Three reasons why fintech is driving change in Africa


When it comes to fintech, the centre of the world is not the USA or the UK or Europe, it’s Africa.

This is something that African tech-sector entrepreneurs such as Mzi Khumalo, Sibusiso Shabalala, and Segun Adeyemi know all too well.

Here are just three reasons why fintech, the people who embrace it and the companies that create it, are the positive driving force behind change in Africa.

Uptake of mobile banking

The uptake figures for mobile money adoption in sub-Saharan Africa are quite staggering.

According to the Brookings Institute, not only does this region have the most money accounts, most mobile outlets and the highest volume of transactions in the world, but it also has more mobile money account users than people with physical bank accounts.

Why? Partly because of the leapfrogging phenomenon, where people in the developing world leap over obsolete technologies and straight onto the latest tech.

But in the case of fintech in Africa, it’s also because the cost of mobile phones has dropped rapidly over the last couple of years, creating a boom in mobile phone ownership in a continent where poverty is still rife.

According to estimates ownership is set to rise exponentially, which is good news for consumers and businesses. By 2020, 634 million people in Africa will have a mobile phone subscription – that’s 52% of the entire population.

To put that in context, mobile phone ownership in India last year was languishing at around 30% of the population, in a nation often cited as the developing world’s tech leader.

All these mobile owners with fintech money accounts, plus the huge untapped potential inherent in the young population, are driving a new and exciting boom in tech startups.

Tech startup explosion

Internet penetration in Africa in 2011, just eight years ago, was only 13.5%. Today it’s 35.9%. Yes, it’s below the world average and you’d be forgiven for thinking this growth sluggish.

But between 2000 and 2012 the number of users grew at seven times this global average; that’s 3,600% growth, according to the Internet World Statistics. In Kenya alone, internet users went from 200,000 in 2000 to a whopping 19.6m in 2018.

This voracious appetite for getting online has fuelled a boom in African entrepreneurship. Last year the number of startups that grew by 32% and funding by more than 70%; estimates for total funding of African startups vary but it’s safe to say in 2018 it was around the $1 billion mark.

These are big figures and fintech companies have reaped the benefit. One African fintech, mobile-pays company Cellulant, raised $47.5 million last year in its Series C round, and in 2017, Lagos-based fintech, Flutterwave raised $10 million in its Series A round.

Investors across the world are beginning to wake up to the potential in Africa and not only does that mean big wins for the startups but positive change for people across the continent.

Changing lives in Africa

The roots of the transformation driven by fintech were planted in 2007, when Africa’s most famous and successful fintech, M-Pesa, was born. Now a developing-world icon, M-Pesa has literally changed the lives of millions in Africa.

Sometimes it’s easy to think of fintech only in a western context and forget that banking is something that a vast number of people still can’t access.

That is a problem not just because the unbanked find it hard to access utilities, services and the basics of life, but also because carrying around lots of cash, such as your wages, is incredibly unsafe in many parts of Africa.

Fintech empowers the disadvantaged in our world and in Kenya, in 2007, M-Pesa was a revelation. It enabled people, and even whole communities, who had never had a bank account to send and receive money; pay for essentials like heating, water and lighting, and start new businesses.

It also meant that you didn’t have to carry money around and put yourself at risk of being robbed.

For example, 96% of Kenyan households use the M-Pesa app and it, along with other fintechs, is credited with transforming not just people’s lives but the whole Kenyan economy.

According to a 2016 study, The long-run poverty and gender impacts of mobile money, fintech has lifted almost 200,000 households out of extreme poverty, and enabled almost the same number of women to move on from subsistence farming into business.

Mobile money in Kenya has had a direct impact on the nation’s economy too. The Central Bank of Kenya recently reported that Kenyans moved the equivalent of almost half the country’s GDP, 44%, through their mobile phones in 2018.

But in a country where there are more than 47m mobile accounts, one for at least every person living in Kenya, this should not come as a big surprise.

Fintech in Africa is one of the world’s greatest tech-success stories. Where we go next can only be even more fascinating. But one thing is for sure: the potential is huge.

By 2050 it’s estimated that the youth population will have increased by 50% and Africa will have largest number of young people on the planet. And their appetite for fintech is unlikely to diminish.