In Fintech for Emerging Markets

In 2015, 60 minutes covered the mobile money revolution in Kenya. Daniel, a cab driver featured on the show, stated “It is one of the best things that has happened to our country. But that makes you feel proud! And now you feel you are Kenyan!”1 Kenya has gained a lot of attention for being the “global epicenter” of mobile payments; driven by the success of M-Pesa, Kenyans moved a record $33 billion via mobile money platforms in 2016.2 This progress has created a sense of patriotism amongst Kenyans and is bringing greater economic success to the country; what can Kenya do to continue to capture the fintech opportunity in Africa beyond M-Pesa?

What does the fintech landscape in Kenya look like now?

In our analysis of the fintech start-ups (fintechs) in Kenya, we found that nearly a third of fintechs in the space fell under lending and financing and about a fifth under payments and remittances. Kenya is seeing growth of new companies based on the string foundation of mobile money in categories such as: insurtech, crypto-currency and blockchain, group savings,  comparison, and business solutions.

Mobile Money has created both a challenge and an opportunity for fintechs in Kenya 

Kenya has a well-developed mobile money (MM) infrastructure. As a result, the local fintech eco-system is primarily focused on mobile-based solutions, and is in many ways more advanced compared to other countries in the continent. On the other hand, dependency on MM is often a barrier to scale, as the adoption rate of MM is still quite low outside of Kenya.

Disrupt Africa’s 2016 report indicates that 26 Kenyan tech startups raised funding of about $10 million over passing Nigeria and putting the country 2nd behind South Africa.For Kenya to continue making headway in the African fintech space and attract more attention from international VCs, fintechs will need to show that their target market is substantial and that their solutions are economically scalable by either:

1. External Quickly expanding to countries where the adoption rate of MM is high, such as Uganda, Ghana, Tanzania, and winning a significant market share, or;

2.Internal Expanding their reach beyond the urban middle class, and target the roughly 75% of the population who live in rural areas and are in need of financial services 4

According to Bloomberg reports, Nairobi’s tech scene could be worth as much as $1 Billion to Kenya in the next 3 years.5 We believe if fintech start-ups working in Kenya focus on meeting the challenges of scale, this number could be much greater than $1 Billion.

1.http://www.cbsnews.com/news/future-of-money-kenya-m-pesa-60-minutes/
2.https://www.businessdayonline.com/kenyans-beat-nigerians-mobile-money-transfers/
3. http://exchange.co.tz/?p=13389
4.http://www.geohive.com/earth/pop_urban.aspx
5. https://vc4a.com/blog/2016/04/25/kenya-africas-silicon-valley-epicentre-of-innovation/
6.https://www.centralbank.go.ke/uploads/850146089_2014%20Annual%20Report.pdf