When it comes to fintech, you might be likely to think about the USA, the UK or even Europe as the centre of the world while it’s clearly Africa. This is something well known by African tech-sector entrepreneurs such as Mzi Khumalo, Sibusiso Shabalala, and Segun Adeyemi.
We will now give you three reasons why fintech, the people who embrace it and the companies that create it, are the positive driving force behind change in Africa.
If we consider sub-Saharan Africa, the uptake figures for mobile money adoption are quite astonishing. Not only this region has 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, according to the Brookings Institute.
Are you wondering why? Well, on the one hand, this is because of the leapfrogging phenomenon, where people in the developing world leap over obsolete technologies and straight onto the latest tech. But on the other hand, in the case of fintech in Africa, it’s also because the cost of mobile phones has decreased rapidly over the last couple of years, which provoked a boom in mobile phone ownership in a continent where poverty is still rife.
The good news for consumers and businesses is that ownership is expected to rise exponentially, according to estimates. By 2020, 634 million people in Africa will have a mobile phone subscription, which represents 52% of the entire population. In comparison with Africa, 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.
Now, we can observe that a new and exciting boom in tech startups has been driven by all these mobile owners with fintech money accounts, plus the huge untapped potential inherent in the young population.
If we go back only eight years ago, Internet penetration in Africa was only 13.5% in 2011. Today it’s 35.9%. It’s still below the world average and this growth may seem sluggish. Yet, 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.
The boom in African entrepreneurship has been fuelled with this voracious appetite for getting online. 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.
Investors across the world are now aware of the potential in Africa, and this doesn’t only mean big wins for the startups but positive change for people across the continent as well.
When Africa’s most famous and successful finch, M-Pesa, was born in 2007, the roots of the transformation driven by fintech could have been planted. Now a developing-world icon, M-Pesa has literally changed the lives of millions in Africa.
Sometimes, it might seem easier 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.
In 2007, M-Pesa was a revelation in Kenya. Fintech clearly empowers the disadvantaged in our world. 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.
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.
One of the world’s greatest tech-success stories is occurring in Africa with fintech. Where we go next can only be even more fascinating. But one thing is for sure: the potential is huge. By 2050, the youth population is expected to increase by 50% and Africa is projected to have the largest number of young people on the planet. Hopefully, their appetite for fintech is unlikely to diminish.