Africa: Nigeria Got Third of Fintech Funding in Africa, Middle East, Pakistan in 2021

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

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

Mastercard, a global technology company in the payments industry, disclosed 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 per cent of the record-high number of deals closed and 61 per cent of the USD 2.7 billion deployed across Africa in 2021.

In terms of funding, the study showed that Africa’s fintech startups recorded 894 per cent 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 yearly growth rate over the past five years.

It said Sub-Saharan Africa received USD 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 deployed into fintech in 2021.

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

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

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

The study noted that the rapidly growing sector comprises sub-segments of particular interest, including digital payments, e-money, international remittances, peer-to-peer (P2P) lending, and equity crowdfunding.

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

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

“The growth in alternative payment rails and emerging platforms are shaping the commercial landscape.

Buoyed by demand, fintech it said has seen products based on multi-faceted innovation in emerging and mature economies.

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

Country Performance

Within 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 that enable the 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 per cent 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 amount of funding.

it said 15.6 per cent of Nigerian tech startups have at least one woman in the founding team while 45.1 per cent of startups have gone through acceleration or incubation (38.6 per cent in Egypt and 25.7 per cent 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 per cent in 2006 to 83.7 per cent in 2021.

“During the first 11 months of 2021, Kenyans made 1.9 trillion mobile money transactions worth more than USD 55 billion, up 20% 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 per cent of ventures; Johannesburg follows with 41.6 per cent.

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

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

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

“Payments and remittances attract the most startups in fintech, 27.2 per cent in 2021 while lending and financing produce 17 per cent,” 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 multiple 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 are helping to fuel fintech acceleration by offering access to our expertise, network and technology. We provide a portfolio of technology solutions, APIs, developer tools, partner networks, startup programs and a community experience for every fintech company and payments developer, helping turn their bold ideas into reality,” she said.

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