The Covid-19 pandemic caused distressing times for banks all over the world. And in Africa, the story isn’t any less concerning. The continent as a whole went through its deepest recession in at least half a century. In aggregate, GDP in South Africa, Nigeria, Morocco and Kenya — Africa’s four most important banking centres — fell by roughly 6 per cent in 2020. Consequently, banks had to ramp up their provisions for bad loans.
In richer countries, central banks buy up debt to relieve pressure. But in Africa, most of them have had to weather these conditions on their own. Some of these harsh conditions even made British banks leave the African market . But, despite a tough macroeconomic environment, an analysis from McKinsey suggests that average returns on equity (ROE) at African banks have done relatively well. It says Africa is the world’s second most profitable banking market after Latin America. However, the consequence of their survival is that lending rates are higher.
The tech threat
In 2020, Africa had a population of 1.34 billion people, which is forecast to jump to 1.87 billion by 2035 and 2.48 billion by 2050, according to Statista. Africa’s population is the fastest-growing in the world on a continental level, and it will account for almost half of global population growth over the next two decades. By the year 2050, the UN estimates that Africa will have 945 million people under the age of 25. That will be the biggest pool of tech-savvy young people on the globe, making up almost twice the young population of South Asia and South-East Asia, East Asia and the Pacific region combined, according to the Bill & Melinda Gates Foundation .
From 2015 to mid-2021, more than 270 firms raised about 900 million dollars across the continent. Flutterwave, African focused payment startup, raised $170 million last year. OPay became a unicorn after being valued at over $2 billion, and Senegal’s Wave has joined the train. Even to a casual observer, 2021 was a massive year for the African tech ecosystem. There were more disclosed funding rounds than we could keep up with. A report by Briter Bridges shows that startups on the continent received over $4 billion from investors in 2021. That represents more than double the investments gotten in 2020. However, fintechs represented 62 per cent of the total investments raised. Why? Since traditional banks have hunkered […]
