Fintech, the application of digital technology to financial services, is a powerful enabler of financial inclusion.
Investors put in Sh82.3 billion in Kenya’s financial technologies (fintechs) last year, underscoring the huge potential that deep-pocketed financiers see in the country’s budding financial market.
The Central Bank of Kenya disclosed the investment of Sh82.3 billion ($638 million) made in fintechs while highlighting the role played by technology in deepening financial inclusion in the country, which is at 84.8 percent, up from 26.7 percent in 2006.
CBK pointed out that fintechs, anchored on the country’s early adoption of mobile money and a technologically savvy population, had ensured more people had access to formal financing, which has attracted investors lured by fees earned from high volume transactions.
“This isn't just money, it's a plan to break down barriers to financial access using technology focused on users’ needs. Companies like M-Kopa and Oye create simple tools that grow with their customers,” said the Central Bank of Kenya.
“They show how fintech can help many people access services like credit, savings, payments, and insurance,” added the regulator.
Some of the Fintechs that got funding last year, as disclosed by Disrupt Africa – a research firm that tracks funding in Africa’s fintechs, include MTek, Badili, GoBeba, Sukhiba Connect, and Chpter.
MTek, which empowers self-service of insurance products, received Sh161.2 million.
Chpter received Sh154.8 million to fund its expansion plans to Egypt and Nigeria, while Badili, an online marketplace, received Sh129 million.
Sukhiba Connect, which helps small and medium-sized enterprises push their brand on social media platforms, raised Sh200 million.
The Fintechs offer financial solutions to different sectors of the economy, including agriculture, transport, and health.
“These tools are especially useful in farming. They lower costs and risks for small farmers who usually can't get help from banks,” said CBK.
The amount received by Kenyan Fintech was the third highest in Africa, behind Nigeria and South Africa.
Fintechs have been some of the fastest-growing companies in the country, riding on access to cheap funds from angel investors looking to impact the poor population excluded financially and the subsequent earnings from a high number of users.
“Many of the fastest-growing companies, especially in the Fintech sector, are those seeking to tap Africa’s unbanked population, or markets that have been previously underserved or ignored,” FT wrote in the Africa’s Fastest Growing Companies report.
Notably, technology firms have become the biggest recipients of foreign capital flowing into Kenya, surpassing banks, factories, and retail stores. The jump followed a government decision to drop a rule under the National ICT policy requiring foreign firms to cede a 30 percent stake to local shareholders.
The Kenyan payments market is best known for M-Pesa, Safaricom’s mobile money service launched in 2007. M-Pesa processes over 10 million transactions daily and serves more than 50 million active users in Kenya.
