Investing in African Fintech
In February, Edmund Higenbottam discussed the increasingly broad opportunities for investors in Africa’s fintech sector with African Business. The podcast coincided with the UK-Africa Fintech Summit on February 3-4, 2021.
The podcast discussed key recent developments driving investor interest, including the accelerated digitization of the financial services hierarchy, dating back to the launch of M-Pesa in Kenya in 2007. Payments is a natural starting point for digitization, given the lower risk and easier adoption as a platform. Even within payments, there has been layers of advancement; for example, Capricorn Digital of Nigeria has advanced its business model from payment of bills to now covering a broader set of payments via its Baxibox/pos, BaxiPay and other B2B channels.
The podcast further described how the financial services hierarchy has further digitized according to the level of risk and complexity of the service. Credit for example has become more interesting as a fintech platform as the mechanism of both provision and collection has become both more profitable but also more inclusive. For example, Tugende in East Africa extends credit through providing productive assets, rather than simply to a customer’s mobile wallet or app. Tugende’s credit mechanism leads to small-scale asset ownership (i.e., motorbike taxis) and a longer spectrum of opportunity and empowerment.
Finally, the podcast discussed the scale potential of fintech in Africa given size of the aggregate Continent and the fact that financial services remain comparatively underpenetrated. As evidence, even Africa’s largest economies have bank assets-to-GDP ratios of less than 50%, vs 100%+ for high-income countries and many upper-middle-income countries. If the overall scale of the market in Africa in aggregate (USD 2.6 trillion) is an opportunity, then 54 different countries / regulatory regimes is a headwind. The ability to scale cross-border is a key driver of success for many aspiring unicorns.
A link to the podcast can be found here
Source: African Business