A comparative analysis on financial inclusion in Sub Saharan Africa and role of financial technology services

Financial inclusion is perceived as an enabler to eliminate poverty around the world. It is therefore today’s primary agenda on the minds of all policy makers in the African countries.
My mentor Dinesh Singh wanted to emphasize the importance of financial inclusion. He further advised me to look for research insights into the comparative levels of financial inclusion in Africa.

I have written this article while investigating the extent of financial inclusion in different developing regions throughout the continent. Let me remind you that this region’s population is also at the highest risk of financial exclusion.
A step further is taken to look into the acceptance and growth rate of financial inclusion and role of Fintechs in these countries.

I was also determined to explain why the acceptance and growth rate of the inclusion differs considerably.
This article follows another piece of work which you can read [here].


Africa is a region of opportunities for Fintech investments due to its unique economic and demographic environment. The region is characterized by less-developed financial infrastructure, and an unbanked population of about 60%[3]. By ensuring access to financial services to this population, Fintechs have the potential to profoundly change the financial services landscape.

They can play a pivotal role in improving and democratising inclusive financial services.
The continent has already proven its readiness for Fintechs:

1. It has one of the highest mobile phone penetration levels in the world, and;
2. It is currently experiencing a boom in mobile financial services and payment technologies.

You can read more about this in an earlier research published [here].

Fintech Potential

The Fintech revolution in Sub-Saharan Africa(SSA) is accelerating with a steady pace. Fintechs are offering a revolutionary boost to the region’s financial technology infrastructure. The conditions for growth are promising, and the market is exhibiting favorable signs for continuous development.

Fintechs have had a considerable impact on the financial industry across the world. Traditional financial institutions now see Fintechs as a force to be reckoned with. They have innovative, customer friendly solutions and a level of flexibility that the traditional institutions have struggled to provide. Their specialized focus and unique value propositions have put pressure on financial institutions to retain customers and have forced an entire industry to innovate. But what potential could Fintechs have in a market that is devoid of these established financial institutions?

This potential has begun to be explored in Sub-Saharan Africa, a region with an under-developed financial sector rendering most of the entire adult population without access to traditional means of financial services. Fintechs are already one of the main drivers for financial inclusion in SSA.

The SSA region has a population of more than one billion people inhabiting a total of 46 countries. At present, about 60% of that adult population does not have access to traditional means of financial services, and a huge proportion of Africans are underbanked. The proportion of unbanked and underbanked citizens combined with a substantial mobile penetration rate of 44% (as of 2018) have laid a very fertile foundation for the expansion of Fintechs.

Kenya, Nigeria, Ghana, South Africa and Tanzania are leading the Fintech Hub in Sub Saharan Africa as mentioned in the EY’s Fintech in Sub Saharan Africa report[3]. Besides this, Africa is the world leader in mobile money services consumption. An affirmative perspective published by the Africa Development Bank in its Annual Development Effectiveness Review which positions several African countries as the fastest growing economies in the world[4].

Sub-Saharan Africa Currency

The Fintech burst is still to happen in Africa, which will go beyond payments, mobile money transactions. This will ensure access to quality and modern financial services enabled with intelligent credit scoring, peer to peer platforms, invoice financing, loans securitisation with alternative methods of asset tagging, etc. There are many such examples and I can go on but I will reserve these examples for another article covering this.

Africa’s Fintech Growth

In the African countries, financial inclusion initiatives have received broader support from governments and international bodies. Few global bodies which are at the forefront of this are the World Bank and the International Monetary Fund (IMF). These organisations are revisiting and reviewing their developmental policies to provide the much-needed support to accelerate the economic growth of these countries[5].

I will draw two examples of activities here:

1. Nigeria and Zimbabwe, both signatories to the Maya Declaration, launched their financial inclusion strategies in 2012 and 2016 respectively, setting 2020 as the target year.

2. The African Development Bank (AfDB) launched the Africa Digital Financial Inclusion Facility (ADFI) in 2019. This is an innovative financing facility designed to accelerate digital financial inclusion across Africa. They aim at ensuring access to the formal economy to millions of Africans.

The Fintech landscape of SSA has experienced rapid growth over the past decade, making big impacts on the broader financial-services industry. This growth positively disrupts the livelihood of the population stuck in the unorganised employment space. With the combination of the conducive environment and regulatory support from governments in the region backing it, Fintechs have the ability to shake up the industry further and bring about greater financial inclusion practices. This will enhance and fuel social and economic development of the region. Such a development agenda can clearly bring more stability in terms of human rights, quality of African life and status of marginalised groups.

The EY report “Fintechs in Sub-Saharan Africa: An overview of market developments and investment opportunities”[3] reveals that the Fintech landscape in Africa has grown at an annual rate of approximately 24% over the last 10 years. This is fueled by the continent’s three main hubs – South Africa, Kenya and Nigeria. In addition to the three main hubs, recent developments have shown encouraging signs of Fintech growth in Ghana, Uganda, Cameroon and Rwanda.

