Nicole Anderson is a Fintech entrepreneur, advisor and multiple times CEO. She will be leading the fintech and financial inclusion panel at the Africa Technology Business Forum in London on Wednesday 21st June.Below she shares her thoughts on the opportunities the Fintech sector in Africa holds for UK and international businesses.
Christine Lagarde MD of the IMF described the rise of the African market as a “once in a generation opportunity”.
Africa’s chief attraction is that it has been growing while richer regions have stalled. As America, Europe and China age, Africa can expect a bulge of workers in their productive prime. As the image below demonstrates, the continent is emerging as having almost 40% of the world’s population. Though skills are in short supply, they are becoming more abundant. According to the McKinsey Global Institute, the consulting firm’s research unit, in 2002 only 32% of Africans had secondary or tertiary education, but by 2020, 48% will have.
The technology opportunity in Africa.
Technology is a global enabler. Mobility through technology is synonymous with Africa. According to IDC, in the past three or four years multinational technology companies have adopted a “completely fresh approach”. They have “a lot more skin in the game: investing in local people, so there’s proper knowledge transfer, investing in country offices.” Companies are in it for the long term now, rather than quitting after a bad quarter or two.
Africans are more mobile, and mobile is the future.
In Africa, the past 10 years have seen a boom in cellphone ownership and usage. Two-thirds of all homes in Sub-Saharan Africa own at least one mobile phone, according to a Gallup poll. What Africa has is a culture of innovation.
Africa doesn’t have a robust broadband infrastructure, or continent-wide digital-rights laws and copyright regulations, so new startups like iROKOtv can rapidly become the Netflix of Africa, bringing Nollywood movies and shows to the continent. There are dozens of examples just like this — industries where Africa can develop robust tech solutions to local problems like entertainment delivery and payments without having to fight back a monolithic incumbency.
What is FinTech’s relevance in Africa?
The rapid proliferation of digital financial platforms and services, particularly mobile money, has been a key driver of financial inclusion progress across the region. GSMA estimates that about 168 million people will become connected by mobile services across Africa over the next five years.
Digital financial services are contributing to financial development and financial inclusion in Sub Saharan Africa. The rapid spread of systems such as M-Pesa in Kenya and other countries have helped reduce transaction costs and facilitate personal transactions, while contributing to the surge of financial intermediation services. With less need for cash for transactions, more economic agents are able to send and monitor financial market signals, contributing to the closing gap between financial inclusion and wealth creation.
African FinTech – What are the hurdles?
Policy and regulation have always been important, and that role has not diminished. There remains a need for a Pan-African unity in financial regulation. The growth of mobile money (especially Generation 1) is highly dependent of the institutional backbone of the given country. We know that Telecom companies have significantly different success rates of addressing unbanked people with mobile money in different countries. Some of these differences can clearly be explained by the differing rules, regulations and institutional forms.
Even beyond mobile money and beyond financial services we often hear about the ‘regulation patchwork’ that Africa poses for companies trying to expand cross-border within the continent. Amidst this ‘regulation patchwork’ an international African presence is a significant advantage. However, international FinTech companies need to understand the pulse of this diverse continent, place strategic bets and hold firm with trusted partners on the ground and a willingness to be flexible.