How Kenya is leading Africa in the mobile payments market

How Kenya is leading the mobile payments market in Africa - Startup Lagos

The mobile payments landscape in Africa is growing remarkably, especially as fintech in Africa is attracting the cynosure of attention globally. A report by Disrupt Africa this year highlights that African fintech startups are much more probable to access funding or achieve exit, than startups in any other sector. With a large percentage of Africa’s unicorns being fintech companies, it becomes even more evident that fintech in Africa is a treasure chest.

African sectors with the largest volume of investments – 2021

Fintech growth in Africa

Already, fintech in Africa has raised over $1.5+ billion in the past year, and this implies that the growth of the sector has been massive. The mobile payments space, in the fintech sector, has largely focused on driving financial inclusion and reducing the ranks of the unbanked in Africa. With African countries like Morocco, Egypt, and Nigeria, according to the Merchant Machine, leading the list of the most unbanked countries globally, Africa must be at the forefront of the financial inclusion drive. This, in turn, will help to ramp up growth across other sectors of the economy, with EY Global estimating that broader access banking, savings, and lending products generally can assist in boosting GDP by 14% in large emerging economies like India, and over 30% in frontier economies like Kenya.

As Andy Jury, CEO of Mukuru, a South Africa-based fintech startup, financial inclusion for Africa has to espouse more of doing and less of fanciful speeches. At the front burner of driving this growth, is the importance of providing more easily accessible alternatives for people to make payments and facilitate transactions. On the list of the most unbanked, Kenya sits at the 11th spot, with a percentage of over 44%, unbanked in a country of over 53.8 million people. In spite of this, Kenya’s financial inclusion has grown from a meager 26% of its population in 2006 to over 83% presently, with greater access to basic financial services. This is remarkable, as Kenya has not only been developing its fintech space but as well remarkably growing its mobile penetration rates with subscriptions going well past the total population amount by 12%.

The pandemic boost: Kenya on the driving seat

The COVID-19 pandemic has also continued to stimulate and impact the Kenyan credit market significantly, with spikes in loan disbursement during the second quarter of the year, increasing by 2.5% from the first quarter. Challenges in cost of living and economic situations are pushing Kenyan families to source online loans and credit facilities. Mobile money services have also been providing a much-needed buffer to cover for the disruptions in mobility and commerce occasioned by the pandemic. As such, Forbes reports that mobile money transactions in Africa had hit close to a massive $500 billion during the pandemic, especially in sub-Saharan Africa.

Safaricom’s mobile money transfer service M-Pesa has also been performing exceedingly well, after hitting over 50 million in active users this September. By leveraging Safaricom’s wide mobile penetration and infrastructure, M-Pesa offers its clients easier and more seamless opportunities for mobile money transfer, payments, and micro-financing. M-Pesa’s Fuliza overdraft service has been likewise enjoying growing demand from customers, with a massive 58.6% of accounts opened in the second quarter of the year, being overdraft facilities.

M-Pesa started what has now turned into a mobile money revolution in the country, through managing microloans generated through Safaricom. The UK Department for International Development was finding it difficult to disburse loans to Kenyan farmers, especially as these rural farmers were well-displaced from proximity to banks and financial institutions. To make this easier for the farmers, M-Pesa was offering users the opportunity to receive payments on their phones via their mobile accounts. However, they recognized another opportunity and cash cow in the necessity and behavior of Kenyans to instead send money to themselves. With the explosive evolution and growth of this initiative, the Kenyan mobile payments market has continued to flourish.

With Kenya’s startup act, expressing ways through which innovation and entrepreneurship can receive a firm boost, the startup environment in the African country has continued to likewise develop immensely.

Comparative statistics of Nigeria, Egypt, Kenya, and South Africa

In comparison to other African countries, Kenya, with the smallest population size among top African giants like Nigeria, Egypt, Morocco, and South Africa, records a relatively more favorable Ease-of-doing-business rank at 56. Also, the country this year has achieved a remarkably funding per capita, as of August 2021, of $11, comparatively better than Egypt at $1.3, Nigeria at $2, and South Africa at $5. These metrics show clearly that the startup growth climate in the country is largely conducive, and that investors are seeing the opportunities and growth potential for startups in the country.

The future of mobile payments in Africa

As large chunks of investments pour into the mobile payments and fintech space in Africa, along with the increasing penetration of mobile phone usage, it is without a doubt that huge and significant disruptions to traditional banking are in the offing. Especially in African countries, where policies are changing to create conducive and beneficial environments for startup growth, there is and will continue to be improved potential for startups, especially fintech to drive innovation on the continent. Kenya has positioned itself at the forefront of this revolution and is poised to take sub-Saharan Africa, the rest of Africa, and the world by storm, with its remarkable strides in the mobile payments space.

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