In the last couple of years, Africa’s fintech landscape has been a global success story when it comes to investment. Fintech has become Africa’s fastest-growing segment with the continent being at the forefront of payment innovation, reports Mastercard. Overall, the fintech sector comprised 61 per cent of the $ 2.7 billion venture capital investment deployed across Africa in 2021. Large deals worth more than $ 100 million each have characterised the industry in the region.
The Need for Fintech in Africa
Africa’s population is rapidly growing whilst the majority of its population remains unbanked. These unbanked individuals and businesses do not have access to traditional banking services, such as loans, savings accounts, and insurance.
African Fintech Needs
The Challenge in Numbers
- 1.7 billion people worldwide have no relationship with the financial system
- 80% of African jobs come from micro, small or medium enterprises
- 90% of retail turnover is generated by 3 million micro retailers
- 98% of payments to micro retailers are in physical cash whilst suppliers increasingly demand cashless payment, requiring the retailer to convert physical cash into digital money.
Fintech companies – like Correlaction – are beginning to take notice of this gap and the opportunity it presents by developing new platforms and tech solutions that provide the needed access to financial services to Africa’s unbanked population and businesses. Innovations, entrepreneurs, and capital are reshaping Africa’s fast-growing electronic payments landscape with solutions for consumers and businesses alike.
The Role of Mobile Technology
On top of the missing accessible digital banking services, mobile technology is also playing a significant role in the growth of fintech in Africa, as the continent has one of the highest rates of mobile phone penetration in the world, which provides a significant opportunity for fintech companies to deliver financial services to remote and not easily accessible areas.
Although figures for mobile transactions are strong in Africa overall, they are not consistent across the continent. Kenya and Ghana, with their relatively mature mobile payments sectors, account for much of the business in the region. In most of the other African countries, currently, less than 50% of financial transactions occur through mobile payments, reports the Boston Consulting Group (BCG). However regardless of inconsistency between countries, the underlying conditions for growth—including the potential market for mobile payments, and opportunities to reduce friction in transactions and data sharing among companies—are favourable in Africa.
Already, 400 million consumers in sub-Saharan Africa use mobile payment banking systems to handle $300 billion worth of mobile money transactions, generating $200 billion in mobile banking fee charges to customers. According to Boston Consulting Group by 2025, the mobile payment market could reach 650 million to 750 million customers, whilst the ultimate size of the market across Africa could be as high as 850 million customers, supporting about $2.5 trillion to $3 trillion in transaction volume and $25 billion to $30 billion in yearly revenue from the financial transactions alone.
The Importance of Microfinance
Microfinance is another area where fintech is making a big impact in Africa. Microfinance is the practice of providing small loans to people who do not have access to traditional banking services. Fintech companies, like Correlaction, are using data analytics and cutting-edge technology to ease and automate the loan application process and make it more accessible to MSMEs. This is especially important in Africa, where most of the population is engaged in small-scale entrepreneurship. Fintech companies are also using technology to simplify and reduce the cost of providing microfinance loans, making them more accessible to people who would not otherwise be able to access them.
Our Impact
At Correlaction, we are the driving force behind Kenya’s most significant retail finance program and are currently broadening our reach to Uganda. Our mission is to promote financial inclusion in Africa by offering a user-friendly, secure, and cost-effective solution. Our solutions already link four banks with over seven mega-suppliers and over 20,000 retailers. Our ultimate goal is to leverage technology to enable MSMEs to access financial services,reduce the number of unbanked and underbanked adults globally, and support them becoming more resilient.
Africa’s emergence as the new frontier of fintech presents an extraordinary opportunity for our company and partners. With a rapidly growing population and remarkable rates of mobile phone penetration, we have the chance to extend responsible financial services to remote areas, thereby empowering individuals and communities across the continent. Our focus on value chain efficiency and microfinance has already begun to make a substantial impact in Africa, and we are committed to continuing our efforts to drive positive change and foster inclusive economic growth. Together, we can harness the power of innovation and collaboration to unlock Africa’s immense potential and build a brighter future for all.
With Correlaction, let’s strive together towards achieving financial health for African retail sector.
