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Fintech could be the technological enabler of Africa’s economy

11 August 2022

“FinTech is emerging as a technological enabler in Africa, facilitating innovation in other sectors of the economy and allowing African nations to leapfrog more traditional infrastructure”. This is one of the main conclusion of a recent report from ICAEW (Institute of Chartered Accountants in England and Wales).

The report argues that economic growth in the region has mainly been driven by public infrastructure investment and the expansion of services to a largely underserviced population. However, it adds, financial technology could have a huge impact on Africa’s economic landscape, providing opportunities to diversify and increase growth avenues. Due to its great potential, the social and developmental benefits of more widely available services such as banking and insurance, Fintech is “increasingly receiving attention from both the private and public sectors”.

If managed appropriately, fintech provides a leapfrogging opportunity to foster inclusive economic growth and development. Although it wasn’t mentioned, Fintech’s growth is subject to the necessary and policy reforms, that will unleash the full potential of financial services. A modern legislative framework will accelerate penetration of smartphones, Internet access for more people and the development of advanced digital services, such as handset loans, fintech and monetary credit services.

The report focuses on two countries: Nigeria, which is a late bloomer on mobile money services and Kenya, which has a long history in this field.  Nigeria has the largest mobile market in Africa with roughly 142 million subscribers. Despite this, Nigeria only had 39 registered mobile money accounts per 1,000 adults in 2017, according to the IMF’s Financial Access Survey. In 2018, mobile money was used for transactions worth just 1.4{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e} of GDP last year (compared with 44{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e} in Kenya). This suggests there is significant scope for growth in this particular market space.

On the other hand, Kenya is considered global pioneer in the adoption and proliferation of mobile money services and it is estimated that 64 out of 100 inhabitants had access to and used mobile money transfer services last year.

Unbanked and underserved population of Africa represents a great opportunity for the fintech sector. Services of vital importance, great success in several African countries, new and promising startups, increase of funding, all the above are steady pillars for fintech’s ecosystem to expand even further in the future. The conditions for growth are promising, and the market is exhibiting favorable signs for continuous development.