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FinTech

African fintechs raised $2.7B since 2021 – Disrupt Africa

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Fintech comfortably remains the most-populated vertical within Africa's wider tech ecosystem, with steady growth over the last two years.

Disrupt Africa's "Finnovating for Africa 2023" report found that African fintech startups grew by 17.7% over the past two years, to 678.

This was similar to the 17.3% growth between 2019 and 2017; and between 2017 and 2023 overall, the number of fintech startups active in Africa increased by 125.2%.

"Total investment per year has been on a fairly steady upward trajectory since 2016, yet growth has been especially impressive in the last two years. The number of funded ventures has almost doubled since 2021, and more than US$2.7 billion has flooded into the ecosystem in the last 24 months," the report said.

Since 2015, 540 fintech startups from 25 countries have raised over $3.6 billion, three times more than any other sector.

(Source: Disrupt Africa's Finnovating for Africa 2023 report.)
(Source: Disrupt Africa's Finnovating for Africa 2023 report.)

This growth is taking place across the continent, with all major markets bar South Africa posting an increase in the number of active ventures. Egypt and Nigeria are growing especially fast, with the number of fintech companies based in those countries leaping by 66.7% and 50% respectively over the course of the last two years.

"Startups continue to launch at a steady rate. Almost 40% of currently active fintech ventures were launched between 2019 and 2021, and though numbers for 2022 and 2023 look lower for now, there will undoubtedly be many startups that formed more recently that have yet to flick across our radar," the authors said.

Every two years since June 2017, Disrupt Africa has released the "Finnovating for Africa" publication, and this year's report is done in partnership with fintech company AZA Finance, and insurance infrastructure company Curacel.

Among the earliest segments to emerge in African fintech, the payments and remittances space was once again the most populated in 2023, as in the previous three editions of the report. Almost half of the fintechs tracked are active either in the payments or lending verticals.

"The significant pain points inhibiting payments on the continent, as well as moving money around and in/out of the continent, means entrepreneurs are ever-eager to provide new solutions to plug the gaps left by incumbents in the financial services sector," the authors explained.

Fintech is pan-African but 'big three' still lead

In 2023, Disrupt Africa identified fintech startups operating across 25 African countries, with three new fintech markets emerging for the first time in the 2023 edition of this report – Burkina Faso, Lesotho and Namibia.

The number of ventures per country ranges from one – in places such as Algeria, Burkina Faso and Mali – to 217 in Nigeria, which over the last couple of years has overtaken South Africa to become Africa's most fintech-populated country.

South Africa has been the most populated market since Disrupt Africa data began, but has now fallen to second, with 140 ventures. This accounted for 20.6% of Africa's 678 fintech startups, behind Nigeria's 32%. Kenya falls into third place with 102 companies in operation – 15% of the total.

Almost 68% of Africa's fintechs are located in the "big three" markets of Nigeria, South Africa or Kenya, a percentage share that barely differs from a 67.9% share in 2021 and 65.2% in 2019.

(Source: Disrupt Africa's Finnovating for Africa 2023 report.)
(Source: Disrupt Africa's Finnovating for Africa 2023 report.)

Disrupt Africa said it's clear that fintech activity remains focused in the larger markets. When you look at the "big six" of fintech in Africa – adding Egypt, Ghana and Uganda to the equation – the six countries account for almost 87% of startups in 2023.

"While clearly levels of activity hugely differ, with different ecosystems at vastly different points in their lifecycle, fintech has certainly infiltrated markets across the continent, and is changing financial markets and boosting access to financial services everywhere you look," the report's authors said.

High churn rate and fewer launches

Despite the sector's strong growth, it also has a relatively high churn rate. Of the 576 startups included in Disrupt Africa's 2021 report, 20% have since ceased to operate. Between 2019 and 2021, 22.2% of fintech ventures closed their doors, and between 2017 and 2019, another 23.2% shuttered.

"The closure rate appears to be slowly falling, but remains high, something which is to be expected in a popular yet cluttered space that has so much potential but so many pitfalls," Disrupt Africa said.

African fintech startups are also more likely to be acquired than their peers.

Disrupt Africa tracked 26 fintech startup acquisitions between June 2021 and July 2023, compared to just seven between 2019 and 2021, and accounting for over 60% of the 43 such deals reported since 2011.

"This should serve to embolden both investors and entrepreneurs in the sector, as exits are the name of the game," the authors added.

There has also been a slowdown in the number of new fintech startups that have launched since the last edition of "Finnovating for Africa."

Around 260 startups launched between 2019 and 2021 (86 or 87 per year), but there have only been 40 launches in the last 18 months.

"This would seem to suggest that the scramble to be 'the next big thing' in African fintech is over, but in the last edition of this report we said exactly the same thing. Ultimately, however, it emerged that more recently-launched startups had yet to be flagged, and this may yet prove to be the case with regard to the current relative lack of 2022 and 2023 launches," the report explained.

(Source: Disrupt Africa's Finnovating for Africa 2023 report.)
(Source: Disrupt Africa's Finnovating for Africa 2023 report.)

No other vertical of Africa's tech ecosystem is subject to more acceleration or incubation than fintech. In all, 46.5% of the 678 startups tracked have taken part in some such program.

Fintech gender diversity underperforms

The fintech market, however, is lagging when it comes to gender balance of founders.

Under 15% of the fintech startups tracked by the 2023 report had at least one female co-founder, and only 7.7% were led by a female CEO.

These percentages mean fintech ranks below e-commerce and retail-tech, e-health, edtech, logistics, and recruitment and HR when it comes to gender diversity, Disrupt Africa found.

To compare with the ecosystem-wide average, 14.6% of African tech startups have at least one female co-founder, while only 9.6% have a female CEO.

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*Top image source: wayhomestudio on Freepik.

— Paula Gilbert, Editor, Connecting Africa

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