The Role of Fintech in Driving Financial Inclusion In Africa

Fintech is revolutionizing financial inclusion in Africa by addressing key barriers such as high transaction fees, lack of access to affordable credit, and the absence of basic transaction accounts. Through innovative solutions like mobile money transfers, digital microloans, and streamlined account onboarding processes, fintech companies are making financial services more accessible and affordable for millions of Africans. The growth of the fintech sector in Africa is not only driving financial inclusion but also having broader economic and social impacts, such as market expansion, cost efficiency, investment, job creation, and the empowerment of individuals and businesses.

The World Bank, McKinsey and Investopedia define Financial Inclusion as the process of ensuring that individuals and businesses have access to useful and affordable financial products and services that meet their needs—transactions, payments, savings, credit, and insurance—delivered in a responsible and sustainable way.

The opposite is financial exclusion.

This refers to the condition where individuals or populations lack access to common financial services such as savings accounts, loans, cashless transactions, credit, and other traditional banking services.

Financial exclusion in Africa is primarily as a result of drivers such as high transaction fees, lack of access to affordable credit, and the absence of basic transaction accounts.

Other drivers include:

  • Distance to Financial Services
  • Technology and Connectivity

High transaction fees, for instance, are identified as a major driver of financial exclusion, with a Human Sciences Research Council (HSRC) survey revealing that 76% of low-income consumers in Eastern Africa cited these fees as a barrier.

Additionally, the lack of access to affordable credit hinders the growth of small and medium enterprises (SMEs), a critical segment of the economy. Credit risk assessment, which is costly in Sub-Saharan Africa due to the absence of reliable sources of accounting and financial information, further exacerbates this problem.

Problem. This is what truly determines a piece of technology's effectiveness. And in our case, the problem is financial exclusion.

Fintech plays a major role in solving the financial exclusion problem. Simply put, it is like a financial toolbox of smart gadgets that help people and businesses manage their money, pay bills, save, invest, and even trade cryptocurrencies without the need for traditional means of banking.

According to a 2022 McKinsey report, the African fintech sector entered a phase where it rivals traditional banks in size and value, with a growing number of high-valued fintechs and record-high consumer access to financial services. This growth was and is still being driven by the sector's ability to create jobs, skills, opportunities, and wealth across Africa, with an estimated 230 million jobs in sub-Saharan Africa requiring digital skills by 2030.

And that is how Fintech drives financial inclusion here in Africa: by neutralizing the drivers of financial exclusion.

High transaction fees

We won't start far. You're most likely to be familiar with M-Pesa.

This platform revolutionized the relationship of money and its users. Originating from Kenya, M-Pesa introduced mobile money transfers, which opened up a wave of innovations that made banking accessible to millions of Africans who lacked traditional banking services. Interswitch in Nigeria and Fawry in Egypt built country-specific infrastructure, demonstrating how Fintech can adapt to local market needs and constraints.

Mobile wallets have also helped lower the cost of remittances across Africa, presenting a viable solution to the high costs associated with traditional money transfers. In South Africa, for instance, the cost of sending money is 14.6% of the total value sent, the highest in the world, according to the International Monetary Fund.

These are just some of the platforms that gave their respective populations a more affordable means of carrying out monetary transactions by lowering transaction costs, particularly in rural areas.

That breaks one of the barriers to financial inclusion.

Lack of access to affordable credit

Fintech in Africa has addressed the issue of lack of access to affordable credit by leveraging innovative technologies to democratize credit options for small businesses and individuals. One of the key challenges in Sub-Saharan Africa is the high cost of credit risk assessments due to the absence of reliable sources of accounting and financial information, as well as the lack of credit bureaus.

Fintech solutions that utilize tehcnologies such as big data and machine learning have emerged as game-changers in this regard. These technologies can analyze vast amounts of data, including mobile phone usage and payment patterns, to assess creditworthiness more accurately and affordably.

