The growth of financial technology (Fintech) in Africa continues to be revolutionary in how businesses and individuals make payments, access credit, and manage their money. Most significantly, fintech has been instrumental in promoting financial inclusion, especially due to the lack of the effectiveness of, overload on and limited number of traditional banking systems, leading to significant financial sector gaps. The advent of mobile money solutions and digital payment platforms has democratised access to financial instruments, providing millions of Africans with access to payments and lending services. Innovation and market needs are also critical in providing solutions to clients at all levels.
Fintech’s impact on the financial sector significantly democratises access to a large spectrum of financial services. It has acted as a catalyst enabling small and medium-sized businesses to access capital, payment options and lending solutions, positively impacting the cost and ease of doing business.– Funmilayo Otsemobor, Partner, Aluko & Oyebode (ALN firm in Nigeria).
According to reports from the Bolton Consulting Group (BCG), in collaboration with Elevandi, financial inclusion in Africa has grown exponentially since M-PESA was founded in Kenya in 2007. While South Africa, Kenya, Uganda, and Ghana are growing in financial inclusion above the regional average, fintech ecosystems in other African countries are maturing and attracting more investment.
Role of Fintech in Promoting Financial Inclusion for African
Fintech’s role in transforming Africa’s financial landscape is evident in its utilisation of the continent’s digital and technological revolution. The rapid growth of this technology is positively impacting businesses and the largely unbanked population across the continent, ensuring that they benefit from convenient payment and lending solutions, which are critical pillars of any economy.
Mobile money and digital wallets continue to gain widespread adoption, allowing users to perform financial transactions using their mobile phones. Services such as M-Pesa in Kenya and EcoCash in Zimbabwe have become integral to the financial lives of millions, enabling them to send and receive money, pay bills, and access other financial services without a conventional bank account.
Peer-to-peer lending platforms connect borrowers and lenders digitally, empowering entrepreneurs and SMEs who face challenges securing financing through conventional channels, and digital lending platforms such as Nigeria’s Fairmoney, Opay and Palmpay offer alternative sources of credit to individuals and small businesses that may have limited access to traditional bank loans, In addition to banking services, Fintech is expanding into insurance through Insurtech solutions, utilising data analytics and mobile technology to provide affordable and accessible insurance products.
Beyond banking services, Fintech is also extending into insurance, where Insurtech solutions leverage data analytics and mobile technology to provide affordable and accessible insurance products to individuals previously excluded from the formal insurance sector. This helps mitigate risks and protect vulnerable populations against financial shocks.
Impact of Fintech on Africa’s Economic Sectors
Fintech’s impact goes beyond Africa’s banking and finance industries. Its impact is felt across other key sectors, such as agriculture, insurance, and e-commerce, among others. Farmers are increasingly relying on mobile banking and lending solutions to secure loans for seeds, fertilisers, and equipment, fostering increased productivity and sustainability. Additionally, weather-indexed insurance is a potential solution offering protection to farmers against weather-related risks. This and other innovative insurance models use meteorological data to trigger payouts, providing a safety net for farmers in the face of adverse weather conditions.
Africa’s key sectors are feeling the positive impact of technological advancements. The emergence of fintech companies continues to provide a viable avenue through which businesses can access financial solutions and provide alternative means of banking, doing business, and managing finances. – Simon Kapampa, Partner, Musa Dudhia & Co (ALN firm in Zambia)
E-commerce is also experiencing significant growth, leading to access to goods and services across the continent. Online marketplaces and retailers are leveraging fintech platforms to offer various payment options, including mobile money and digital wallets, expanding the reach of e-commerce to a broader audience. Smallholder retailers have also found it convenient to operate their businesses without establishing a physical store.
Insurance products are becoming more accessible and affordable for individuals and small businesses. Across Africa, Microinsurance facilitated by Insurtech is addressing the unique needs of low-income populations, offering protection against various risks, including crop failure, health emergencies, and property damage. Digital claims processing is also being streamlined, with blockchain and artificial intelligence enhancing efficiency, reducing fraud, and expediting claims settlement, improving the overall customer experience.
Opportunities for Sustainable Growth, Investment and Development
According to a recent report by BCG, Africa’s fintech market is poised for significant revenue growth, with a projected USD 65 billion by 2030. This is further supported by the fact that Africa has over 90 percent mobile and 88 percent internet penetration. For context, Sub-Saharan Africa has more mobile users than the United States and the United Kingdom combined. Africans spend one-third of their daily lives on their phones.
The technology industry, particularly, is seeing tailwinds. While venture capital spending cratered globally in 2022 and 2023, according to McKinsey research presented at the conference, it is up nearly 10 percent in Africa. Due to this positive impact, African businesses are thinking beyond Africa. For instance, Flutterwave recently announced plans to scale its business to India. This will allow Fintechs to foster collaborations that strengthen the connection between the continent and the rest of the world.
Conventional banks should look at the advent of Fintech as an opportunity for collaboration, growth and partnership. When viewed from a positive lens, there are bound to be more opportunities for businesses and potential investors. – Valerie Bisasur, Partner, BLC Robert & Associates (ALN firm in Mauritius)
Collaboration between fintechs and traditional financial institutions is key in promoting financial inclusion and unlocking investment opportunities. Fintech continues to drive the future of Africa’s economic growth, proving that it’s not about producing faster and cheaper goods but more about providing real value to businesses and changing people’s lives.
Sources
African Business | Bankingly | BCG | Carnegie Endowment for Peace | Forbes | Tech Trends Kenya
