In June 2022, our writer Oluwatosin Ogunjuyibe wondered if Africa had too much fintech. The sector was booming, with 573 fintech startups in mid-2021, a 17.3 percent increase from 2019. They also raised nearly $3 billion, or two-thirds of all the startup funding on the continent. Five of the six African unicorns, including Flutterwave, were fintechs. This sparked debates about whether the sector was saturated, overvalued, and overrated, and whether it was taking away focus and resources from other vital and impactful sectors for Africa’s development.
Recently, Disrupt Africa published a report that confirms Africa is still a hotbed for fintech. The sector has expanded by almost 20 percent in size and attracted an estimated $5.2 billion in investments in 2022, more than double the amount in 2021. Africa still has a large unbanked population. According to the World Bank, only 33% of African adults have a bank account. Fintechs are helping to decrease this number by offering innovative financial services that reach the underbanked. It is a simple case of supply and demand. If there is a high need for financial services in Africa, there will be a high supply of fintech services. Africa also has a young and growing population that wants new and convenient ways to manage their money. Fintechs are catering to this need by providing innovative and user-friendly financial products and services.
Other highlights from the report
First-timers in Africa’s fintech ecosystem
The report identifies three new fintech markets that have emerged for the first time: Burkina Faso, Lesotho, and Namibia. These countries have seen the launch of new fintech startups that are addressing local challenges and opportunities. The emergence of new fintech markets in Burkina Faso, Lesotho, and Namibia is a sign of the growing diversity and maturity of the fintech ecosystem in Africa. It also demonstrates how fintech is empowering people and businesses in developing countries and creating new opportunities for economic growth and inclusion. It is part of the larger trend of growth and investment in the African tech industry. Despite a slowdown in funding in line with global trends, significant growth and value creation are expected to lie ahead for the fintech industry in Africa. As the industry continues to mature and diversify, we can expect to see more new markets emerge across the continent.
Less active fintech-focused blockchain startups
In recent years, there has been a lot of excitement about the potential of blockchain to revolutionize the financial industry. This excitement led to a surge in the number of blockchain startups in Africa by 150% between 2017 and 2019. However, the excitement over blockchain has started to fade due to a number of factors, including the volatility of cryptocurrency prices and the fragmentation of the crypto world. As a result, the number of active blockchain startups in Africa has declined.
In 2017, there were 45 active blockchain startups in Africa, which represented 9.2% of the global total. By 2021, this number had fallen to 42 (7.2%) and by 2023 it had fallen again to 37 (5.5%). Despite this decline, Nigeria remains a major hub for blockchain startups in Africa. In 2023, there are 21 blockchain startups in Nigeria, which represented 56.8% of all active blockchain startups in Africa. This is a significant increase from 2017 when there were only 11 blockchain startups in Nigeria. The other two major markets for blockchain startups in Africa are South Africa and Kenya. In 2023, there were 9 blockchain startups in South Africa and 3 in Kenya. However, some startups are still innovating in this space and exploring new use cases for blockchain technology.
More entries, more exits
Fintech startups in Africa are growing rapidly. In the past 8 years, they have raised over $3.6 billion in funding. This is three times more than any other sector in Africa. The funding momentum has been strong in recent years, with nearly $2.8 billion invested in the ecosystem in the past two years. However, fintech startups in Africa are also more attractive for acquisitions than their counterparts. In the past two years, there have been 26 fintech exits, compared to only seven in the previous two years. This makes up more than 60% of the 43 exit deals tracked since 2011. This means that fintech startups in Africa have attracted more investment from venture capitalists and other sources, and have also been more likely to be acquired by larger companies or go public. This exit activity could inspire both investors and entrepreneurs in the sector, as it shows the potential for lucrative returns.
