Fintech in Africa – A rolemodel for Germany?

Germany has the international reputation of being one of the most modern countries in the world. But anyone who has been to Germany knows that there is still a lot of room for improvement. Particularly in the area of digitalisation, Germany is not up to scratch in international comparison. Poor internet connections in rural areas, hardly any free WiFi in German city centres and I don’t even want to get started on the paperwork in German administrations.

An important part of the digitalisation process is the fintech sector. As the name suggests, fintech is about technological innovations in the financial sector. Among other things, it revolves around cryptocurrencies, such as Bitcoins, but also innovations on how to make banking as easy as possible for end consumers, such as contactless payments. Even though the Federal Republic still has a long way to go in the overall digitalisation process, German metropolises such as Frankfurt am Main and Berlin have become important locations for many fintech companies. The German fintech market has therefore developed from a niche phenomenon to a market with significant volumes in recent years.

But fintech also holds enormous potential on the African continent. In contrast to the German and European market, the focus is not on improving the entire banking process, but on integrating everyone into the process. Unlike in Germany, it is not common in Africa to open your first current account at the age of 16. A large part of the African population is not integrated into the traditional financial sector. However, this deficit naturally also holds great opportunities for companies – especially in the African fintech market, leapfrogging is developing.

In the course of this, mobile banking has become very popular in Africa. If you look at Kenya, for example, you can see how mobile phone manufacturer Safaricom has brought mobile payment options into everyday life. Safaricom has signed deals with banks such as the Commercial Bank of Africa and KCB Bank that allow them to lend to customers and take bank deposits through an M-Pesa platform. Customers of the M-Pesa platform visit a local M-Pesa agent to deposit money, in exchange for which he or she receives cyber money – “e-float” – the M-Pesa currency. This electronic money can be exchanged with other M-Pesa customers in the form of an SMS. Therefore, users can send money to family and friends, pay bills, but also reload money. A virtual bank account without a bank. This means that Kenyans are no longer dependent on large banks, which are usually only located in big cities, but have a low-cost mobile alternative. As a result, M-Pesa has become a common payment method in Kenya.

The example of M-Pesa clearly shows how important fintech is in our everyday lives. In Africa it is a rising economic sector that can go a long way towards financial inclusion. Because through such innovations, both the rural population and women can benefit greatly. These two groups in particular are often excluded from the traditional financial sector, thus fuelling a larger gap in the African population. Through inclusion, poverty can be combated and further innovations can be promoted through entrepreneurship.

Of course, it is difficult to compare the German and Kenyan financial sectors, if only because of the basic conditions discussed earlier. Nevertheless, I think that we can learn from the African fintech market here in Germany as well. In particular, German administrations, companies and consumers can learn a lot from the openness to new technologies among users. Of course, M-Pesa also clearly shows how promising the African financial sector can be. Even if Africa is underestimated in the eyes of many Europeans, the success story of Safaricom shows how innovative and lucrative Africa can be. A joint, partnership-based exchange at eye level can thus promote innovation and digitalisation on the African continent as well as in Germany and expand new, equal partnerships.


About the author:
Jessica Stang is Community Manager of the Germany Africa Business Forum, a private association that promotes socio-economic relations between Germany and Africa.