East African fintechs raised $462 million from 2010 to 2017, Fintreks report

A report [PDF] by Intellecap says FinTechs in East Africa raised USD 462 million from 2010 to 2017. Dubbed Fintreks, the report traced "back the evolution of FinTech" in East Africa". The report also covered various players in the ecosystem. "Over 150 FinTech companies and investors" participated in the research for the report.

According to the report, 2017 saw East African fintechs raise over USD 202.1 Million. Which is a 338% year on year growth. It bases its figures on Crunchbase, Intellecap Analysis and other sources.

But, the report doesn't give a break down per country. Though, based on another graph of regional investment in East Africa, Kenya is ahead. East Africa is leading when it comes to investing in fintechs operating in East Africa.

Also read: Uganda tech startups raise USD 16 Million, as Africa hits a record USD 560 Million

Investment from East Africa into East African fintechs was USD $206.4 million from 2010 to 2017. Yet, USD 203.5 million, over 98% of that went into Kenya. The report says that the "amount [of USD 203.5 million] raised represented over 28% of all the investments to FinTechs in the period".

Ugandan fintechs raised $1.9 million. Followed by Rwanda and Tanzania with $0.2 million and $0.8 million raised.

Kenya has an upper hand because "most East Africa focused funds have their head office in the country". Thus, this local presence makes them feel "comfortable investing". Because of a "physical presence as they have local expertise in deploying capital".

Ethiopian-based FinTech companies raised no funding between 2010 and 2017." Attributing this to the tough regulatory environment in the country. As for Rwanda, investors shun it because of its "low market potential".

For Uganda and Tanzania, there was no explanation. But, it is likely to be between lower market potential and tougher regulations.

For Uganda and Tanzania, there was no explanation. But, it is likely to be between lower market potential and tougher regulations.

Important to note is that 55% of startup investment from 2010 to 2017 went to FinTechs established outside of East Africa.

"Investors note that local FinTechs lack innovative business models and thus those established outside of the East African region tend to raise more funding than their locally-established counterparts," the report says.

This is despite the fact that "58% of all the FinTechs are established within the East African region."

45% of all investments made into FinTechs in East Africa in the past seven years originated from North America. With 95% of the funding coming from the U.S.

The U.S.’s venture capitalists and private foundations dominated the deals closed in the region in the past seven years; raising over $240 million. These include Institutional Venture Partners, IFC Venture Capital Group, Overseas Private Investment Corp, Greycroft Partners, DBL investors, Calvert Foundation and Emerson Collective.

Europe was also a popular source of funding among FinTechs in the past seven years. Having contributed to 30% of all funding raised.

Recently, there are questions raised on which publisher or figures to trust or quote. While as this report puts the figure of funding raised by fintechs in 2017 at USD 202.1 Million, a recently released report by Partech Ventures puts the total funding by all fintechs across Africa at USD 119 Million for 2017. Another by Disrupt Africa puts the entire amount of funding raised by all tech startups in Africa at USD US 195.

The main challenge here is the method and scope used by each of the publications. For example, under the Fintrek report, M-Kopa is a fintech. Though, the company can pass for Off-Grid Tech under the Partech report.

The Fintrek report defines fintechs as "firms leveraging technology to deliver financial products/services or capabilities to customers or other financial services firms".

Most, if not all, Off-Grid tech have that element underneath their business model. Harmonizing the methods will save all interested in the findings the current confusion.

The report explores other areas like fintech challenges, enablers, investment opportunities the ecosystem in East Africa and its future.

In the annexe, it also highlights some of the recent FinTech deals in East Africa. M-Kopa's USD 80 Million is the most outstanding. It also points out the key partnerships leading fintechs have forged in the region. The outstanding one is that of PesaLink. They have partnered with over 30 commercial banks.

Digest Africa



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