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bne May 2017 Companies & Markets I 19
bne:FinTech
Africa welcomes emerging fintech start-ups
Nicholas Watson in Prague
Given financial technology is about smart, innovative, flexible start-ups looking to eat away at traditional financial firms’ intermediary roles, it is not surprising that Africa, with its woefully inefficient banks and sclerotic infrastructure, is feeling the full force of the fintech wave.
According to industry players, there is a hive of fintech activity now in most major capitals of Sub-Saharan Africa.
Kenya has been probably the most successful centre for fintech ventures, starting with Kopo Kopo in 2012, which was Africa’s first major fintech iteration of a vanilla mobile payments business, and which received Silicon Valley investment from Javelin Venture Partners. Kenya now has at least 38 fintech companies operating out of Nairobi.
One of the continent’s first hubs was iHub in Nairobi, which was launched in 2010, which has an incubation arm focused on mobile technology, called m:lab. How- ever, as The Economist notes in a recent piece about the difficulty in developing incubators in Africa, “m:lab, like many of its kind, is not a real incubator: it was founded with grant support from the World Bank and takes fees from, but not equity in, the companies that it nurtures.”
BitPesa, a universal payment and trading platform for Africa, was also started in Nairobi in 2013, and has since expanded rap- idly across the region into Uganda, Tanzania, the DRC and Nige- ria – “making us well connected to partners across the industry”, says Elizabeth Rossiello, co-founder and CEO of BitPesa.
As the African economic powerhouse, South Africa has
a large fintech scene in its main cities of Cape Town and Johannesburg, where there are professional venture capital and early-stage investors. The Cape Town-based Zoona, one Africa’s fastest growing startups, processed $200mn in transactions last year and talks of reaching 1bn customers.
Lagos in Nigeria has also emerged as a new centre for fintech in the last few years, while Accra, Abidjan, Dakar and even Kampala are starting to make waves, say industry players.
It’s not just the private sector, either. In March, the Kenyan government became the first to carry out the first mobile-only government bond auction targeting retail investors over its M-Akiba platform. The $1.5mn issue of 3-year bonds, open to all mobile users registered with mobile operators Safaricom and Airtel, pays inves- tors a tax-free interest of 10% and was all snapped up in just a few days. Other African governments, looking for ways to diversify financing sources and tap the grow- ing savings of citizens, are expected to follow suit.
What’s driving the emergence of fintech across Sub- Saharan Africa are the huge inefficiencies found in the traditional African financial sector, compounded by chronic under-investment in infrastructure. In fact, the existing
“Fintech isn’t disrupting the sector at all, it’s actually building it”
financial services sectors in many parts of Africa are so bad or non-existent that some have argued that fintech isn’t disrupting the sector at all, it’s actually building it.
“With high-speed internet getting cheaper and more pervasive – 4G internet has become available in the last year in most markets and 3G is available in even rural areas for affordable prices – it has finally become easy to run digital companies,” says BitPesa’s Rossiello.
The differences in fintech development between the vari- ous countries of the region can be partly explained by the approach of governments and regulators to innovation, which varies widely. “Some give lots of lip service to inno- vation but make it nearly impossible for new companies to secure partnerships with traditional financial institutions. Other regulators, like those in Nigeria, have clear and strict regulations that make it feasible for companies devoted
to compliance and structure to succeed,” says Rossiello.
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