An example of the significant impact Fintechs have had has been observed in Kenya. Here, a large mobile payment provider [M-Pesa] revolutionized the way the nation’s population is making payments. The extent is such that about 45% of the entire nation’s GDP was processed through this payment service infrastructure. Again, the growth potential of the expanding payments sector is significant. The research points to the expectation that the total number of mobile phone connections will exceed 1 billion by 2025 out of a population of approximately 1.3 billion.

Role of financial technology platform providers:

Aside from aiding financial services providers in their pursuit to enable end consumers, many financial technologies companies innovate on their business models. They are gearing towards improving the financial infrastructure in the SSA region. There is clearly a global but hyper local collaborative ecosystem. These partnerships are taking place across other Fintechs, SMEs, and corporations, enabling the ecosystem to offer financial services to end consumers.

Fintechs, with their agile approach and latest technologies such as data analytics, have already made a profound impact in SSA’s financial services landscape. Combined with favourable demographics, an under-represented banking sector and a lack of financial infrastructure now begins to show that the conditions for growth are promising.

SSA statistics  on number of Fintechs and Startups
Figure: Estimated Number of Fintechs and Startups in the African Continent

What are few challenges that exist in this narrative of Fintech growth?

Despite the efforts made, large gaps in financial inclusion remain across and within countries. This is probably due to the wrong strategies to promote faster inclusion, or due to their poor implementation. Most African countries have very high exclusion rates when compared with other countries.
Nigeria, for example, is one of the developing nations which reports a dismal position of 68% exclusion rate. And this is even after 4 years of the implementation of the country’s strategies for financial inclusion (announced in 2012).

Using data from the global Findex database[6], a comparative analysis of financial inclusion in 31 sub-Saharan African countries indicates that individual-level factors play a role in estimation of the extent. Some of these factors are age, education, gender and wealth. Macroeconomic variables such as growth rate of GDP, presence of financial institutions and Business Freedom are also significant predictors of the extent of financial inclusion[5].

Global interest

The EY “Fintechs in Sub-Saharan Africa” report[3] reveals that the Fintech sector in SSA comprises more than 260 active companies. These active companies are split into local (80%) and international (20%) players. The international Fintechs originate from the UK, the US, Europe, Canada, India and China.

Based on this report: Jan-Erik Behrens, Partner, Strategy and Transactions – EMEIA Financial Services, EY Germany, says “International investors have overcome their reservations about the SSA sector and have started to invest at an increasing rate. Apart from seeking potentially high returns on investments, many investors are driven to the Fintech segment by the opportunity to combine the growth potential of financial inclusion with the positive social impact, as well as a means of diversifying their portfolios.”
At the same time, it is our view that risk mitigation for these global investment portfolios are influenced by the region’s uncertain political factors.
I will try to cover this in another upcoming article while arguing a positive tunnel through these factors posing instability challenges.

South Africa, arguably the epicenter of the Sub-Saharan Africa’s Fintechs, harbors about a third of the firms, predominantly in Cape Town and Johannesburg. As the most diversified hub, it exhibits great similarities to more developed markets. The sector has an extensive network of venture capitalists and investors and is home to many accelerators and incubators.

Kenya, the second largest SSA Fintech hub, hosts around 20% of the entire region’s Fintech landscape. It also has a stronger focus on the payments segment. The Kenyan hub is located in Nairobi, which is home to more than 50 Fintechs. Fintechs are already one of the main drivers for financial inclusion and economic growth in SSA.

Nigeria is the SSA Fintech sector’s third largest hub, with most of its Fintechs based in Lagos. Like Kenya, the Nigerian Fintech sector is dominated by the payments segment.

Funding in the ecosystem

While Fintechs received considerable funding from the private sector, funding support from governments is also expanding. For example, in Nigeria, small and medium-sized enterprises (SMEs) can receive funding from dedicated funds or can take out loans at friendlier rates. One way to do so is through the Bank of Industry (BOI), which provides funding to small businesses by offering customer-friendly rates through its Youth Entrepreneurship Support (YES) Programme and the National Youth Service Fund[7]. These programs have a focus on technology companies.

SMEs can also obtain funding from the Aliko Dangote Foundation, the Tony Elumelu Foundation and the National Information Technology Development Fund.

Another factor in the region’s favour is its rapidly growing workforce. While having a large workforce at their disposal, SSA states are looking to train and develop the skilled pool of talent required to supplement this growing Fintech sector in their countries.

This trend is evident in SSA’s Fintech hubs, such as South Africa and Kenya. For example, in South Africa, universities are taking measures to offer relevant skills to strengthen the talent pool.
1. In 2018, the University of Cape Town offered a new program: Master of Philosophy in Data Science of Financial Technology.
2. In Kenya, academic institutions are developing entrepreneurial skills among students through incubation centers, such as the Kenyatta University (KU) Chandaria Business Innovation and Incubation Centre and the Strathmore University @iLabAfrica.

