BLOG

FINANCIAL TECHNOLOGIES

Four pillars for growth of the fintech ecosystem in Sub Saharan Africa

15 August 2022

There is no doubt that Sub-Saharan Africa has been a global leader in fintech innovation and adoption. Low penetration rates for traditional banking services coupled with high penetration of mobile phones makes Sub-Saharan Africa a rich breeding ground for fintech innovation. In many respects the region has been miles ahead of other developing – and most developed – markets. Sub-Saharan Africa has proven its readiness for the fintech era.

A decade later than the first mobile financial services, SSA has been a hotbed for fintech companies (both local and global) and the fintech landscape has grown at an annual rate of approximately 24{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e}. The fintech revolution in Sub-Saharan Africa is accelerating steadily over the last 10 years, and the conditions for growth for the years to come are promising, as the market is exhibiting favourable signs for continuous development.

Although no one can ignore global players, the evolution of the local ecosystem will be the base for future fintech development in Sub-Saharan Africa. Ιn building a healthy and efficient ecosystem four factors play (and will continue to play) a crucial role. Those pillars, as described from a recent report of EY, are:

  • Talent. Sub-Saharan Africa has the fastest growing workforce globally, which is predicted to represent over 25{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e} of the global workforce by 2050. Analysts argue that limited employment opportunities for traditional jobs create a more creative entrepreneurial environment where young graduates look to innovate and develop new solutions.
  • Demand. The potential demand for fintech companies in the region is tremendous due to the fast growing and underbanked population. The report underlines that the under-developed financial sector also leaves SMEs and entrepreneurs with a lack of access to financial services resulting in a high demand for financial inclusion.
  • Policy. Governments in SSA are starting to show interest in supporting fintech companies and innovation in the financial services sector. On the other hand, the report notes that the region is highly heterogeneous and little to no subsidies and tax incentives have been implemented.
  • Capital. In contrast to capital flows in established financial services, investments in fintech companies have grown substantially in recent years. Volumes are still lacking significantly behind more developed markets, driven by the market maturity and overall valuations.