FINTECH Rising To Become Africa’s Investment Magnet

Digest Africa reports that African fintech firms raised $906 million in the third quarter of 2021 alone, an amount that represents more than 60 percent of all venture money that flowed into Africa’s last quarter, and more than all other sectors combined in the first half of 2021.

A separate analysis by BFA Global’s Catalyst Fund, showed that funding for African Fintech grew exponentially, from a mere $385m in 2018 to $1.35bn in 2020. A great deal of this funding is championed by Fintech startups in Nigeria.

From a survey of about 290 startups conducted by Ernst & Young in collaboration with FinTech Association of Nigeria (FintechNGR), 57% of fintech startups (165) in Nigeria reportedly generate revenues of over $5 million yearly and $276.5 million in the first seven months of 2021, making Nigeria a formidable leader in the world of Fintech in Africa, second only to Kenya.

Global Investors

Normally, foreign investors are often skeptical to invest in Africa due to volatile government policies, conflicts and poor physical infrastructure. The structure of Fintechs in the continent and its unique features make the sector an ideal and safe fit for foreign investment.

A research showed that 40 percent of sub-Saharan Africa’s people are under the age of 15, making them potential future customers at a time when smartphone penetration and dependency is on the rise.

In addition, most talents in the sector have matured now, with many founders on their second or third startups. Investors know they’re dealing with people with a proven track record of success.

Key investors in Africa’s startups are the United States and China, however, Japan’s Soft Bank backed by Chinese investors Sequoia Capital poured in $400 million in funding to Nigeria-based mobile money service OPay, leading it to became the most-valued African startup at $2 billion.

Other top investors include; Kepple with an investment worth around $15m across 96 companies, Australia’s TEN13, Indonesia’s Gojek , New York-based Tiger Global with an investment weight of $15 million in Nigeria’s Mono, and $3 million in Zambia’s Union54. An additional $170m funding round was given to Nigeria’s Flutterwave.

Japan’s SoftBank followed by Samurai Incubate Africa and Asia Africa Investment & Consulting.

Impact of Investments

The global investment rush for Africa’s startups can affect the economy both negatively an positively.

On the negative, it is possible that heavy external funding would mean proceeds of investment are taken away from and not reinvested in the continent. On the positive side, the influx of foreign direct investments, jobs would be created and more talents would be discovered, invariably beefing up the economy.

Patsy Nwogu

Reporting on data-driven featured stories and investigations.

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