Global investment money is flooding into Africa’s fintechs

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Fintech startups attracted more than 60 percent of all venture funds flowing into Africa in the last quarter.

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Ricky Rapa Thomson was a security guard and then a motorbike taxi driver before becoming an entrepreneur. Safeboda, the startup he co-founded, promises safe and reliable transportation on Uganda’s deadly roads. It also provides fintech solutions for its drivers and customers and hopes to become Africa’s largest ride-hailing service.


It’s the kind of fairy-tale that tech investors usually love. Yet this is the kind of pothole-ridden journey that foreign capital has traditionally avoided in Africa, preferring instead to focus on industries that focus on mining or infrastructure projects.

So Thomson was worried when Safeboda sought Series B investments in 2019. But the startup received funding from the investment arms of German insurance major Allianz and Indonesian super app Gojek, neither of which had ever invested money in African tech before.

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“It was humbling,” Thomson told Al Jazeera, recalling his feelings at the time. “It’s a wonderful recognition.”

Two years later, Thomson’s experience resonates with hundreds of African founders, as the continent emerges as ground zero for a surprising boom in fintech funding. Global investors, often from countries that have not traditionally been major players in Africa, are rushing to back promising startups. From giant corporations to venture capital (VC) firms of myriad sizes, no one wants to be left behind.

this is a wonderful recognition

Ricky Rapa Thomson, Co-Founder, Safeboda

In the third quarter of this year alone, African fintech firms raised $906 million, according to Digest Africa, a database of early-stage investments on the continent. This represented more than 60 percent of all venture money that flowed into Africa in the last quarter, and more than all other regions combined in the first half of 2021.

This year’s trend is based on a separate analysis by BFA Global’s Catalyst Fund, which showed funding for African fintechs grew rapidly, from just $385 million in 2018 to $1.35 billion last year.

multiply unicorns

Three years ago, there was a privately owned startup in the continent worth more than $1bn – Nigerian e-commerce company Jumia. Today, at least seven African startups have joined the “unicorn” club. Five of them are fintech firms, three of which – Flutterwave, Opay and Wave – became unicorns this year.

Too many numbers? The wave is just beginning, according to Ryosuke Yamawaki, whose Keppel Africa Ventures entered the continent in 2018.

“I think it’s going to explode,” Yamawaki told Al Jazeera. “We now see new investors from outside Africa every day.”

In October, Google announced a $50m fund to support African startups. In the same month, New York-based Tiger Global invested $15m in Mono in Nigeria and $3m in Union54 in Zambia. In March, Tiger Global led a $170m funding round for Nigeria’s Flutterwave, which helped that company become a unicorn.

But it is not just the West that is eyeing African fintech. In August, Nigeria-based mobile money service OPay became the most valuable African startup at $2bn following a $400m funding round led by Japan’s SoftBank and backed by Chinese investors such as Sequoia Capital.

But while these behemoth funds are often in the limelight, it is the smaller investors from various countries who have laid the foundation for the African fintech moment in the sun.

Now we see new investors from outside Africa every day.

Ryosuke Yamawaki, Keppel Africa Ventures

Unlike Tiger Global and SoftBank, which only started investing in African startups this year, Japanese venture capital firms Keppel, Samurai Incubate Africa and Asia Africa Investment & Consulting have been rapidly building out their portfolios over the past two years.

Yamawaki said that Keppel has now invested about $15 million in 96 companies.

In April, Australia’s TEN13 invested an undisclosed amount in Kenya-based ImaliPay. And the investment in Safeboda from Indonesia’s Gojek underscores how emerging markets funds are joining their peers from developed economies in betting on Africa. “The world has realized that the best way – the only way – to find solutions to Africa’s challenges is to invest in local innovators who are able to design improvements that actually work,” Thomson said.

the race is on

Certainly, fintech is hot globally – not just in Africa. But the continent has unique characteristics and challenges that make the region a perfect fit.

Traditionally, the high cost of doing business in Africa has acted as a deterrent for many foreign investors, said Aubrey Hruby, who advises Fortune 500 firms and other major companies on investing in the continent. Poor physical infrastructure complicates business activities.

“Fintech addresses those infrastructure challenges,” she said.

African talent has also matured in this area, with many founders on their second or third startups. “Investors know they are dealing with people with a proven track record who have learned along the way,” Hrubi told Al Jazeera.

Then there’s the market: 40 percent of people in sub-Saharan Africa are under the age of 15, making them potential potential customers at a time when smartphone penetration, still less than 50 percent, is growing rapidly.

Investors know they are dealing with people with a proven track record.

Aubrey Hruby, Consultant

“It’s a huge opportunity,” says Ricardo Schaefer, partner at London-based venture capital fund Target Global. “Like the gold rush, you want to invest in picks and shovels, we want to focus on the infrastructure of digital money – and that is fintech.”

Although the United States, China and others are all vying for influence in Africa, the race to invest in fintech is unlikely to be influenced by geopolitics, according to Hrubi and Yamawaki. The VC, Yamawaki said, just don’t think so. But a distinct competition among private sector investors around the world appears to be inevitable. Yamawaki said, “There’s a scramble to get in.” “The winners will be the ones who come to the market first.”

Yet getting up early brings its own risks and concerns. After Target Global led a $10m investment round for Nigerian digital bank Cuda last year, Schaefer said his firm’s “biggest concern” was whether smart capital would “follow us.” It did: In early August, Cuda was valued at $500m following a fresh round of funding. “Our worries went away very quickly,” he told Al Jazeera.

Now, the entry of some of the biggest funds on the planet like SoftBank and Tiger Global, Yamawaki said, is likely to boost the confidence of smaller VC firms looking to invest at an early stage. And as startups get bigger, “their talents will leave and start their own businesses,” they carry on the lessons they learned from their success, Hruby said.

True, the political instability and regulatory uncertainty that has long scared investors in Africa remains a reality in many countries today. But Safeboda’s Thomson is convinced that the flood of investments in African fintech paves the way for a better future. “When global investors support local innovators and local technology, you build a better world,” he said.


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