Fintechs in Africa is dominating fundraising compared to other African Startups. Tech startups in Africa raised up to $5 billion and sealed big deals in the year 2021.
But, Fintechs took a large part of the fundraising which accounts for about $3 billion or even two-third of investments raised by startups in Africa in the year 2021.
A report by Briter Bridges market insights firm shows this and also shows that the amount doubled the $1.35B investment realized in 2020. The 2021 funds also were triple the amount in 2019.
Growth opportunities for Fintechs in Africa
According to McKinsey study, Africa is the world’s second-fastest-growing and profitable banking and payment market after Latin America.
This means the Fintech sector is prone to attract investors who are relying on the increasing opportunity for growth.
Africa is already a global leader in the adoption of Mobile money going by the bulk of mobile money transactions made in 2020. The number of mobile money accounts In the year 2020 rise by 43%.
The role of Mobile money
Mobile money across the African continent is due to ease of access by the advancements in telecommunications technology created.
For instance, M-Pesa, East Africa’s biggest telco, Safaricom’s mobile money service. M-Pesa requires no internet connection for its users to receive or send money, and also in paying utility bills.
M-Pesa wallet works in a way that it turns its users’ phone numbers into a kind of proxy for bank accounts.
This service is presently Safaricom’s top earner surpassing voice after the platform’s revenues hit $745 million in March 2021 the end of the financial year.
Across the region (Kenya especially), M-Pesa is serving as a lead for a load of new services that will be coming online. For example, in 2012, Safaricom launched M-Shwari, an app for loans and savings products.
M-Shwari happens to be the foundation for the adoption of lending applications. Different related apps have since found their way into the market including Silicon Valley-backed Tala and Branch.
These now-popular lending apps use users’ transaction history to know the amount of instant credit to extend to borrowers. Afterward, the customers’ mobile money wallet is then credited.
These startups are making loans accessible to a lot of people with no history of credit scores. Also, those who are cut out for loans by financial institutions due to a lack of banking history data.
Going by the incremental funding for Fintechs in Africa over the years, capital injected into these startups is only likely to increase with deepening mobile phone usage and internet penetration.