Why Africa is recording rising FDI, by Goott
Director of Unlimint, a fintech innovation firm, Trevor Goott, has said that the growth of the African fintech market with startup companies securing around $330.5 million in the first half of 2021, which was more than double the amount raised in 2020, was the outcome of its huge population and improvements in valuation, demographic and urbanisation trends, and pain point solutions on the continent.
In a statement, yesterday, Goott noted that for many decades, Africa had limited access to traditional financial services such as loans, insurance and credit facilities, adding, however, that the continent has begun to witness unprecedented growth in its Financial Technology sector, popularly known as fintech.
He said: “This growth is attributable to three major economic improvement factors such as Africa Valuation, Demographic and Urbanisation Trends and Pain Point Solutions. These factors are the reasons many countries in Africa have been able to showcase their potential for economic growth, causing them to be attractive to foreign investors across the globe.
“With Africa Valuation, startup companies in the African Fintech space have begun to draw an increasingly large amount of investor attention from global venture capitalists, private equity funds and angel investors. The last two years have seen a strong inflow of Foreign Direct Investment (FDI) into the continent.
“In 2020, approximately $744 million was invested in Fintech in Africa, accounting for 31 per cent of the total inflows into the continent. In 2021, the interest in African Fintech startups exploded, with Fintech start-ups focused on the continent raising $3.03 billion in disclosed funding rounds. This counted for a massive 62 per cent of the total investment inflows.”
With Demographic and Urbanisation Trends, Goott stated that Africa clearly has the world’s fastest-growing population, noting that the United Nations (UN) anticipates at least half of the global population growth between now and 2050 would come from the continent.
He added: “This growth coupled with urbanisation has been followed by increased productivity and economic development. Then of course, the Pain Point Solutions factor has provided the perfect opportunities for fintech companies to be innovative and disruptive. Across the continent, this particular sector of the population (banked and unbanked) who have historically been ignored by conventional banks, are now looking to the startups for their financial solutions.
“Take for example the payment and remittance space, which according to research, accounts for one of the most sought-after segments with a +-24 per cent growth in startup companies since 2019 (Disrupt Africa). Emerging fintech innovators are working tirelessly to find solutions and spur financial inclusion by solving some of the difficulties experienced by businesses and individuals alike – such as loans, investments and money transfers (internationally and locally).”