plans in the African startup ecosystem to maintain stability amidst financial difficulties.

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