Dar es Salaam. Fintech startups continue to dominate venture capital funding in Africa, attracting more than half of all investment in 2024.
Startups across the continent raised over $2.2 billion in equity, debt, and grants, with Fintech capturing the lion’s share of this funding.
According to The Big Deal, Fintech’s share increased from 42 percent in 2023 to 47 percent in 2024, marking its highest share since 2021.
This growth highlights Fintech’s crucial role in Africa’s digital economy, addressing long-standing financial challenges and enabling other industries to thrive.
Mr Praygod Japhet, Head of Programmes and Operations at the Tanzania Startup Association, explained in an interview with The Citizen that Fintech’s expansion is driven by its ability to solve problems while offering significant returns for investors.
One major factor is the financial inclusion gap; over 60 percent of African adults remain unbanked.
Fintech startups are bridging this gap through mobile wallets, microloans, and insurance products, enabling millions to access formal financial services.
“Fintech startups are not just filling a gap; they are building an entire ecosystem that empowers millions of Africans to participate in the economy,” he stated.
The scalability of Fintech is another key attraction. Unlike other sectors, Fintech solutions can be replicated across borders.
Companies like Flutterwave, Wave, and Chipper Cash have demonstrated that Fintech can succeed in multiple African countries by tapping into shared infrastructure and regulatory frameworks.
“The cross-border nature of Fintech is a major selling point for investors. The potential for exponential growth is enormous,” he added.
Additionally, Fintech’s transaction-based revenue models provide investors with reliable cash flow. “Fintech businesses are not just scalable; they are profitable. Investors prefer models that offer consistent revenue streams, and Fintech has proven to be a very safe bet,” he remarked.
The founder of Tembo Plus, Mr Victor Joseph, shared similar views.
He noted that Fintech serves as the backbone for other industries like e-commerce, health tech, and agritech, all of which rely on Fintech for payment processing and financial services.
“Fintech doesn’t exist in isolation; it supports and enables other industries to thrive. This interconnectedness is another reason for Fintech’s dominance,” he explained.
Despite Fintech’s growth, it is concentrated in four key African markets: Nigeria, Kenya, Egypt, and South Africa. These countries have become fintech hubs due to favourable demographics, infrastructure, and regulations.
Nigeria, Africa’s largest economy, attracted over $1.2 billion in 2022, with companies like Flutterwave and Paystack leading the way.
Mr Japhet attributes Nigeria’s success to its young population and rapid digital adoption. “Nigeria’s youthful population and swift digital integration have created an environment ripe for Fintech innovation,” he noted.
Kenya, the home of mobile money pioneer M-Pesa, continues to lead Fintech innovation in East Africa. In 2024, Fintech captured 88 percent of Kenya’s startup funding, solidifying its status as a Fintech powerhouse.
Egypt, with its young and tech-savvy population, has also experienced rapid Fintech growth, capturing 70 percent of the country’s equity funding in 2024.
South Africa, with its advanced financial systems, offers Fintech startups access to both local and international markets.
While these markets dominate, emerging Fintech ecosystems in Ghana, Senegal, and Tanzania are gaining traction. Mr Japhet emphasised that Tanzania’s fintech sector is rapidly growing, driven by mobile money adoption, supportive regulations, and increasing investor interest.
However, reports from the Tanzania Startups Association indicate that Tanzania’s Fintech sector still lags behind its dominant counterparts in terms of funding. In 2021, Fintech represented 11 percent of Tanzania’s 576 known startups, making it the fourth-largest sector. By 2023, Fintech’s share had slightly decreased to 8.83 percent, although it remained significant.
In 2024, Tanzania’s Fintech sector saw a boost, raising $43 million in the third quarter alone—almost double the amount raised in the same period in 2023.
Mr Japhet noted that regulatory reforms have also fuelled Fintech’s growth. This year, the Bank of Tanzania introduced Fintech Regulatory Sandbox Regulations, allowing startups to test innovative financial products in a controlled environment.
“These regulations provide a safe space for Fintech startups to experiment and scale while ensuring consumer protection. This is a major step in fostering innovation in Tanzania’s Fintech sector,” he said.
Despite this growth, Tanzania’s Fintech sector faces challenges, such as limited infrastructure in rural areas and a shortage of early-stage funding. Mr Japhet underscores the need for more venture capital to support early-stage startups.
Furthermore, regulatory fragmentation across African countries poses a challenge to cross-border expansion.
However, there is potential for harmonising policies within regional frameworks such as the East African Community.
