A new study found that 61% of $2.7 billion worth venture capital financing was invested on Africa in 2021 by African fintech startups. While its share of global fintech funding is just over one percent, the continent’s fintech sector still recorded one of the highest year-on-year growth rates globally.
‘Record-High Number of Deals Closed’
According to the findings of a new Mastercard study, African fintech startups — whose number grew from 311 in 2019 to 564 in 2021 — accounted for “61% of the USD 2.7 billion deployed across Africa in 2021.” The findings also show that fintechs’ share “of the record-high number of deals closed” in that year was 27%.
When compared with the $131.5 billion that was raised globally, African fintech’s share of the total remains very low — just over 1% of the 2021 total. However, in terms of the funding growth rate, the study noted that the continent — the Sub-Saharan Africa region in particular — had one of the highest year-on-year growth rates globally. This was explained in the report.
In the Sub-Saharan Africa (SSA) region, fintech startups recorded 894% year-on-year growth in funding in 2021 – the second highest in the Middle East, Africa, and Pakistan region during the period, and the highest yearly growth rate over the past five years. The region’s largest funding source, USD 1.56 Billion, was received by SSA.
Concerning the funds raised by fintech startups per country, the study findings show that Nigeria, which is home to some of the continent’s fintech unicorns, had in fact emerged as a leading fintech hub not just in Africa but across the Middle East and Pakistan. According to the study’s findings, the West African nation’s fintechs alone “accounted for a third of all funding deployed into fintech in 2021.” Within the country, fintechs’ share of all venture capital raised during the same period topped 71%.
Financial Exclusion Gap: Fintechs and Fintechs
Regarding why the fintech sector continues to get a disproportionate share of the funding, the study, titled the “Future of Fintech in Africa,” points to the continent’s longstanding financial exclusion gap and how fintechs are “building inclusion from the ground up.”
Much of the sector’s past and projected success in the future is also tied to improved smartphone penetration. According to the 2022 GSMA reports, it is expected that smartphones will connect more than 6.2 billion in 2021 and 7.5 billion in 2025.
According to the report, Nigeria will be driving sector growth along with South Africa (and Kenya) in the meantime. However, the study suggested that the fintech sector growth rate will depend on regulators’ and policymakers’ continued prioritization of “affordable internet and mobile penetration.”
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