Africa is an emerging continent with a growing population and economy. This includes the wider tech community and fintech. In many rankings where emerging and upcoming cities in the emerging market, including Africa, are starting to appear and make its presence known. Growing Africa’s fintech ecosystem is important, as it not only will bring new innovations to the continent, but, also foster home-grown talent and intellectual property.
Africa, by several estimates, is home to the largest share of the world’s unbanked and underbanked population. The International Monetary Fund (IMF) estimates that Africa’s informal economy is one of the world’s largest, which gives fintech startups and small and medium enterprises (SMEs) the opportunity to tap into this large pool of unbanked and underbanked citizens. In 2018 Africa surpassed $1 billion USD in VC to startups, where fintech was the focus of much of the capital and deal-flow.
The following are four emerging fintech hubs in Africa:
The largest city in South Africa is home to some of Africa’s leading banks and financial institutions such as Standard Bank Group, FirstRand, Absa Group, Nedbank Group and Investec, making it a potential fintech magnet for Africa. It is not only home to the country’s primary financial cluster, but, has developed an ecosystem where fintech can thrive.
Also, South Africa Reserve Bank has overseen several initiatives that have included ProjectKhoka and the InterGovernmental FinTech working group. Johannesburg with respect to fintech, in particular, is fast becoming a magnet for banking for low income customers, financial inclusion fintech and insurance. The city last year had more than 220 programmes offering support to startups. Amongst the estimated 450 startups in the city, around 30 percent of those are in the fintech space.
According to the recent Findexable Global Fintech Rankings 2020 that was published by Findexable Limited, Nairobi was ranked second after Johannesburg. The report said, “Nairobi is Africa’s second largest fintech hub, with an estimated 20 percent of African fintechs and an emerging ecosystem of local investors and venture capital firms complemented by a steady rise of international investors and growing interest from global technology firms.” Strengths within fintech the largest city in Kenya have built are in payments, remittances, bank and lending technologies.
The same report also mentioned some local companies to watch out for included Cellulant, Musoni, Kopo Kopo, Alternative Circle, Lendable and Bitpesa. Nairobi even has its own nickname, dubbed “Silicon Savannah.” Many multinational companies such as IBM have their offices in Nairobi and in fact IBM even has its firs research laboratory there, their 12th international research centre at the time, the IMB Research-Africa laboratory. Of course, as being the capital and largest city in Kenya, Nairobi is home to several banks such as Kenya Commercial Bank KCB, Co-Operative Bank of Kenya and international ones such as Standard Chartered Bank. Finally, last year the idea of partnership beyond Africa was evident, where the Monetary Authority of Singapore (MAS) and the Central Bank of Kenya (CBK) inked a FinTech Cooperation Agreement to support Kenya’s digital infrastructure development.
The financial hub of Nigeria, Africa’s largest country by population, the megacity of over 20 million inhabitants is home to the nation’s largest financial institutions such as First Bank of Nigeria (FBN), Access Bank, Ecobank and First City Monument Bank (FCMB) as well as international banks such as Citibank. Nigeria has a relatively young population who are digital natives. The World Bank’s Global Findex report in 2017 stated that 40% of Nigerian adults had a bank account in 2017, 6% had an online account, while more than two-thirds of adults had a mobile phone. It presents an opportunity for fintech to grow in this market.
Lagos has an ecosystem that is trying to allow for the fintech community to prosper. For example, there are organizations such as the Fintech Association of Nigeria and it was Lagos that hosted Africa’s first Africa Fintech Summit back in 2018. The city is also home to startup incubators such as Passion Incubator, Leadpath, Wennovation Hub and Co-Creation Hub.
South Africa’s second largest city is a big player in the tech industry. The majority of the industry, or some 47% of tech start-ups, is based in the Western Cape, where Cape Town is located, with Gauteng, where Johannesburg is, in second place at 44%. In addition, Cape Town accounts for 75% of the country’s venture capital deals. Of the more than 500 entrepreneurial companies in Capetown’s tech sector, around 20 percent are in ecommerce and SaaS while 15 percent are in fintech. The city is also home to Africa’s oldest tech incubator, the Cape Innovation and Technology Initiative (CiTi), according to its website. Cape Town has ana international pool of talent, growing ecosystem of support, and a relatively low cost of living, helping promote not just fintech but tech in general.
South Africa generally has fintech-friendly rules, where the South African Reserve Bank established the Financial Technology Programme, which aims to assess the emergence of fintech and take into consideration its regulatory implications. The Financial Intelligence Centre, Financial Sector Conduct Authority, National Treasury, South African Revenue Service and the South African Reserve Bank even have released a paper on crypto assets.
In the inaugural edition the Global Fintech Index City Rankings, all four of these cities were ranked in the top 100 fintech ecosystems globally. The rankings included indicators such as the number of fintech startups and hubs in cities, scale of investment and regulatory environment – amongst others. To note, Africa has other emerging fintech hubs that were not highlighted such as Accra in Ghana and Kigali in Rwanda. Also, as Egypt often is categorised in the Middle East, Cairo was also not mentioned too. Nonetheless, Africa has an opportunity and fintech appears to help fill current gaps and find innovative solutions not just in the continent but global economy.