Unlocking the funding drought for Africa’s fintech

The fintech industry in Africa has been experiencing a funding slowdown due to global economic shifts and industry saturation, but key players are optimistic about reversing this trend. Kenya, known as a vibrant market for fintech funding, has been facing challenges in attracting investments. Munyi Nthigah, Secretary General of the Association of Fintechs in Kenya, shed light on the key trends shaping the industry and the necessary steps to drive growth during an interview with CNBC Africa. Nthigah highlighted the impact of a 45% decrease in direct foreign investment in Africa over the past two years, which has also affected the fintech sector, a nascent industry with a growing number of startups. The decline in global venture capital funding by 50% has further compounded the situation, driven by factors such as a strengthening dollar, high US interest rates, and capital outflows from Africa. Despite these challenges, Kenya continues to be a top investment destination for startups in Africa, according to reports from the Ministry of Industry and Trade. However, local operational environments, including new taxes and regulations, pose additional hurdles for fintech companies. Nthigah emphasized the need for the industry to adapt to shifts beyond traditional banking and payments services, moving towards areas like agritech and insuretech to address new challenges and opportunities. The upcoming Africa Fintech Festival, organized by the Association of Fintechs in Kenya in collaboration with the Africa Fintech Network, aims to bring together industry players from over 40 countries across the continent. The festival will focus on four key areas: smart regulation, agri-tech, green finance, and policy formulation. Smart regulation will explore ways to support innovation, scale, and collaboration in the fintech sector. Agri-tech discussions will center on digitizing agriculture value chains, promoting digital payments and lending for smallholder farmers, and enhancing access to working capital. Green finance initiatives will seek to align investments with environmentally friendly activities and integrate fintech solutions. Policy formulation discussions will address the need for participatory, contextual, and inclusive policymaking to streamline regulatory frameworks across diverse African markets. Nthigah emphasized the importance of collaboration between fintech companies and legacy industries like banking and insurance to leverage regulatory stability and foster innovation. He highlighted a shift towards solution-driven innovation as fintechs move beyond digitization-led products to create new revenue models. With agriculture contributing significantly to Africa's GDP but experiencing limited digital payment penetration, there is a vast untapped opportunity for fintechs to develop tailored solutions and infrastructure in sectors like agri-tech. The evolving fintech landscape presents challenges and opportunities for industry players, requiring strategic partnerships, regulatory alignment, and innovative solutions to drive sustainable growth. By addressing key trends, embracing collaboration, and exploring new revenue models, fintech companies in Africa can navigate funding challenges and unlock the industry's full potential.