What is Responsible For Africa’s Slow Growth In Fintech Industry?
New Study Finds That The Reason For Africa’s Slow Growth In Fintech Industry Is Lack of Regulations
In recent times, the fintech industry in Africa has witnessed massive growth. The advent of blockchain technology and cryptocurrency into the African market is considered a driving force behind this significant growth. While a few countries have capitalized on both technologies to develop their economies, several others are trailing behind owing to some factors including not having much knowledge about the innovations.
In light of this, a new study sought to determine the factor(s) responsible for a thriving fintech sector in a few African countries whereas others are moving at a snail’s pace. The study also found that countries such as Nigeria, Kenya and South Africa have the most developed fintech sector in Africa.
In its study, Afriwise attributed the huge growth in the fintech sectors of these countries to the presence of regulations. The study highlighted the connection between regulations and the growth witnessed by the three countries. Afriwise noted in its report that investors are usually attracted to markets with existing frameworks for regulations. The report also claimed that this is why foreign investments are tilting toward a few markets in the region.
Conversely, the absence of regulations is often a major turn-off for foreign investors. As such, African countries with less-regulated fintech sectors have witnessed insignificant growth. Stressing the importance of regulations in its report, Afriwise stated that the lack of comprehensive regulations posed lots of risks to both consumers and financial service providers.
The report added that lack of funding is another factor slowing the industry’s growth in some regions. Afriwise explained that government agencies in some regions often lack adequate funding to develop regulations to address the ever-changing needs in the fintech industry. This challenge also extends to cross-border operations for financial service providers.
The company proffered recommendations in its report. It encouraged synergy between fintech startups and regulators in terms of building relationships, keeping up with emerging trends and working to develop favourable regulations. According to Afriwise, this will accelerate the growth of the industry.
The African fintech industry might be in its infancy but economic experts have agreed there are a lot of untapped potentials in the region which blockchain and cryptocurrency are starting to unveil. As such, there is room for more growth in the coming years.
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