Nigeria received a third of fintech funding in Africa, Middle East, Pakistan in 2021

Fintech startups in Africa grew 81 percent in 2021, with South Africa, Nigeria and Kenya emerging as key hubs on the continent, says a Mastercard study.

Mastercard, a global technology company in the payments industry, revealed this in its recent study on the state of fintech in African markets titled “The Future of Fintech: Rapid Growth Smart Capital”.

According to the study, fintech startups in Africa grew from 311 in 2019 to 564 in 2021.

It said the sector accounted for 27 percent of the record number of closed deals and 61 percent of the $2.7 billion distributed across Africa in 2021.

In terms of funding, the study showed that Africa’s fintech startups recorded 894 percent year-on-year growth in funding in 2021, the second highest in the Middle East, Africa and Pakistan region during the period, and the highest annual growth rate over the past five years .

It said sub-Saharan Africa received $1.56 billion in funding, the highest in the region by a wide margin.

“Nigeria emerged as a leading fintech hub across the Middle East, Africa and Pakistan, as startups there accounted for a third of all funding distributed to fintech in 2021.

“Within Nigeria, fintech accounted for 71 percent of all venture capital,” it said.

Globally, it said fintech funding jumped to a new record of US$131.5 billion in 2021.

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“The number of fintech unicorns reached 235 with 34 born in Q4-2021. Fintech companies now represent more than 20 percent of the total tech unicorn value, compared to 15 percent the previous year,” it said.

The study noted that the fast-growing sector encompasses sub-segments of special interest, including digital payments, e-money, international money transfers, peer-to-peer (P2P) lending and equity financing.

On the demand side, it said the role of micro, small and medium enterprises (MSMEs) has been critical to fintech’s growth.

“MSMEs are using fintech and e-commerce solutions to scale, source and reach.

“The growth in alternative payment rails and new platforms is shaping the commercial landscape.

Fintech, driven by demand, has seen products based on multifaceted innovation in emerging and mature economies.

It said that by offering scalable financial services using the internet, blockchain and algorithms, fintech companies have expanded the reach of financial services traditionally offered by banks, including loans, payments, investments or wealth management.

Country performance

In Africa, the study said Kenya, Nigeria and South Africa are among the countries leading the transition to digital payments, with existing or rapidly developing infrastructure and policy frameworks enabling growth.

It said Nigeria is a major player in tech startup funding in Africa and the fintech sector is dominated by the payments segment.

It noted that Lagos is one of the continent’s major startup hubs, with 88.4 percent of Nigerian tech startups based there.

According to the study, fintech is the leading sub-sector of the Nigerian startup space, both in terms of activity and funding volume.

it said 15.6 percent of Nigerian tech startups have at least one woman in the founding team, while 45.1 percent of startups have gone through acceleration or incubation (38.6 percent in Egypt and 25.7 percent in South Africa).

“Nigeria produced two unicorns in 2021,” it said.

According to the study, a third of all fintech funding in Emerging Venture Markets in 2021 was in Nigeria.

In Kenya, the study said financial inclusion increased from 26.7 percent in 2006 to 83.7 percent in 2021.

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“In the first 11 months of 2021, Kenyans made 1.9 trillion mobile money transactions worth more than $55 billion, a 20% increase over the number of transactions in all of 2020,” it said.

It said Cape Town is the startup capital of South Africa, accounting for 45.9 percent of ventures; Johannesburg follows with 41.6 percent.

It noted that fintech is a major driver of startup activity with 30 percent of companies active in this space

“14.3 percent of South African tech startups have at least one female founder and 25.7 percent of startups are accelerated; South Africa has the continent’s oldest technology incubator.

It added that fintech is the largest employer among startups, accounting for almost 40 percent of jobs.

“Payments and remittances attract the most fintech startups, 27.2 percent in 2021, while lending and financing produce 17 percent,” it said.

Speaking on the findings, Ngozi Megwa, Senior Vice President, Digital Partners and Enablers, Eastern Europe, Middle East and Africa, Mastercard, said: “It is encouraging to witness the growth of the fintech landscape across the region, creating more opportunities for start-ups, scale-ups, enablers and micro, small and medium enterprises (MSMEs) to bring more people into the digital fold.

“At Mastercard, we help with fintech acceleration by offering access to our expertise, network and technology. We offer a portfolio of technology solutions, APIs, developer tools, partner networks, startup programs and a community experience for all fintech companies and payment developers, helping turn their bold ideas into reality,” she said.