Business ON THE RISE TECHNOLOGY

Africa’s fintech continues to collect investments

The streak of big ticket investment companies in African fin-tech continues with the investment in Cellulant, a digital payment solutions company.

Fintech describes the emerging technological financial services sector in the 21st century. There are over 300 fintech companies in Africa and more than half of them were founded in 2015-2016. About a third of investments raised by startups were in the fintech sector and venture funding in general has increased by 51% in 2017.

Cellulant raised over 47.5 million dollars to scale digital payments across Africa in its Series C round, organized by the Rise Fund, with participation of Endeavor Catalyst, Satya Capital, Velocity Capital & Progression Africa.

This is the Rise Fund’s first investment since raising $2 billion last October with the help of a US-based private equity firm, TPG. Their backers include Andra AP-fonden, the Swedish pension fund, and the Washington State Investment Board, and they also have musician, Bono, and Richard Branson on their board.

This is one of the largest investments for an Africa-focused, venture-funded company. The company advertises being “for Africans, by Africans.” The service provides a way for Africans to pay for utilities, airtime, shopping and other lifestyle commitments through their phones as well as track expenses and get loan. Cellulant was first founded in Nigeria and Kenya in 2004. It has since expanded to nine other African countries and will be expanding to two more following this investment. About 12% of Africa’s mobile consumers can make payments with it.

Fintech companies are playing a key-role in filling gaps in crucial payments and financial inclusion across Africa. Over the past three years fintech has been rising continuously and become the most attractive startups for investors on the continent, pointing to how important they are becoming for business in Africa. Since 2015 more than $100 million was invested in Fintech startups.

“Rather than disrupting an existing infrastructure as their counterparts in the developed world are, they are in fact building a whole new infrastructure of their own,” says Wim van der Beek, managing partner of Goodwell Investments.

Residents in both rural areas and major cities in many African countries find it difficult to access certain financial services. In region 2014, only 34% of the population of Sub-Saharan Africa had bank accounts. Fintech is helping reduce economic and social disparities through financial inclusion. Investors are counting on this underserved market being a huge opportunity for fintech start-ups to build payments infrastructure and financial inclusion.

Success of mobile technology was shown by the company, M-Pesa in Kenya and other parts of East Africa, another phone-based money-managing service.

“Financial services are the lifeblood of the economy,” Hilda Moraa, founder of Pezesha, a micro-lending marketplace that helps low-income Kenyans, tells Quartz. “In East Africa, we are seeing [how] financial services continue to be agents of change not just for the middle or upper-class but particularly to low-income earners.”

Flutterwave in Nigeria, which aims to build underlying payments infrastructure for African businesses, raised more $10 million in its Series A round in August of last year, the CEO claiming that they want to advance global African unity. The rapid growth of these companies has illustrated the potential for fintech and the demand of the market.

However a lot of the capital from fintech has only gone to “shinier” countries such as Nigeria, Kenya, and South Africa. In 2016, these three countries put-together accounted for more deals than the rest of the continent. There is a need to diversify the target countries as not all of them are on board and to ensure this happens, the founders and investors need to base it by region.

Wikimedia via Flickr/InvestmentZen

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