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Sub Saharan Africa: Boosting financial inclusion through fintech
18 August 2022Not many years ago, in 2011, more than 2.5 billion adults, mainly in the emerging markets, didn’t have a formal financial account. Since then, it is estimated that almost half of those have obtained an account (bank or mobile money) representing great strides in escaping poverty and boosting prosperity. Sub-Saharan Africa is the most striking example οf this progress, as account ownership increased from 23{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e} in 2011 to 43{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e} in 2017, according to the latest available data from World Bank. A great achievement which should be attributed in large part to the incredible growth of mobile money. A great achievement at the pursuit of financial inclusion in Sub Saharan Africa.
The region remains a hotbed for mobile money services. A recent report from GSMA notes that by the end of 2018, there were 395.7 million registered mobile money accounts in the region, representing nearly half of total global mobile money accounts. More than 130 live mobile money services are being served in the region. Additionally, more than 60{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e} of the adult population in a growing number of countries, including Ghana, Kenya and Zimbabwe, has a mobile money account.
The region’s big financial inclusion gains have been driven by mobile money, not the traditional banking sector. While many of those mobile money services are being led by mobile network operators, a steadily growing number of new players has been gaining ground in the field, leveraging their experience and customer base to provide digital mobile financial services, such as micro-loans, micro-insurance, savings management and more, all enabled by digital technology.
Investors gain faith in Sub-Saharan fintechs
Investors have been carefully monitoring developments in the fintech landscape in the region: in recent years, they have started to act upon the favorable conditions for fintechs in Sub-Saharan Africa. These conditions include the fundamental gaps in offering traditional financial services which fintech providers are able to bridge, and the willingness of the population to adapt to these innovative solutions and services. The rise of mobile penetration and smartphone ownership provides the necessary building blocks to support such solutions.
According to GSMA, “over the last 12–18 months, Sub-Saharan Africa has emerged as one of the fastest growing fintech hubs in the world in terms of investments, albeit from a low base”. Investment in African fintechs nearly quadrupled in 2018 to $357 million, with startups in Kenya, Nigeria and South Africa accounting for the largest share. This trend has continued into 2019, with a number of high-profile deals. At the same time new destinations for investments such as Ghana, Uganda, Cameroon and Rwanda are emerging.
Sub-Saharan Africa has come a long way during the previous years, but there are still strides to be made in certain markers, and across the wider African continent. For instance, Africa’s three most populated countries, Nigeria, Ethiopia and Egypt (home to a combined adult population of over 242 million) have low rates of financial inclusion (below 40{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e}) and limited availability of mobile money services. All three markets have had unfavorable conditions for mobile money uptake but due to recent reforms it is estimated that over 110 million new mobile money accounts could be unlocked in the next five years.
