BLOG

FINANCIAL TECHNOLOGIES

High expectations for fintech in West Africa

10 August 2022

Fintech’s strong potential and role in enhancing financial inclusion in West Africa is once again highlighted at a new report from GSMA. According to GSMA’s analysts, fintech is recognized as one of the two emerging trends, which has the power to shape the digital ecosystem of the region in the coming years.

For “The Mobile Economy West Africa 2019” report, mobile industry plays an increasingly important role in accelerating social progress in West Africa. “With a sizeable proportion of the sub-region’s population excluded from many services, mobile enabled digital platforms provide a vital opportunity to deliver solutions that can improve the livelihood of the most vulnerable people in the society and foster greater socioeconomic inclusion” it notes.

As a result, mobile technology is facilitating the rise of fintech startups looking to plug the gaps in financial services in West Africa. In more developed markets, fintech startups tend to disrupt existing financial services, such as credit, mortgages and insurance, to provide more efficient services and lower the cost for end users. However, in Africa and other developing regions, a large part of the population is currently excluded from these services, providing a blank canvass for fintech startups to create new systems and value chains from scratch.

The report focuses specifically on Nigeria, the biggest West African country in terms of population and its economy size. Nigeria also has one of the most active fintech markets across the entire region of Sub-Saharan Africa, offering significant opportunities. For GSMA’s analysts, fintech startups can redefine the financial services landscape in the coming years. “In addition to a large, youthful population and increasing connectivity, the country has a huge financial inclusion gap, with access to complex financial products still limited to only a small proportion of the population” they argue.

For example, only 1{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e} of the population hold any form of insurance, according to the Nigerian Insurers Association. Other countries in West Africa, notably Ghana and Senegal, are seeing similar trends in the fintech landscape. «For these countries, a more established mobile money market, with advanced features such as interoperability and international remittances, provides an even firmer foundation for fintech startups to build upon» the report concludes.

However, analysts believe that the essential ingredient for the market to flourish is a new policy framework. “Mobile money plays a critical role in enhancing financial inclusion in West Africa. This highlights the importance of establishing a more level regulatory playing field which allows innovative market-led solutions to increase adoption and the expansion of the digital financial ecosystem” they add. West Africa should follow the example of markets where regulation is enabling. Restrictive regulatory frameworks can stifle investment, limit the rollout of new services and raise costs for consumers – all of which can negatively affect adoption and activity rates.