The startup ecosystem in Africa is currently flourishing and this is particularly true for financial technology or fintech. In 2021, Africa enjoyed $4.9 billion in funding and it is estimated that $300 million lies in undisclosed deals. 62% of this funding was picked by the fintech sector, followed by health and biotech, logistics, education, cleantech, agriculture, e-commerce, mobility, and data and analytics sector. The growth has been two folds in total volume since 2020 and a 25% growth in the announced deals recorded since 2020. Most of the funding came to Nigerian start-ups, followed by South Africa, Kenya, and Egypt 

The fintech is a growing sector 

The biggest share of funding has gone to financial technology start-ups. More than two-thirds of the total funding has gone to fintech start-ups and this trend holds true even when it comes to deals of more than $50 million. Fintech start-ups are exceeding in both volume and funding activity. 

The top 20 deals of 2021 that Africa managed to get covered 65% of the total volume. A major portion of the fund came from the United States and the United Kingdom. In addition to that, Asian players are also joining investment deals when it comes to bigger rounds of investment. Even though the investment has been pretty good, it needs to be pointed out that only 8.2% of the deals have gone to companies that are run by all-female co-funded teams. 

Why fintech companies are picking the majority of the investment?

The domination of the fintech company in Africa raises the question of why the fintech company? It is surely not because they are making a profit equivalent to Dhankesari but a lot more than that. One can attribute the interest of the investors in the fintech companies to the increased penetration of mobile phone usage and internet penetration. It is projected that by 2025, half of the African continent’s population will become mobile subscriber users. With increased mobile phone penetration, growth can be seen in the adoption of digital payments like receiving the winning sum of events like Lottery Sambad through online methods, lending, insurance services, and banking. 

With the growing population, Africa presents a huge potential with its growing economy and underdeveloped financial service ecosystem that has huge growth potential. With an increase in internet penetration, the start-ups that are dealing with digital and mobile payments are getting more focus from the investors. The digital payment space in Africa has seen the greatest growth in terms of funding too within the fintech space. With Africa adopting mobile phones and internet penetration, it has now become possible to let go of the restrictive traditional banking infrastructure. 

Currently, Africa comprises an unbanked population and is massively underbanked. However, the middle class of Africa is growing and the communications infrastructure is still growing in Africa along with increasing mobile penetration, and this presents a huge platform for mobile financial services and fintech innovation.

According to a report by McKinsey & Company, Africa is the world’s second-fastest-growing and most profitable payments and banking market. This indicates the interests of the investors in this sector will still be high and one can see more funding in this sector. Currently, Africa is the global leader when it comes to money adoption.

Even though the funding has been huge for Africa, it needs to be noted that the bulk amount of funding went to a very small number of startups. The same can be stated with the fact that only 20 companies together managed to secure a fund of $3 billion and the other 700 startups together raised a fund of $2 billion. 

Which startups picked the most funding?

The start-ups that managed to get the most amount of funding are Flutterwave which raise $170 million, TradeDepot secured a funding of $110 million, Kuda raised $ 80 million and it was followed by Moove which raised a funding of $63.2 million and Daystar Power grabbed funding of $62 million in Nigeria. 

With the high fundings of the African continent, more investors are joining different funding rounds in Africa and also, this is creating many jobs in the continent. Community employment can surely be seen as an outcome of these start-ups which is reducing the unemployment rate and is helping in improving the economic prospect of the country.

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