Digital microloans offered by fintech companies such as Tala and Lendplus show how Fintech is breaking the barrier of access to affordable credit, which is beneficial for individuals, entrepreneurs, and small businesses.

In Uganda, where traditional banking is challenging, lenders use First Access software to screen potential clients and match them with appropriate financial products, making credit more accessible to a broader segment of the population.

Furthermore, the introduction of alternative credit-scoring technologies such as monitoring of phone usage statistics and digital currencies has further This has allowed individuals without access to traditional banking services to participate in the formal financial system, providing small loans of as little as $3 in minutes. These innovations enable individuals with limited credit histories or unconventional employment backgrounds to access credit, fostering entrepreneurship and economic growth in emerging markets.

Fintech's role in addressing the lack of access to affordable credit in Africa is multifaceted, encompassing technological advancements in credit assessment, the proliferation of mobile money services, and the creation of new financial products tailored to the needs of the unbanked and underserved populations.

Absence of basic transaction accounts

This refers to the situation where a significant portion of the population lacks access to basic financial services, such as bank accounts, which are essential for conducting routine financial transactions like receiving salaries, paying bills, and saving money. This issue is particularly prevalent here in Africa, where majority of the adult population is financially excluded due to factors like illiteracy, poverty, and lack of identification documents.

But that is changing.

Fintech is revolutionizing the process of onboarding bank accounts and alternative financial accounts by simplifying and streamlining the traditionally cumbersome procedures associated with opening a new account. This transformation is evident in the contrast between the lengthy and complex onboarding processes of traditional banks and the streamlined, user-friendly approaches adopted by fintech companies and neobanks. For instance, a test conducted by Peter Ramsey, founder of Built for Mars, revealed that opening an account with a challenger bank required fewer steps and clicks compared to traditional banks, highlighting the efficiency gains achieved through fintech innovations.

Fintech companies are leveraging digital technologies to transform the onboarding experience, focusing on creating frictionless journeys that adapt to customer behavior and preferences. This includes the use of no-code development platforms, which allow for rapid adjustments and enhancements to the digital journey, ensuring that the onboarding process remains relevant and engaging for customers.

Additionally, fintechs are prioritizing the digital and remote channels of communication, recognizing the importance of seamless multi-channel experiences and personalized interactions to enhance customer satisfaction and loyalty.

These platforms offer digital aspects to traditional paper-based welcome kits, providing targeted, journey-based communication and action-oriented microsites to enhance the customer experience.

Distance to financial services

Fintech addressed this through innovative solutions that leverage technology to overcome geographical barriers. One of the major contributions has been the introduction of mobile money services, such as M-PESA in Kenya, which allows individuals to conduct financial transactions using mobile phones, eliminating the need to travel to physical bank locations. This innovation has made financial services accessible to millions of people in remote areas, significantly reducing the distance to financial services..

Another approach is the development of digital-only banks and fintech platforms that operate entirely online, further minimizing the physical distance to financial services. These platforms offer a wide range of financial services, including savings, loans, and insurance, directly through mobile devices.

Additionally, fintech companies are investing in improving internet connectivity and mobile network coverage in underserved areas. This can be seen through partnerships with telecom operators and government initiatives aimed at expanding digital infrastructure.

Furthermore, the growth of fintech ecosystems in Africa is attracting more investment, leading to the development of innovative financial products and services tailored to the needs of the African market, which does not seem to be looking towards traditional banking. This investment fuels the expansion of fintech services and encourages the creation of new solutions that address the challenges posed by distance to financial services in Africa.

Technology and connectivity

Fintech is addressing the issue of technology and connectivity in Africa through innovative solutions that leverage existing infrastructure and adapt to the continent's unique challenges.

