Why do I would like to launch a startup in Africa (in the financial sector).

Africa today is no longer regarded to be uniquely risky, on the contrary, the opportunities are enormous.

1. Context

Opportunities — and challenges — that Africa’s burgeoning middle class, which is forecast to triple over the next two decades, presents, an increasing number of financial institutions have awoken to the massive potential that lies within Africa’s growing consumer base.

There has been a rapid expansion of innovative activities across the continent in recent years, which, encouragingly have not been driven by global/western companies.

Mobile technology and innovative strategies set to revolutionise functioning of societies for continent.

At the broadest level, the roll out of mobile banking has allowed millions of people who are otherwise excluded from formal banking systems to perform financial transactions relatively cheaply, securely and reliably. In essence, this form of ‘cashless banking’ negates a number of barriers posed by traditional banking, in particular, accessibility with limited development of banking branch networks, especially within remote rural areas; affordability as transactions are done at a relatively low cost; and creditworthiness as no documentation is usually required to facilitate the transfer.

Given the rapid diffusion of inexpensive mobile networks in a continent with limited landlines, as well as the vigour with which Africa has embraced technology and social networking, this is unsurprising. More than this, with 70% of people on the African continent expected to own a mobile phone by the end of 2016 compared to 30% in 2008 according to Accenture, the scope for innovative banking services is significant. That said, the degree to which mobile banking proliferates and captures the unbanked market will differ from economy to economy, depending on public policies surrounding mobile money.

One of the most successful mobile banking models in Africa is considered to be Kenya’s MPESA, which, today caters to more than 14 million customers (70% of Kenya’s adult population).


It would be hard to argue that the advent of mobile banking and associated benefits provided by mobile money transfers have been anything but significant for Africa’s poorest. More than this, innovative mobile technology appears to have the potential to transform the banking sector’s landscape. This corroborates, noting that technological and other innovation that help overcome the barrier of physical distance could potentially increase the share of adults with a formal account by up to 23 percentage points in Africa.

2. Challenge

The challenge today as a result is how to successfully tap into the massive lower income and ‘unbanked’ sectors’ of societies. What needs to be done to satiate large unmet needs for basic financial services across Africa and how do we go about making financial services inclusive to enable the unbanked to participate in financial intermediation ? Furthermore, how do we overcome the numerous barriers known to limit the use of formal banking services, which include insufficient fund, high transaction costs, vast distances from financial institutions and unstable incomes amongst others ?

There are many challenges lie ahead, development of Africa’s banking and finance sector has the potential to transform the lives of millions across the continent. Indeed, the successful expansion of nancial services to include the lower income and ‘unbanked’ sectors of the population has the ability to provide jobs, create safety networks, and ultimately have a hand in reducing poverty. More than this, financial deepening is critical to ensure more inclusive, far-reaching economic growth.

The main challenges for financial services in Africa :

• People do not trust financial service providers.

• Given how poor Africans are and how challenging the business environments are, there is not enough incentive for multinational companies to enter African markets and develop the sector. Innovative solutions must be created on the spot

• There is also a lack of reliable information, making it very difficult to assess people’s creditworthiness.

• The legal and judicial systems are poor.

• There is a lack of human capital and expertise.

• Shallow financial markets make it difficult to raise enough to capitalise insurance/re- insurance companies.

• Communities often make use of informal forms of financing (neighbours loans) rather than using the services of formal institutions.

3. Chances

Areas of my interest follow with objectives:

• Simplifying products and creating innovative new ones. Base on personal contacts and world of mouth.

• Customer education through direct communication.

• Using social media and technology to reach the untapped lower end of the market. • Promoting the image of financial services providers from Africa (currently, there is a lack of trust in ).

• Improving the functioning of financial companies

Recognising the opportunities that Africa’s burgeoning middle class presents, an increasing number of nancial institutions have awoken to the massive potential that lies within Africa’s growing consumer base. Also very interesting are the citizens of Africa who are outside, eg. in London

To do so, institutions will continually need to embrace innovative strategies so as to shape banking products to consumers rising financial sophistication needs, as well as to tap into the continent’s massive ‘unbanked’ population, much of which could be well be beyond the realm of ‘traditional banking products’.

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