Africa is a unique region in several ways. The continent has diverse cultures, different languages, and wealth distribution is on an extreme spectrum. Africa also has 6 of the world's top 10 fastest economies as per the World Economic Forum; Africa's average GDP growth has consistently outpaced the global average and is expected to remain at least 6% until 2023.
As a continent, Africa has focused on leveraging technology, especially in the last decade using mobile carriers to push the financial inclusion agenda. Africa's mobile subscription penetration is at 80%, and for countries such as Kenya, this figure is over 91%.
This is a major factor for FinTech booming in the continent. In this report, MEDICI analyzed 581 FinTechs that have been founded in Africa, and during the analysis period of this report from January 2018 to November 2020, over $821.94 million had been invested in the sector. As per our analysis of the market over the last four years, there has been a steady growth in FinTech funding in Africa between 2016 and 2019.
Due to COVID, the number of startups founded in 2020 has reduced significantly. The average number of companies founded between 2015 and 2020 is close to 66, while the average number of FinTechs founded between 2010 and 2014 is close to 30, which shows that FinTech is starting to gain traction in the African market.
FinTech has played an important role in the growth of Africa's financial sector. It has provided an alternative to the traditional financial sector, especially in the rural and urban areas where proximity is a barrier to access services and products from incumbent banks and FIs.
Growth of FinTech Startups in Africa
Mobile money has been a catalyst to the revolution in banking and financial services in Africa, which started in Kenya and subsequently spread across the continent. It demonstrated that people are ready to adopt new offerings along with unlocking an opportunity for entrepreneurs to develop new solutions that drive financial inclusion in the continent by providing them access to financial services from their mobile phones.
The growth of FinTechs in Africa would potentially be fueled by the African Continental Free Trade Agreement that has 54 of the 55 African Union (AU) nations. Among other objectives, this agreement aims to create a single market and deepen economic integrations. Once the agreement comes into force, Africa would be the largest free trade area, and this will help FinTech companies expand their services across the continent without much regulatory barriers. This is also likely to incentivize successful FinTech businesses in overseas markets to introduce their offerings in the continent.
During this analysis we also observed multiple acquisitions and exits clearly demonstrating vibrant consolidation. Over the past decade, there were over 30 such deals. The two biggest deals were the acquisition of EMP and DPO Group by Network International for about $320 million and $288 million, respectively. A total of 21 of those were in Payments, indicating a clear consolidation trend in this segment-the most mature of all FinTech segments in the continent. Governments across the continent and regulators in respective countries are taking steps to bolster innovation using FinTech as a vehicle.
Here are some of the initiatives:
Local authorities in the continent have undertaken many other initiatives. Owing to a large customer base, quick adoption of new technologies by people, and regulatory support, FinTechs have a great opportunity to provide banking and financial services to those who were previously left out.
Africa FinTech Landscape
Break-up of 473 active startups in Africa
South Africa, with 190 active startups, and Nigeria, with 141 active startups, have the largest FinTech ecosystem in Africa, followed by Kenya. We are also witnessing Egypt, Ghana, Uganda, and Rwanda as centers of innovation in financial technology in the continent.
Growth Over the Years in Top FinTech Ecosystems in Africa