Fintech Growth in Kenya: Kenya has been able to establish the technological foundation for fintech innovation in the last ten years.
While financial technology, or fintech, is booming in Asia, another continent is also using the advantages of technological innovations to facilitate growth in the financial sector. Africa’s fintech sector has grown significantly in recent years. African fintech businesses have raised $320 million in funding since the beginning of 2015. In 2017, the number of fintech companies in Africa had reached 491. A year later, in 2018, fintech growth proved particularly successful as 210 African fintech start-ups were able to raise $334.5 million in funding. A closer look at fintech in Africa reveals that Nigeria, South Africa, and Kenya are home to the largest fintech sectors on the continent. Reviewing Kenyan fintech innovations is particularly relevant since local fintech innovators have successfully responded to local market demands and paved the way for further fintech expansion.
Under the Vision 2030 development program, Kenyan leaders aim to foster industrialization, innovation, economic growth, social security, and political stability. In order to become a key player in the global digital market, Kenya installed four additional fiber-optic sea cables between 2009 and 2016. These enhance internet connectivity and reduce costs for consumers and companies. Kenya also seeks to increase the use of smartphones in the country in order to provide a platform for fintech innovation. Estimations suggest that mobile penetration (the number of active sim cards in relation to the total population) is approximately 100% and about 45.5% of all phone users possess smartphones helping Fintech Growth in Kenya.
One of the most successful fintech innovations in Kenya is M-Pesa by telecommunications company Vodafone and domestic mobile networks operator Safaricom. M-Pesa is a mobile payment service that offers customers a range of financial services, including money transfers, loans, deposits, and savings. What makes M-Pesa particularly useful to customers is the fact that money can be transferred via text message, granting access to the service to anyone with a mobile phone. While developed countries often rely on smartphone-based online banking services, in 2007 Vodafone and Safaricom recognized that not all Kenyans had smartphones. They responded to local market demand by instead investing in mobile phone-reliant services.
In 2018, Kenya’s government took a step towards controlled fintech growth and announced that it will establish a regulatory sandbox. Regulatory sandbox programs allow fintech start-ups to test out their business ideas with the supervision of government authorities, creating a safe and enabling environment for businesses and consumers.