Here's how:

  • Building Infrastructure-Specific Solutions: Early fintech pioneers in Africa, such as Fawry in Egypt, M-Pesa in Kenya, and Interswitch in Nigeria, entered markets by constructing infrastructure tailored to the specific needs of each country. This approach allowed them to navigate the continent's infrastructure constraints and become market leaders.
  • Leveraging Pre-existing Networks: To overcome infrastructure limitations, leading fintech companies have leveraged preexisting physical networks. For example, South Africa's TymeBank formed a strategic alliance with major retailers to place account-opening kiosks in retail stores nationwide, circumventing the need for a traditional branch network.
  • Adapting to Low Average Revenue Per User (ARPU): Given the low GDP per capita in Africa, fintech companies have adjusted their business models to accommodate low ARPU. Strategies include using scale to reduce the cost of serving customers, as demonstrated by M-Pesa, or adopting a pay-as-you-go model for businesses that cannot afford upfront payments, as practiced by Yoco.  
  • Reaching Clients Offline: With a majority of transactions on the continent still relying on cash, successful fintechs have developed strategies to serve clients outside the digital realm. Building agent networks or utilizing existing infrastructure, such as physical shops, for the delivery of financial services has been key.

The Ripple Effect: Broader Economic and Social Impacts

As witnessed, Fintech drives financial inclusion. Consequently, financial inclusion drives positive economic and social impacts in Africa.

Here are some key areas where these impacts are evident:

  • Market Expansion: Africa's financial services market is projected to grow at about 10 percent per annum, reaching approximately $230 billion in revenues by 2025. This growth is driven by increasing smartphone ownership, declining inteFintechsts, expanded network coverage, and a young, rapidly urbanizing population. The COVID-19 pandemic has further accelerated digitalization trends, creating a favorable environment for Fintech growth.
  • Cost Efficiency and Accessibility: Fintech players are delivering value to customers by offering transactional solutions that can be up to 80 percent cheaper compared to traditional methods. The IMF has recognized this factor of fintechs in the Sub-Saharan Africa in their Is Fintech Eating Up Banks' Lunch? This can be attributed to the digital-first approach of Fintech, which reduces overhead costs, enabling them to offer lower fees and potentially higher interest rates on savings.
  • Investment and Job Creation: African Fintech is emerging as a hotbed for investment, with average deal sizes growing and the proportion of Fintech funding in Africa increasing over past years. An Africa: The Big Deal Revealed that about $4 billion in venture capital flowing into African tech startups in 2021, half of which went to Fintech. Startup funding reached $3.6 billion in the first eight months of 2022, up from $2.3 billion in the same period of 2021, indicating a booming market for Fintech and other tech ventures. The number of deals exceeding $100,000 rose from 486 to 608 in 2022, signaling a maturing investment climate.

Social Impacts

  • Financial Inclusion: Fintech is playing a crucial role in increasing financial inclusion across Africa. By making financial services more accessible and affordable, Fintech is helping to reduce cash usage, which currently accounts for around 90 percent of transactions in Africa. Achieving similar levels of fintech penetration to those seen in Kenya could see African fintech revenues reach eight times their current value by 2025, significantly impacting the socio-economic fabric of the continent.
  • Empowering Individuals and Businesses: Fintech solutions empower individuals and businesses by providing access to credit, insurance, and investment opportunities. This empowerment fosters entrepreneurship, encourages savings, and supports investment in education and health, thereby improving living standards and reducing poverty.


However, to fully realize these benefits, there are several actions that need to be taken. Governments need to create an enabling regulatory environment that promotes innovation while protecting consumers. Financial literacy programs are also needed to help people understand and use Fintech services effectively.

And investments in digital infrastructure, like expanding mobile network coverage and increasing access to smartphones, are crucial to support the role of Fintech in Financial inclusion.

This sector has evidently rededefined how Africa goes about its financial activities. It has emerged as a crucial ally in making financial services accessible to the previously unreachable. From mobile banking solutions in rural Africa to the budgeting tools for the urban population, Fintech continues to prove its role in driving financial inclusion.

Through Fintech as the foundation, Africa’s financial future is set to be a Universal testament of the advancement of financial inclusion in the world, and beyond.

And that's a vision worth striving for.


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