investors eye East African FinTech space for capital deployment

East Africa recorded over $200 million in investments in financial technology (FinTech) businesses with Kenyan-based FinTechs leading the pack in the region.

According to the 2017 finnovating for Africa report released by Disrupt Africa, over 301 African fintech start-ups are currently active following a boom in the launch of fintech start-ups of which 58% of all the FinTechs are established within the East African region.

Following the instant rise of start-ups in 2015, research finds that Africa as a continent have secured over $62,679,000 in FinTech investment. With the increasing success of FinTech’s, investors are keen to understand the opportunities available for capital deployment in East Africa’s FinTech space despite global investments in the sector showing a downward trend.

Another study compiled by the East Africa Venture Capital Association (EAVCA), Intellecap, Financial Sector Deepening-Africa and FMO, and UKAid, revealed that the total regional investment in FinTech companies in east Africa between 2010 — 2017 stood at $202.1 million; contributing to 28% of all the Fintech investments in the region.

Although there has been a boost with leading FinTechs witnessing increased interest (about $390) by funders over the past three years, there is still a challenge of local debt financing. However, for FinTechs to grow, they require a good balance of equity and debt financing the report notes.

Meanwhile investors in the region explained that local FinTechs lack innovative business models and as such those established outside of the East African region tend to raise more funding than their locally-established counterparts.

In the last 10years, East Africa has experienced rapid advancement in the payments sector, with Kenya as the most mature payments economy in the region and Tanzania displaying faster growth, both in payments migration and transaction KPIs.