Financial technology—fintech—is enhancing and streamlining the ways in which Africans produce food, transact business and build savings, paving the way for more sustainable models of growth, said expert panelists at an event at the African Development Bank’s Annual Meetings.
At the event organized by the Egyptian government in Sharm El-Sheikh where this year’s meetings took place, experts from government, and the development and investment sectors shared their experiences of introducing fintech solutions for farmers, the unbanked, and entrepreneurs running small enterprises.
There was consensus on the need for close collaboration among regulators, development institutions, businesses and investors in order to harness the potential of fintech. Panelists stressed the centrality of data—collecting it and widening access to it—to the fintech transformation.
The participants were Dr. Rasha Negm, Head of FinTech & Innovation at the Central Bank of Egypt; John Bosco Sebabi, Deputy Chief Executive Officer of the Pan-African Payment and Settlement System (PAPSS); Ms. Mélanie Keïta, Co-Founder & CEO of Melanin Kapital; Mr. Kenneth Kou, Head of Mercy Corps Ventures and Mr. Osama Abbas, Head of Financial Services at Vodafone Egypt. Aiaze Mitha, Global Lead, Digital Finance for the SDGs, moderated the discussion.
“Egypt is home to more than 177 fintech startups and payment service providers,” said Negm, with some 14 sub-sectors, including alternative finance, personal finance management and agrifintech, she said. In 2022, Egyptian fintech startups raised $360 million.
She said Egypt’s central bank played a regulatory and an enabling role for the sector. “In cooperation with the financial regulatory authority, we are now preparing to issue a new law, fintech alternative finance.” This would pave the way for equity-based crowdfunding and peer to peer lending among other alternative forms of finance.
Keïta said: “We built Melanin Kapital as a green blending platform where SMEs could sign up, connect their mobile money wallets,” and get insights about their financing. She said the company decided to adopt a mechanism to incentivize SMEs to become more environmentally sustainable. “The more they’re going green, the more we track the CO2 that they’re saving, and we can leave room to set the carbon print that comes from this saving and give them cashbacks,” she said.
In Kenya, Keita said Melanin Kapital used CO2 emissions as a benchmark for what she called “greenness.” “So you become greener the more you reduce CO2.” The company said it was collaborating with partners to standardize this benchmark for use in other countries.
Abbas said the COVID-19 pandemic had offered an opportunity for Vodafone in Egypt, working with the government, to introduce a wave of new customers to mobile wallets.
“In Mozambique, Vodacom has been supporting the rural people … by providing them with access to electricity with solar and energy devices that they can buy using their mobile wallet, M-Pesa, and they can also recharge and pay with M-Pesa as well.”
Kou of Mercy Ventures said that blockchain technology could be used to make supply chains more traceable. “There are 600 million smallholder farmers, largely speaking, they are not compensated equitably. In North and America, you have big pushes for fair trade, eco trade but in reality a lot of that money doesn’t actually flow down (to the farmers),” he said. “Using block chain technology where you actually have transparent, immutable data that’s put on chain, you’re able to actually see how much money makes it from each transaction.”
Another area where fintech was making a difference was in terms of raising the rates of adoption of crop insurance –– which in Africa are as low as 3% –– through automation.
The participants agreed on the need for governments and development partners to be involved in the development of fintech. Keita said the Bank’s technical assistance funds were a resource to support pilot initiatives.
The Bank recognizes the key role fintech can play in driving innovation and more inclusive development. The sector is viewed as providing pathways to offer financial services to the unbanked and lowering transaction costs.
For instance, the Africa Digital Financial Inclusion Facility (ADFI), a joint initiative of the Bank and several partners, is supporting the Africa Fintech Network, which has membership across 34 countries, to establish a digital hub. The digital hub will enable African fintechs to showcase their work and access training while also providing opportunity for partnerships and resources. Africa Fintech Network also pushes for a conducive environment for financial sector startups.
ADFI is also working with Pula Advisors, an agritech firm, to offer digital micro insurance to over one million farmers across Zambia, Kenya and Nigeria.
The Bank has partnered with the European Commission and European Investment Bank on the Boost Africa initiative. Boost Africa enhances entrepreneurship and innovation across Africa by providing equity investment and technical assistance grants to incubators, accelerators and venture capital funds that invest in tech-enabled women- and youth-led start-ups.
Boost Africa has had a significant impact: beneficiary start-ups, including SendWave, have grown rapidly into regional and multinational companies that employ thousands of African youth and women.
The African Development Bank’s Annual Meetings took place in Sharm El-Sheikh, Egypt from 22-26 May.