Both private and public investors worldwide have started to pay more attention to the development of Fintechs in SSA. This is evidenced by a steady increase in investments in the SSA Fintech market. Overall, the sector exhibits promising signs of accelerating growth, ample investments and new business opportunities with SSA experiencing an impressive CAGR (compound annual growth rate) of 24% over the past 10 years, and the number of Fintechs growing from 47 in 2009 to more than 260 in 2018[3].

Sub-Saharan Africa Fintech Status
Figure: Sub-Saharan Africa To Fintech Hubs Status

Fintechs making a difference

With the primary pain-point among African citizens being the lack of financial-services access, Fintechs in the region have emerged to solve it. In the digital-banking space:

1. TymeBank, which was established in South Africa in 2015, provides access to banking services for the unbanked and underbanked. TymeBank is possibly the country’s first digital-only bank. It does not own any banking branches and relies solely on digital technologies to support and service its customers.

2. Pezesha, initially launched in Kenya in 2016, is a peer-to-business micro-lending marketplace. It allows users to acquire instant loans on their mobile phones via SMS (short message service), providing loans if minimum criterias are met. Potential borrowers cannot have pending payments on their previous loans and they must have paid both their first and second installments on time. The prospective borrower must qualify through Pezesha’s credit-scoring system. Pezesha’s services are also extended to SMEs. Remember SMEs employ 80 percent of Africa’s workforce. It is incredible offering a solution to a segment that has traditionally grappled with access to financial services.

3. In another Kenyan example: M-Pesa, a mobile payment system launched in 2007 allows people without bank accounts to transfer funds as quickly as sending a text message. M-Pesa had 21 million active users as of February 2019 which translates to 93 percent of the Kenyan population as of that time having access to mobile payments and handling more than 17 million transactions a day.

Governments are showing keen interest in supporting Fintechs and innovation in the financial-services sector:

1. The Central Bank of Nigeria, along with the Nigeria Inter-Bank Settlement System, introduced a regulatory sandbox in 2018 with the aim to facilitate digital innovation by Fintech companies.

2. South Africa’s central bank, the South African Reserve Bank, established its Financial Technology Programme in 2018 to assess the emergence of Fintech in a structured manner and to consider its regulatory implications[8]. Under the program, the South African Reserve Bank has reviewed policies related to cryptocurrencies. It decided on the applicability of innovation facilitators and launched Project Khokha to experiment with distributed-ledger technologies.

The three main SSA Fintech areas (South Africa, Nigeria and Kenya) are likely to continue providing innovative financial solutions, as Fintechs expand regionally within SSA. This consistent growth is important in order to provide services to a larger number of customers. Other SSA countries have also shown tremendous growth and investment potential in recent years. Rwanda, for example, recently launched a Fintech hub to boost its Fintech sector.

The increase in investors’ confidence, paired with the success of multiple Fintechs across the industry, will continue to drive investments in the sector. The combination of these trends reinforces the view that the SSA Fintech sector has high growth potential and presents significant opportunities for future investment.


In this article, Muellners Foundation analysed Africa and assessed the degree of financial inclusion in Sub Saharan African region. This region constitutes a huge number of underdeveloped and a few developing countries.

Factors such as ownership of a bank account in a formal financial institution, use of bank credit and savings compared with other factors like gender, education, income and a few others which vary across countries within the African continent are proving to directly impact the extent of financial inclusion and growth rate of Fintech in varying countries in this region.

This explains why certain countries such as Kenya, Nigeria and South Africa are leading the Fintech hub, whereas others are lagging behind.


[1] EY Global Press Release- Africa’s fintech landscape has grown at an annual rate of approximately 24% over the last 10 years, https://www.ey.com/en_za/news/2019/01/africa-Fintech-landscape-has-grown-at-an-annual-rate-of-approximately-24-over-the-last-10-years
[2] Fintechs Create an Impetus for Enormous Growth in Sub-Saharan Africa, https://internationalbanker.com/technology/Fintechs-create-an-impetus-for-enormous-growth-in-sub-saharan-africa/
[3] FinTechs in Sub-Saharan Africa: A Landscape of Opportunities, https://www.proshareng.com/news/FINTECH/FinTechs-in-Sub-Saharan-Africa–A-Landscape-of-Opportunities/47898
[4] Annual Development Effectiveness Review 2020 – Building resilient African economies, https://www.afdb.org/sites/default/files/2020/10/30/ader_2020_en.pdf
[5] Financial Inclusion Measurement in the Least Developed Countries in Asia and Africa, https://link.springer.com/article/10.1007/s13132-021-00773-2
[6] Global Findex database, https://globalfindex.worldbank.org/
[7] Fintechs Create an Impetus for Enormous Growth in Sub-Saharan Africa, https://internationalbanker.com/technology/fintechs-create-an-impetus-for-enormous-growth-in-sub-saharan-africa/
[8] Reserve Bank establishes Financial Technology (FinTech) programme, https://www.gov.za/speeches/fintech-13-feb-2018-0000

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