Report Preview: Untapped Fintech Opportunities in Africa

It is hard to ignore Fintech’s rise in popularity and impact on our lives. Fintech startups have disrupted traditional financial services business models and given access to underserved markets around the world. Fintech has evolved over the years and fintechs in Africa are responsible for attracting significant investment from international firms. However, Africa’s share of fintech funding leaves a lot to be desired. Funds raised are dominated by the so-called big 4- South Africa, Egypt, Kenya, and Nigeria. With that in mind, we embarked on a study to find out which untapped opportunities exist across the continent to start the conversation about where aspiring entrepreneurs and investors should turn their attention to. These untapped countries satisfy the following criteria:

1. Low financial inclusion

2. High mobile subscription rates

3. Growing GDP

4. Growing GDP per Capita

This article is a preview of our upcoming Fintech 2025 report, Untapped Potential: Exploring Future Growth Opportunities for Fintech in Africa, which will be released on the 31st of January 2025.

State of Fintech in Africa

Data reveals that Africa’s fintech industry has experienced healthy growth since 2017: the number of fintechs increased by more than 125% between 2017 and 2023, while the funds raised by fintechs in 2023 were 16.7X more than funds raised in 2017. This shows that fintechs are attracting a significant amount of investments and founders are addressing the financial needs of African consumers.

However, the number of fintechs and investment opportunities are largely concentrated amongst the so-called big 4: the graph below shows that Nigeria, South Africa, Kenya, and Egypt account for 77.2% of active fintechs. This suggests that other African markets are either untapped or underserved by the current solutions given how regulatory barriers in Africa stifle fintechs’ expansion into other African markets.

Another cause for concern is the declining number of new fintechs entering the industry. It is no secret the global pandemic led to a boom in the number of new fintechs being launched and the subsequent surge in investments, however, the market seems to have corrected itself since 2022: in 2022 only 36 new Fintechs were launched in Africa. Yet our analysis reveals that the job isn’t done in terms of creating financial solutions for underserved or untapped markets.

State of Financial Inclusion in Africa

Financial exclusion is a phenomenon whereby people have difficulties accessing and/or using financial services and products in the mainstream market that adequately meet their needs and enable them to lead economically fruitful lives.

Financial inclusion refers to the access and provision of financial services to all citizens, especially low-income earners, poverty-stricken and marginalised individuals in society (Ozili, 2018). Another definition of financial inclusion sees it as a situation that advances the ease of access to formal financial systems by the citizens of a country. This means that all citizens in an economy don’t have difficulties with opening a bank account, accessing affordable credit, and regularly using financial products/services.

To measure financial inclusion, we looked at the proportion of people who own financial accounts. Then the following classifications were used to determine the extent of financial inclusion within a country.

• Extremely low financial inclusion: Countries with less than 25% of people who own financial accounts.

• Low financial inclusion: Countries with less than 50% of people who own financial accounts.

• Moderate financial inclusion: Countries with less than 60% of people who own financial accounts.

• High financial inclusion: Countries with less than 80% of people that have access to financial accounts

• Extremely high financial inclusion: Countries with 80% or more people that have access to financial accounts.

Regional Level

On a regional level, the proportion of Sub-Saharan Africa’s population that owns financial accounts has increased from 23% in 2011 to 55% in 2021 while the proportion of MENA’s population that owns financial accounts has increased from 33% in 2011 to 48% in 2021.

Country Level

Extremely low financial inclusion: 17.4% (8 countries) of our sample fall into this category. Countries with extremely low financial inclusion are South Sudan, Burundi, Niger, Djibouti, Central African Republic, Sudan, Mauritania, and Chad. As illustrated below, less than 25% of people 15+ years old in these countries own any financial account.

Low financial inclusion: 41.3% (19 countries) of our sample are deemed to have low financial inclusion (or high financial exclusion). Countries in this category include large nations such as Egypt, Tunisia, Algeria, and Nigeria. This means that 58.7% of African countries have extremely low or low financial inclusion.

High financial inclusion: 19.6% of our sample is classified as having high financial inclusion. These nations are Zimbabwe, Lesotho, Libya, Uganda, Gabon, Eswatini, Ghana, Namibia, and Kenya. On average, 67.3% of people in these countries own a financial account.

Extremely high financial inclusion: A paltry 4.3% (South Africa & Mauritius) of our sample enjoy extremely high financial inclusion.

The State of Economic Growth

The top 10 largest nations by GDP accounted for 72.7% of our sample’s total GDP in 2023. Despite this, our analysis revealed a few notable surprises when we look at the fastest-growing economies on the continent. Ethiopia & Kenya are the only large economies that also feature among the fastest-growing economies in our study: this supports the notion that growth rates usually decline the bigger an economy becomes (7 of the largest economies don’t feature in the top 20 fastest-growing nations in Africa).

As illustrated by the graph above, Ethiopia’s GDP grew by a whopping 130% by 2023 compared to 2013. To put things into perspective, Ethiopia wasn’t even among the top 10 largest economies in 2013. Hence, its presence among the leading African economies in 2023 signifies a tremendous increase in economic activity within the country over the 2013-2023 period. Although there’s reason for optimism concerning economic growth rates, some nations in our sample shrunk between 2013 and 2023.

Looking at countries’ GDP per capita performances paints an interesting story. The average GDP per country for the continent in 2023 was $2440.87 and this figure is expected to rise to $2514.50 by the end of the year. Overall Africa has experienced a steady increase in its average GDP per Capita since 2013 and is projected to grow over the next 5 years as the graph below suggests. These trends support our view that it’s time for entrepreneurs to venture into underserved and untapped fintech markets in Africa.

Mobile Connectivity

In general, the level of mobile subscriptions in Africa is respectable: 78.3% of countries have at least 60 mobile subscriptions per 100 people, 58.7% of countries have at least 80, and 45.7% of countries have at least 100 mobile subscriptions per 100 people. This suggests that the majority of the continent has access to the basic technology needed for fintech solutions. Libya leads the way in terms of boasting the most subscriptions per 100 people while South Sudan has the fewest number of subscriptions per 100 people in our sample.

Recommendations

Our recommended markets that are ready for disruption are based on the criteria highlighted in the introduction. This is exploratory as our analysis didn’t consider factors such as political stability or regulatory requirements to start a fintech business. Before entering these markets we encourage you to conduct further research to ensure you formulate the right strategies to increase the likelihood of success.

Pre-Order Our Fintech 2025 Report

This article is just a glimpse of our upcoming Fintech Industry report. If you want to get more insights about the fintech industry, pre-order our Untapped Potential: Exploring Future Growth Opportunities for Fintech in Africa. The report includes:

• Detailed Analysis of South Africa’s Fintech Industry

• Competitor Analysis

• Innovation in SA’s Traditional Banking Sector

• Consumer Behaviour

• Global Fintech Trends

• Comprehensive Opportunity Map with 46 African Countries

• Market Segmentation Analysis

• Africa Fintech Regulation & Policy Analysis

Pre-order your copy today and get exclusive benefits such as:

1. Quarterly fintech trend reports so that you stay ahead of the curve

2. Access to our Fintech Founders Community to grow your network and form business relationships

3. Access to a Virtual Live Q&A Session on the 10 February 2025

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