FinTech Takes on East Africa

Introduction: Leapfrogging Sub Saharan Style

remittances

Leapfrog – is commonly associated with East Africa.  Sub Saharan Africa’s potential to overcome persistent challenges in novel ways abound in heaps –attributable to a convergence of forces i.e. a rapid technological boon and a resurgence of SSA development activity. As an example, the wild success of a simple communication tool, the mobile phone transformed traditional banking models and prompted thoughts on next generation financial services. SSA is poised to ride on technology rails and in a truly unique fashion leveraging technology to break down traditional barriers to financial access.

Bright B. Simons, on a past post for the Harvard Business Review

“In much the same way that Africa’s lack of significant telecom capacity was a boon rather than a hindrance to the emergence of mobile telephony, its lack of legacy infrastructure for everything ranging from waste management to energy utilities could provide the appetite — non-existent in the West — for genuinely transformative, future-friendly reconceptualization of the very notion of infrastructure”

Breaking Banks: Mobile Money Operators redefine financial services

Take financial services in East Africa which are increasingly offered through a simple communication tool, the mobile phone. The far reaching implications of fusing technology and financial synergies to address developmental challenges are of a grand scale. For the unbanked, access to financial services, credit, savings accounts, investment schemes and innovative financial products are now feasible en masse through last mile cellular network channels. [Read more…]

PesaBit #002: Remittances In Kenya, Ripe Market Segments for Banks, MNOs & SACCos

Remittances into Kenya 8 year growth Pesa bit #002

Heated competition in East Africa for large scale customer acquisition has opened up the playing field to multiple players offering financial services, banking, mobile banking and a whole host of innovative financial products and services. In what is characteristically East African, the lines between Banks, SACCOs and MNOs are becoming blurrier. Equity bank and 3 other financial institutions are ready to get into the mobile money space through precedent MVNO regulation. Safaricom and CBA bank now jointly offer a micro lending mobile platform that set precedent as well. Competition is driving innovation.

The next frontier of heavy competition and outmaneuvering is in market segmentation. For this PesaBit edition, I particularly favour remittances as a lucrative market segment for financial services firms to desperately seek to entrench themselves in for new revenue streams. A diverse set of revenue streams is a logical step in the competitive East African banking & payments scene. Competition has led to thin margins albeit new market segments remain untapped. Remittances is a unique revenue source for example, in the wake of the financial crisis of 2008, while FDI inflows into Sub Saharan Africa significantly dropped, remittances exhibited resilience even displaying growth year on year. The market size is $ 1.29 billion in Kenya and $ 1 billion in Uganda. The figures are convincing and the above chart from the Central Bank of Kenya shows strong year on year growth from as far back as 2005. [Read more…]

Bitcoin Takes On Remittances Incumbents in Kenya: BitPesa vs. MTOs

PRELUDE

Image: Cointelegraph

Image: Cointelegraph

The World Bank expects cross border remittances by international migrants to developing countries to total $436 billion this year. Growth is expected to boost this to $516 billion in 2016.  Remittances play a big role in the beneficiary countries: in both monetary and human development terms (health, education, social). Its impact on economic growth and poverty reduction is extensively documented.pdf. Sub Saharan Africa, where inbound remittances totaled $32 billion (2% of GDP), is no different. Nigeria ($21 billion) & Egypt ($17 billion) top the recipient list in Africa. Remittances in SSA are far more stable than FDI and private financing inflows. Remittances to Kenya totaled $1.2 billion.

“The increased financial weight of remittances in external flows to Africa and the positive role that remittances can play in Africa’s development have brought about heightened attention to the topic among policymakers.”Mthuli Ncube et al

[Read more…]