The African fintech industry has also mushroomed riding on the pandemic-caused economic slowdown. While banks struggled to stay afloat, even with fiscal cushioning from governments, African fintech filled the gap.
On a continent where cash is still king, African fintech is scooping in huge amounts and exhibiting even larger potential growth. Notably, one of the fastest-growing African fintech hubs in East Africa is Kenya, Uganda, Rwanda, Burundi, S. Sudan, Tanzania and now, DR Congo.
The seven East African Community (EAC) countries are leading the continent’s fintech growth, and sector pundits are estimating that if the trend maintains the current trajectory as projected, then the African fintech industry revenues are expected to multiply almost tenfold by 2025.
According to the McKinsey analysis, it is estimated that Africa’s financial-services market could grow at about 10 per cent per annum, reaching US$230 billion in revenues by 2025.
The fintech industry is the fastest-growing start-up industry in Africa thanks to the exponential penetration of smartphone use and expanded network coverage.
This fact is perpetuated further by the remoteness of a large portion of the continent which has previously limited the scope of services that banks can offer.
With mobile phone penetration into the interiors of Africa, mobile money services have ferried fintechs to creating financial inclusion for Africa’s most excluded communities.
Not only are mobile money and other fintech services more accessible, they are by all means up to 80 percent cheaper, less conditioned and offer up to three times more interest in savings.
With financial inclusion in mind, governments are taking notice and offering more supportive regulatory frameworks, ever further assuring that the African fintech industry growth rivals that of more mature markets, the likes of Vietnam, Indonesia, and India.
Despite the high potential seen in East Africa, with countries like Kenya standing out, South Africa still commands approximately 40 per cent of the industry revenues.
On the western part of the continent, too, in places like Ghana, growth is at 15 per cent per annum and will only get higher all through 2025. Then you have the larger economies coming in; Nigeria and Egypt are both expected to enjoy annual growth rates of 12 per cent over the same period.
While growth rates at this early stages are higher in less developed East African countries, economies with more mature financial systems and digital infrastructure, the likes of South Africa stand a greater chance of executing more innovation in the fintech industry and implementing security measures such as regulatory technology including anti-money laundering.
However, in these younger East African markets where financial systems and digital infrastructures are still in their infancy, fintech services will continue to reign in large amounts offering services ranging from underwriting, insurance, banking-as-service, and buy now, pay later services in retail and lending for SMEs.
.The African fintech industry has multiple positive effects and multiplier effect on economies. The industry is creating much needed jobs, increasing technical skills in digital revolution and increasing financial inclusion altogether.
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As the continent experiences digital transformation, studies show that over 230 million jobs in sub-Saharan Africa alone will require digital skills by 2030, making the ongoing skill adoption even more meaningful and necessary.
Further still, the growth of the fintech industry and the related digital transformation is also improving healthcare, education systems and even agriculture and an overall increase in financial inclusion.
With such growth rates and such widespread impact, it is imperative for regulators to create assurance for Africa investors further. For example, investors need assurance that governments will maintain favourable policies over time.
With digital transformation, there is also a need to formalize data systems and invest in digital ecosystem securities, including identification and tracking systems as well as the already mentioned need for stringent money laundry measures to protect African investors.Close
There is also a need for capacity building both in terms of human resource training for the digital era that is at hand with specifics for fintech needs but also for the wider interconnectivity of industries.
Since fintechs are creating financial inclusion, governments must build the foundation for the fintech structures that are being built at such tremendous scales. Regulators must support the digital ecosystems necessary to keep the ongoing fintech growth in par with international stands and align them with their national development priorities.
All said and done, investors in African fintech are enjoying tasty returns from the sweet welcoming embrace that African SMEs and individuals have offered.
There is still huge room for growth; the demand is high, with large underserved communities still at large. While there may be bumps on the road ahead as regulators and other players wake up to this fintech boom, growth is inevitable.
Investors eyeing an opportunity in Africa will do well to venture into the fintech industry that is creating financial inclusion. That said, regulators in Africa should also put more effort towards empowering local investment in fintech, including placing favourable policies for domestic investors entering the sector and fostering overall digital transformation.
Source : AllAfrica