The fintech industry is Africa’s financial inclusion solution for all vulnerable groups including women.
- Sub-Sahara Africa, fintech startups recorded 894% year-on-year growth in funding in 2021
- More than 400 million new mobile subscribers expected to sign up globally by 2025
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A report published by McKinsey claims that the number of tech start-ups in Africa tripled to around 5,200 companies between 2020 and 2021 and just under half of these are fintech startups.
In the report titled ‘Fintech in Africa:The end of the beginning’ McKinsey shows that in line with global market leaders, the African fintech industry enjoyed revenues of between US$4 billion and US$6 billion in 2020 and average penetration levels of between 3 and 5 percent.
The fintech industry is Africa’s financial inclusion solution for all vulnerable groups including women, the elderly, and the larger section of the population in remote rural settings.
“What you have here is not fintech disruption, the continent is experiencing a fintech eruption, and local and international investors are taking notice,” states the McKinsey report.
Through Fintech’s digital financial services like digital wallets, money transfers, and QR codes, the previously unbanked population is now getting accounted for.
“Majority of this unbanked population have mobile phones and that means they can access alternative banking solutions offered by the fintech industry,” says Mark Elliott, President of Mastercard Sub-Saharan Africa.
“By accessing mobile money services, this informal sector is now creating digital footprints that allow them access to funding in ways they could not before,” explains Elliott.
He adds that fintech start-ups are not only offering financial freedom to individuals but are the ongoing economic growth in sub-Saharan Africa.
Of the more than 400 million new mobile subscribers expected to sign up globally by 2025, the majority will come from Africa and a cellphone, more or less, equals an opportunity for fintech services.
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A Mastercard financial survey estimates that more than half of the adults in Africa have no access to formal banking services, that is more than a million people market for the fintech industry.
Fintech 50, which is run by MetLife Foundation, Visa, and IFC, compiles the ‘top early-stage fintech that contributes to financial inclusion around the world’ list. The latest list shows that 16, or a third of the 50 companies selected are based or have operations in Sub-Sahara Africa.
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You are not late, invest in Africa’s fintech industry
“With the use of the internet, blockchain, and algorithms, fintech companies have widened the reach of financial services like loans, insurance, payments, investments, and wealth management for Africa,” states Fintech 50.
The opportunity lies in both fintech startups and “new value chain and facilitating new technologies that enhance provision and expansion of financial service across Africa.”
Just how big is the Sub-Sahara fintech industry, the Mastercard ….lays it bare:
“Across Sub-Saharan Africa, fintech startups recorded 894% year-on-year growth in funding in 2021 that’s over $1.5 billion.”
That same year, the fintech sector accounted for 27% of the record-high number of investment deals that were closed and represented 61% of the USD $2.7 billion that was invested across Africa.
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All you need is the right products to provide niche solutions and you have a fintech money maker. Problem solving start ups in the fintech industry “…attract funding and investment, leading to great interest and rapid expansion of the fintech sector.”
Below are some of the leading fintech start-ups to look out for. How should you select the most promising start-ups, well first the numbers don’t lie but also as the Mastercard fintech guru explains, “…the most successful fintech innovations will eliminate pain points and reduce friction, bringing effortless convenience to our fingertips.”
Who to look out for: Top 5 Fintech Start-Ups in Africa
- JUMO (South Africa)
- KuCoin (Seychelles)
- MFS Africa (South Africa)
- Opay (Nigeria)
- Paga (Nigeria)
Source: CB Insights Fintech
East Africa Top 5 fintech start-ups
- Digital Mobile Africa DMA Limited(Tanzania)
- FlexPay LLC (Kenya)
- Lipa Later Limited (Kenya)
- Malipo Circles Limited (Kenya)
- Ensibuuko (Uganda)
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MetLife Foundation research for the inclusive fintech initiative shows that: “About 40% of the 50 companies provide credit products to under-served segments including small businesses, while 25% offer infrastructure solutions like biometrics software that enable financial institutions to expand access to previously excluded groups.”
“Fintech startups offering insurance; payments and remittances services; savings as well as personal financial management tools each made up 15% of the 50.
The African fintech industry is now the magnate for investment, the average deal size is growing and the proportion of fintech funding in Africa is increasing drastically.
The fintech industry is creating employment for youth, increasing financial inclusion for the underserved, and contributing immensely to national GDP in each and every country on the continent.
As pointed out, you are not late to invest in the Sub-Sahara Africa fintech boom; “As fintech matures, financial services on the continent are at an inflection point, and several African countries have a significant opportunity to capitalize on the momentum of recent years to unlock further potential in the sector.”
Experts admit that cash is still king in Africa. At the moment, cash transactions represent more than 90 percent of all transactions in Africa, but that is now, and that is good news for investment because it just means that “…fintech revenues have huge potential to grow.”
Take Kenya for instance. Kenya has one of the highest levels of fintech penetration in the world, and the McKinsey report estimates that taking the Kenyan trend as an example of the region, then Sub-Sahara and all of Africa’s fintech revenues could reach eight times their current value by 2025.
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So, when it comes to the question of where to invest next, make an informed decision, invest where there is growth, put your money where you will make a difference, invest in Africa, invest in Africa’s booming fintech industry.