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Fintech for Good: How Africa’s Fintech Revolution is Supporting Sustainable Development

  • February 22, 2022
  • |
  • 5 min read

Since you’re here, let’s do a quick TikTok simulation. Raise a palm, and put a finger down for each operation you can do from your smartphone: 

  • Access bank services (bank statements, account info modification, etc.)
  • Make payment for items and utilities (electricity, TV, streaming services) 
  • Access global investment opportunities 

How many fingers do you still have up? Most likely just two. Yeah, me too.

Thanks to African fintech startups’ efforts to make finance accessible to everyone, these everyday conveniences are possible. 

Fintechs in Africa raised close to $3 billion in 2021, accounting for two-thirds of all the investment realized by startups across the continent last year. For context, this amount was double the previous year’s investment and 9X what the sector raised five years ago.

Of course, this kind of explosive growth benefits more than just the finance industry; its ripple effects are felt across the continent’s economy as a whole.

Here are some ways in which African fintech is contributing to sustainable development.

Financial inclusion

About 95 million people (57% of Africa’s population) don’t have a traditional bank account. 

And that’s understandable. Have you ever gone into a bank to open an account? Long queues. And so much paperwork it’ll feel like you’re about to write an exam. 

And the requirements? Utility bills, house addresses, oyster pearls, and a host of other unnecessary info hiding under the umbrella of KYC (know your customer).

Get past that, and you still have to deal with minimum deposit requirements, upfront fees, and impossible loan eligibility requirements. 

For many people, traditional financial services are unfavorable

But fintech in Africa (and generally) is upending traditional structures and changing how financial services are delivered. Fintechs lower payment costs by opening up the value chain. And make it possible for individuals and businesses to access affordable financial products and services. 

Here are some ways African fintech is making that happen:

  • Flutterwave and Paystack provide payment integrations to eCommerce merchants and marketplaces. These integrations improve the merchants’ capacity to receive payments internationally and continent-wide. 
  • Low remittance fees increase cross-border transfers, increase household expenditure, and reduce poverty rates. According to the UN, further digitization could cut remittance costs by 3.5% on average, lifting 30 million people out of poverty.

Read Also: What to Look Out for When Choosing an International Money Transfer Service

  • Small businesses can expand thanks to microlending services. MSMEs can use digital financial services to build payment histories and credit scores. The data can be used as collateral, allowing more funding. In addition, fintech can enable businesses to adopt previously impractical business models, like pay-as-you-go.

Reducing inequality 

One of the Sustainable Development Goals that African fintech is also addressing is inequality in all forms– gender, income level, or status. Here are several ways it’s doing that:

  • Through partnerships. The UN reports women are 7% less likely to be involved in the formal economy than men. This reduces women’s ability to control their finances. But digital financial services give women safe, convenient, and discreet access to banking accounts. These services are also much better for collating sex-disaggregated data, which helps providers to design better digital financial products for women. 

For example, data shows women are underrepresented in tech. This birthed our partnership with Ghana’s Developer’s in Vogue to equip more women with future-forward skills. And help them find placements in tech companies (including ours). 

  • Access to international money markets. Stock market investing was reserved for a particular set of elite people enough to afford shares and stockbrokers. But with fintech apps like Chipper Cash, fractional investing has become accessible to everyone. Users can buy portions of shares, as low as $10, in companies they deem profitable in the long term.

Fostering innovation 

Because fintech creates and improves digital infrastructure that other industries can build on, they are prime catalysts for innovation.

Many fintech startups in the continent are closing gaps in various sectors, including healthcare, agriculture, energy, transportation, e-commerce, and mobile money services.

For example, fintech companies are helping push the adoption of reliable and sustainable modern energy in Nigeria. Pay-as-you-go electricity options are now available thanks to portable point-of-sale machines that perform many banking functions. For example, Nigeria-based Luminous makes inverters and allows their customers to pay off the cost with a flexible payment plan. 

Also, a growing number of startups are turning to the fintech playbook to solve a vital aspect of the healthcare problem: the shifting dynamics between patients, payers, and providers, as well as the flow of payments and related electronic health records between them. 

Prime examples are Reliance Health, a Lagos and Texas-based startup that provides affordable health insurance and telemedicine via partnerships with hospitals and healthcare facilities. And RecoMed, a South African online healthcare marketplace that connects patients with healthcare providers and allows patients to book physical or virtual telehealth appointments directly from the website or app.

Creating job opportunities 

The internet is a job-creating machine. And fintech is a fresh avenue for new roles to crop up. 

In 2021, South Africa was home to 154 fintech startups, counting the highest number of such companies on the continent. Nigeria came in second with 144 fintech startups, while Kenya housed 93 others. 

These businesses bring a slew of job opportunities, particularly for young talent. For example, the nexus of fintech, eCommerce, and seamless cross-border payments is expected to generate up to 3 million jobs by 2025

These projections indicate a great potential to help alleviate the African youth employment crisis

Fintech in Africa, Fintech for Good

A society is defined by the choices its individuals make.

But it’s impossible to make progressive choices when there is no infrastructure to support them. With the digital explosion rocking the entire world, Fintech in Africa is helping the continent catch up and compete with others to achieve sustainable development goals. 

Of course, the growth of the industry isn’t without its setbacks.

But with Africa being the world’s second-fastest-growing and profitable payments/banking market, the fintech sector will continue to attract investors looking to capitalize on the increasing growth opportunities.

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