Africa —one of the world’s least developed and often misrepresented regions— is leading the creation of a new wave of financial tech (fintech) products. In the process, the continent’s entrepreneurs are showing how digital access to non-traditional banking and financial services can be key to overcoming financial exclusion in emerging markets.
Even casual market watchers will have noticed lately how venture capital is drying up around the world. Runaway inflation stemming from war in Ukraine, stubborn supply chain issues and rich world economies re-animating from their pandemic stupor has prompted central banks to raise rock-bottom interest rates at a blistering pace. This has ended an extraordinary stretch beginning after the 2008 financial crisis that saw global investors funnelling record investment toward start-ups based on seemingly limitless access to cheap money.
However, Africa has defied this trend — its start-up funding grew by 139% during the first six months of 2022 compared to 2021, on top of raising a record $5 billion last year.
African fintechs are also unique in another way, given how their growth is being driven by the mother of all innovation: necessity.
Even after three decades of economic expansion, large swathes of Africa remain bereft of essential goods and services. And as the world’s sole region still experiencing robust population growth—and one dominated by informal economies where the majority of workers remain unbanked—financial inclusion will become an even more salient issue over time.
Here’s where mobile phone technology has been a gamechanger. Amid the convergence of a new generation of digital-savvy youth, rapid urbanization, underserved middle classes and a landmark continental free trade agreement, mobile phones have reached a 46% penetration across Sub-Saharan Africa, a rate higher than in India.
Africa’s fintech ecosystem also reached a new milestone in June, when MFS Africa, the continent’s largest facilitator of digital payments whose network integrates more than 320 million mobile money accounts across dozens of African countries, purchased an American firm to accelerate its growth strategy in a deal reportedly worth US$34 million. The rare move is indicative of how African companies are becoming more confident and assertive in their plans to become global giants within the fintech industry, and in turn provide answers for finance and development issues across the Global South.
But there are still challenges. New tax regimes and regulatory mandates could materialize down the line, as governments try to exercise more control over their digital environments through introducing domestic legislation. However, the hope is that African nations will follow the lead of influential countries Nigeria and South Africa; the continent’s two largest economies have both embraced digital finance.
Policy harmonisation between countries and within regions must be improved as well, although rectifying this is a key pillar of the new African Continental Free Trade Area, launched in January 2021. The continent also suffers from perceived risks around its political stability — true or otherwise — especially considering the re-emergence of military governments and strongman regimes, particularly in west Africa.
However, it’s important to consider such challenges in their proper context. The overwhelming need and utility mean Africa’s fintech sector will still grow and evolve despite some degree of political dysfunction.
Therefore, actors in the fintech industry outside the continent are arguably staring at a generational opportunity to forge innovative and meaningful connections with their African counterparts. However, far from its frequent portrayal as a homogenous bloc, Africa is incredibly diverse — no singular approach will work for every country.
For forward-thinking companies who want to learn more about the opportunities for interaction between Africa and Canada — a widely-recognized global leader in fintech funding, development and innovation —the Afrifursa Fintech Summit, AFRIFIN will bring together dynamic founders, coverage of the latest innovations in fintech, and exciting opportunities for collaboration between Africa and Canada.
More specifically, participants will learn:
For the African side:
How to engage Diaspora communities that contribute significantly to tech innovation, to gather opportunities for remote jobs globally, to attract investment from other global regions and,
For the Canadian side:
How to go global and diversify trade partners, to engage African newcomers and Diaspora communities more, to attract FDI from foreign tech firms.
The Afrifursa Fintech Summit, AFRIFIN will be held on the 22nd of September 2022 from 10 am – 4 pm ET/ 4 pm – 10 pm CAT. Register to secure your virtual seat at: afrifin2022. Access is free
Tapfuma Musewe is the founder of Afrifursa, an organization that connects the African diaspora and others with opportunities for collaboration across Africa. Kyle Hiebert isan independent analyst and contributing writer for the Centre for International Governance Innovation, and former deputy editor of the Africa Conflict Monitor.
