Fintech in Africa: Time for Investors to Double Down.

The impact of the tech downturn has been all to evident since the end official end of the Covid-19 pandemic, the illegal invasion of Russia into Ukraine which have seen central banks attempting to temper high inflation by raising interest rates.

For African countries, the pinch has punched much harder. Renewed borrowing from the International Monetary Fund for some markets (Ghana among these) has led to a more recessive outlook from investors with many waiting and watching.

The good news stories, some few and far between have also been met by market caution.

Yet there are those with a long history and deep routed understanding of Africa that continue to push the boundaries knowing that innovation in Fintech for Africa is not to be turned on or off due to external factors.

The UK's own CAB Payments IPO which i feel will be the bedrock for a great deal of innovation moving forward has been hit by early headwinds. Norrsken22 and their debut fund of $205m to back early stage startups in Africa. Cygnum Capital and its 'Africa Go Green Fund', Mirova and its Gigaton Fund that focuses on investments in Solar.

The Africa climate summit, which took place in Nairobi, Kenya afforded a major opportunity to push links between clean energy and development across the continent, and to mobilise support for international investment in Africa.

Investment not out of charity but because the continent offers a wealth of climate-related growth opportunities. It is turning the negative into positives knowing that all markets are cyclical.

We need capital invested in today’s opportunities and more when new products come to market. The moment is too important to pass up and the consequences of waiting too great.

The impact of not investing into green and climate finance. These investments will predicate whether the world gets remotely close to meeting the global SDGs by 2030.

Investing into fintech in Africa requires more patient capital.

Look back over the last 5 years alone and one can see why large emerging markets where infrastructure lags (especially in rural areas) how rapid adoption of mobile money has accelerated layers of financial inclusion.

In Africa particularly, the rapid adoption of mobile technology and mobile money solutions over the past years has unlocked opportunities for better financial inclusion.

In 2021, according to the The World Bank , 55% of the adult population in sub-Saharan Africa had a financial account, with 33% having a mobile money account.

This is three times higher than the 10% average for mobile money account ownership globally.

The IFC - International Finance Corporation states that “Africa is home to more digital financial services deployments than any other region in the world, with almost half of the nearly 700 million individual users worldwide.”

Mobile money has become the conduit for the expansion of many essential financial services to African communities.

Through the headwinds

Even with the big tech downturn driven by geopolitical uncertainties, this is the time to ensure #fintech founders are given the backing to build back better.

The Silicon Valley mindset of blitz scaling isn't relevant to Africa (IMO) and with such a fragmented ecosystem the real value for investors and founders is to focus small while thinking big.?

By this I mean localisation - the mom+pop stores ( agency banking in Nigeria for example) should become the validation for pan African ambitions.

A supportive political, business and regulatory ecosystem should also be in place to ensure that fintechs promise is fulfilled and its benefits are maximised.?

Global funding in the first quarter reached $76 billion — marking a 53% decline year over year from $162 billion in the first quarter of 2022.

Where are we now?

Progress is occurring across LDCs, where fintechs play an increasingly vital role in boosting financial and gender inclusion, through digital adoption and the digitalisation of financial services and payment systems.

Africa’s fintech industry is coming of age: Despite political and economic headwinds.

More Expansive Regulations

A personal experience while building my new venture Indelible , a rewards based crowdfunding venture focused on high value capacity/infrastructure projects in Africa has been quite the ride since we began work in January 2023.

Quite often the biggest issue is bankability. Yet many of these banks, and NBFIs are regulating and onboarding Crypto and Betting companies.

With so much innovation in regtech to provide comfort in AML/CFT it is astonishing that developed markets are the potential bottle necks for driving investment and being at the forefront of new fintech interventions for frontier markets.

However it is key that regulators, license holders engage and invest from the get-go to help steer and build new innovations. Central banks outside of Africa should look at what those in the continent are doing and follow their lead.

Go Long. Stay Strong.

It is time to be more expansive and to unleash the potential that many fintech entrepreneurs bring to the table.

Altruism does not work well in isolation. It has to be built around sustainable innovation that shows investors a path to revenue. wever investors need to be ready for the long game.

Want to hear more?

Contact me on [email protected]