Feb 19, 2021

Is Africa the next big hub for fintech?

Fintech
africanfintech
emergingmarkets
DigitalTransformation
Joanna England
3 min
Is Africa the next big hub for fintech?
Reports suggest Africa is one of the most exciting emerging fintech markets since China...

Economies around the world are suffering as a result of the pandemic, and Africa is no exception to that rule. Predictions by the World Economic Forum suggest that African economies will contract by 4.4% in 2021 as a direct result of COVID-19.

Despite this, fintech looks set to take off in this swiftly emerging market, and reports suggest the sector will be critical to the recovery process of numerous African countries.

The most positive sign that Africa will enjoy a boost in fintech, is the implementation of the African Continental Free Trade Agreement (AfCFTA), which was completed last month. Despite the pandemic, national economic development strategies that encourage economic growth and job creation, have remained ongoing.

Many African countries have also accelerated their digital transformation and telecom giants are building new networks, and streamlining existing facilities to speed up connectivity and improve internet and wireless services.

Fintech leaders in Africa

In early 2020, figures showed that VC funding for African fintech startups had risen by 51% with funding being generated for virtual banking projects, consumer credit checks and finance apps. Later in the year, reports announced more growth, as new fintechs raised almost $350 million during the first quarter of 2020.

South Africa led the way with $112m in investments, followed by Nigeria, which raised $74m, Kenya at $62m and Egypt at $51m.

Fintech has the highest penetration in South Africa, with 94% of individuals having regular access to the internet. 67% of South Africans have a bank account and mobile phone penetration is over 100 for every 100 people.

Meanwhile, Branch, a Nigerian mobile lending app, raised $260m in funding and has facilitated $350m in loans to date. A recent report by McKinsey also highlighted that fintech investments in Nigeria have grown by 197% over the past three years, with the majority of investment coming from outside the country.

Innovation is also being tried and tested in Angola after the country launched its first regulatory sandbox. The project is being driven by a collaborative innovation consultancy Beta-i, to help the Banco Nacional de Angola to create an experimental regulatory environment for fintech.

The most developed nation digitally is currently Egypt, which implemented the Egypt Vision 2030 - a national agenda launched in February 2016 by the Egyptian Government and unveiled by the Egyptian president, Abdel-Fattah Al-Sisi. One of the eight goals is a mandate to expand fintech services throughout the country.

One of the first triumphs has been a new banking law that occupies the fintech space and regulates the Central Bank of Egypt as well as the banking sector as a whole.

Fintech incentives

Fintechs are launching incentives to encourage the development of the industry. The Ecobank Group, headquartered in Lome, Togo, launched The EcoBank Challenge in 2017, which identifies and partners fintechs that are mature enough to scale. EcoBank then provides them with support and access to its 33 African markets so they can expand. The challenge is open to all Fintechs on the African continent.

In 2020, Ukheshe Payment, a microtransaction platform, and Solutions Growth Factor Technologies - a fintech company that provides trade financing solutions for small businesses came first and second respectively.

Despite the challenges emerging markets face when developing a new industry, the potential for fintech to be a force for good is widespread

Recently, the World Bank reported that the 55 member nations of the African Union have a combined population of more than 1.3bn people, who have the potential to generate a gross domestic product (GDP) of $3.4tn.

Currently, bureaucracy causes a massive backlog of processing - and slows down African governments abilities to facilitate trade between countries. The introduction of fintech, which streamlines, simplifies and speeds up processes, looks set to change that in the next few years.

Additional benefits led by the AfCFTA will see an increase in Africa's exports by an estimated $560bn, mainly from manufacturing sectors. The boost in trade will continue to hasten the growth of fintech.

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Jun 23, 2021

Zopa and CreditLadder Partner to Help Improve Credit Scores

Fintech
Zopa
CreditLadder
creditscore
2 min
Zopa has partnered with CreditLadder to help renters improve their credit score, which in turn increases their eligibility for a Zopa loan

Digital bank Zopa has partnered with CreditLadder, a financial inclusion service. This new partnership will allow renters to make every penny count towards their credit score.

For people who rent, getting access to finance and loans at competitive rates can be made harder as monthly rental payments are not recorded on their credit file. However, using Open Banking technology, Zopa customers will now be able to use CreditLadder to ensure their rental payments are recorded on their credit files. In turn, these payments are taken into consideration in Zopa’s credit score tool and loan eligibility checker, Borrowing Power. 

Borrowing Power is a free tool in the Zopa app that calculates a customer’s financial health score, recommends targeted actions to help them improve it and links directly to their eligibility for Zopa products. By joining forces with CreditLadder, Zopa app users that rent will have the opportunity to improve their Borrowing Power score and gain better access to cheaper Zopa loans. 

Offering renters a more accurate credit score

“We at Zopa are proud to be teaming up with CreditLadder to enable our customers to report their rent payments and use them to help build their credit score. We believe that as many people as possible should have access to fair, simple and transparent products. Partnering with CreditLadder and using its Open Banking technology via our app makes it possible for us to offer those that rent a more accurate credit score, tailored tips on how to improve their credit health and access to more affordable Zopa loans in the future.” said Clare Gambardella, Chief Customer Officer at Zopa Bank.

Data from Equifax shows that just under 70% of users with a ‘thin credit file’, which is where users have two or fewer credit accounts, saw an increase in their credit score when 12 months of rental payments were added.

Sheraz Dar, CEO and Co-Founder of CreditLadder said; “There are over 10 million households in the UK who rent and our mission is to ensure they can benefit from reporting their rent payments to improve their credit score - just like home owners do when it comes to their mortgage. The partnership with Zopa is a great use of technology that can help its customers access finance at better rates simply by using CreditLadder to report their rent payments each month.”

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