Friday, January 08, 2020 / 10:06 AM / By Medici / Header Image
Credit: Medici
Introduction
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
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