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Date: 3 November 2023

Harnessing Digitalisation in Financing the Sustainable Development Goals (Fintech Panel at AFSIC 2023)

Verdant Capital participated in the fintech panel session at the Africa Financial Services Investment Conference (AFSIC), which took place in October 2023 in London. Edmund Higenbottam, Managing Director, represented the firm on this panel, which played host to representatives of top players in the financial services space such as Ugonna Iheme, Director at Stears Advisory, Funmi Dele-Giwa, General Counsel at MFS Africa, and Elizabeth Rossiello, Founder & CEO at AZA Finance. The panel was moderated by Chris Wehbe, CEO at Lendable.

The panel session was centred around fintech, particularly harnessing digitalisation in financing the Sustainable Development Goals (SDGs).

Addressing Edmund, Chris asked, “What do you see as the major advantage to fintechs in terms of availability of data?” Edmund replied saying, “We invest in mature financial services businesses coming out of the digital era which are in the process of transforming and updating their business models both in terms of new products and digitising their loan life cycles, e.g., LOLC, which is one of our investments has done very well.

There have been significant changes to the ecosystem, whether that’s mobile money, mobile wallets, or mobile payments, and how data is aggregated, collected, screened, and measured. That greatly enhances the cost-effectiveness of providing financial services.”

Raising the question to the panel, Chris asked, “Can you give us an understanding of how digital payments are evolving and what we can expect to see over the next few years?”

Addressing the question to the panel, Chris asked, “Can you give us an understanding of how digital payments are evolving and what we can expect to see over the next few years?” Funmi replied, saying, “We have seen a growth to about 700 million mobile wallets last year across the African continent, and that has been a primary route to implement financial inclusion. There has been an uptake in agent networks and digital currencies being layered on top of the digitisation infrastructure that is already in place.”

Edmund replied, “ We have seen very significant opportunities for the payments businesses because they have access to the data from the payments, and there is a route to market. We have looked at MNO-driven lenders making small loans to the wallets, and some have done successfully. We hope to see investment opportunities from the credit side or payment side trying to exploit that synergy.”

Raising the question to the panel, Chris asked, “Should the access to financial services be an SDG?” Ugonna replied, saying, “Access to financial services is an enabler of a lot of the existing SDGs, e.g., formal employment and how that’s connected to financial services reducing income inequality. Another example is the financing of electric bikes enabling clean energy.”

Raising the question to the panel, Chris asked, “The work being done across the panel is creating a positive impact. Do we think that comes at a compromise to commercial return?” Edmund replied, saying, “High impact generates higher return if there is a market that’s not addressed, e.g., providing financial services to the bottom of the pyramid. There is a change in technology that enables you to serve the market, yielding a competitive commercial return.”

Raising the question to the panel, Chris asked, “What do you see as the biggest opportunities and biggest challenges in this space?”

Elizabeth replied, saying, “There is still volatility in the market with respect to risk and return, and there is a lot of opportunities to increase efficiency. The only thing to mitigate the risk in Africa is diversification because you can’t prevent a market cycle from happening.”

Edmund replied, saying, “There are more mature businesses in terms of entrepreneurs. There are a lot of opportunities to deploy equity, junior debt, and mezzanine capital into the investment base and get a good return.”

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