Sign Up EIB assesses fintech growth in Africa
Fintech company rollout is accelerating in Africa? Why? And will it be sustained? Those are some of the topics addressed by EIB Finance in Africa 2024, a new report from the European Investment Bank.
This is the EIB’s ninth annual report in this series, which covers Africa’s banking system, financial markets, digitisation/fintech and climate finance.
Positive Growth in Fintech
The news seems positive. In fact, says the EIB, fintech companies in Africa have nearly tripled in number since 2020, improving access to finance for people and businesses across the continent. Indeed, as EIB Vice-President Thomas Östros puts it: "Fintech is revolutionising the way we think about finance in Africa." He continues: "By leveraging technology it is possible to improve access to finance for millions and foster sustainable economic growth."
Digital finance is expanding much faster than traditional banking. The number of African companies offering new products and services in the area of finance jumped to 1,263 at the start of 2024 from 450 in 2020.
Challenges in Finance
Yet obstacles to finance remain. Private sector credit has fallen from 56% of gross domestic product in 2007 to 36% in 2022. This decline hinders growth in productive economic assets, impeding industrialisation on the continent. However, trade is increasing among African countries and could boost development.
Concerns among sub-Saharan African banks about current economic conditions, asset quality, and the cost or availability of funding are other issues highlighted in the reports.
Access to international bond markets (improving) and the effect of financial conditions on private sector development (still a concern) are also discussed, along with climate threats such as asset quality deterioration due to extreme weather events.
Gender Strategy and Performance
On the upside, nine out of ten banks could soon have a gender strategy in place as they continue to report better loan performances among women-led firms.
Visa's Investments in African Start-ups
By coincidence, the EIB report became available as digital payments business Visa announced strategic investments in four start-ups that graduated from the first cohort of its Visa Africa Fintech Accelerator programme.
The four start-ups operating across the continent are:
- Oze: Located in Ghana.
- Workpay: A human resources tech firm headquartered in Kenya.
- OkHi: Based in Nigeria.
- ORDA: A cloud-based restaurant software company operating in Nigeria, Kenya, and South Africa.
Additional investments and business partnerships with programme graduates are being finalised and will be announced soon, according to Visa.
Future Outlook
Will they succeed? Despite the challenges, there are hopeful signs for the region. EIB suggests that economic growth is expected to increase in Africa in 2024 and 2025, with growth in the five-year period between 2024 and 2028 potentially being the fastest on record since 2008-2012, as the drag on economic activity caused by recent global shocks begins to fade.
No posts found
Write a review
