The fintech revolution in Africa is a fascinating success story. M-Pesa, the pioneer in the field, laid the foundation of Fintech in Africa in 2007. from Kenya. Soon, it spread across the region and revolutionised and simplified the payment processes, particularly of small businesses and consumers with little or no access to banking services. Soon, mobile money became an integral part of Africa’s financial services landscape turning the continent into an important global player in the domain.
Today, Africa has come a long way from the initial days of M-Pesa. Mobile finance management services now include a wide array of services like insurance, credit, international remittances, etc. More than half of the total 282 mobile money services operating across the globe are located in Sub-Saharan Africa. The Continent has an estimated 100 million mobile money accounts.
With the astounding growth recorded by Mobile Finance Services in Africa (MFS), many think that the sector has reached a stage of saturation leaving no more room for growth. Such an assumption may be completely wrong. M- Money penetration in Africa is around 30% over the last five years and is still expanding, diversifying, and moving in the value chain. The profit margin on MFS payments in Africa, approximately two percent of the transaction value, is the highest
globally.
The phenomenal growth of Fintech in Africa can be traced to the rapid fall in the cost of mobile phones for the past couple of years that led to a huge boom in mobile phone ownership. The exponential growth in ownership was estimated at 634 million in 2020, which is 52% of the entire population in Africa with Fintech accounts.
In fact, Africa has proven to be a fertile market for Fintech startups. Robust growth in internet penetration is one of the main reasons for this. From just 13.5% internet penetration in 2011, it rose to 39.3% by the end of 2019.
The tremendous role of Fintech penetration to lift socio-economic conditions in Africa cannot be overrated. For instance, M-money has contributed significantly to economies like Kenya. The Central Bank of Kenya reported that in 2018, their citizens had moved as much as half of the country’s GDP via their mobile phones. Fintech has also lifted more than 200,000 households from extreme poverty in Africa. It has been praised as the most successful tool to have motivated and empowered women to move to business from farming.
Covid-19 and implementation of the Africa Continental Free Trade Area is expected to play a big role in the digital transformation of Africa. With the commencement of the vaccination drive for COVID 19, across the world, there is widespread optimism about the global economy returning to growth path in 2021. This will push Africa’s finance sector higher embracing more innovation, disruption, and fast-paced growth.
Of course, there are caveats to such a growth profile. Foremost is the accessibility to the internet and second is the cost. In many countries, the connectivity is either partial and wherever there is coverage, the speed is extremely slow. A number of countries have complained about the high cost of internet connection, which also deny the people access. The access glitch is mostly due to the low capacity cable network.
Significantly, Facebook has announced a new plan to build a 23,000-mile-long cable around Africa to bring high speed internet to the 1.3 billion people living on the continent by 2024. This expanded capacity will facilitate a healthy internet ecosystem by enabling greatly improved accessibility for people and businesses alike. The coverage of the network will be huge facilitating seamless data transfer between Africa and the rest of the world, particularly Europe and the Middle East from where the continent gets most of its money transfers.
That will also herald the next phase of digitization of the continental market and empowerment of the people.
