Kuunda, a digital lending company operating across Africa, has completed a $5 million secondary share sale that allows some of its earliest backers to sell down their stakes while bringing a larger long-term shareholder into the company.

E4E Africa, an investment firm, led the transaction. Existing investors Accion Ventures, Portugal Gateway Fund and Seedstars Africa Ventures also increased their holdings.

Announced on October 13, the deal is a secondary share sale, a structure in which existing shareholders sell their shares to other investors. Unlike a traditional funding round, the proceeds go to the selling shareholders rather than directly into the company. Secondaries are a common liquidity tool in venture investing, where early backers often wait years for an exit through a listing or an acquisition.

For early investors, the transaction provides a way to recover part of their capital without waiting for Kuunda to list through an initial public offering (IPO) or be acquired.

"This is an important milestone for Kuunda and our investors," said Andrew Milne, of Kuunda. Completing the sale reflects the strength of the business and its lending infrastructure, which serves millions of people across Africa, he added.

Kuunda supplies the technology that enables mobile money operators, banks and other financial service providers to extend credit to customers, merchants and agents. According to the company, its lending infrastructure has disbursed more than 870 million loans worth over $4.4 billion, reaching 14.6 million agents, merchants and consumers across Africa.

The services help individuals and businesses access short-term credit for everyday transactions, particularly those who may struggle to obtain loans through traditional financial institutions. Kuunda currently operates in five markets and plans to expand into seven additional ones.

Bas Hochstenbach, managing partner at E4E Africa, said the company uses technology and partnerships with financial institutions to deliver credit to underserved consumers and small businesses. He cited Kuunda's growth and its focus on building a sustainable business as reasons for increasing the firm's investment.

The sale underscores how investors in African startups can recover their investments before a company goes public or is acquired. It also allows existing shareholders to raise their ownership without the company issuing new shares, leaving the company's share count and the stakes of holders who do not sell unchanged.

For Kuunda, the transaction installs E4E Africa as a larger long-term shareholder as the company prepares to enter new markets. The $5 million should not be mistaken for fresh operating capital, however, as the proceeds go to the shareholders selling their shares.

The company says it remains focused on expanding its lending infrastructure and building profitable financial products for consumers and businesses across Africa. Its planned entry into seven additional markets will be the next milestone to watch for that strategy.