Investors Shirk Kenyan Fintech As M-Pesa Dominance Makes It Unattractive
Kenya, overlooked by fintech investors in the past five years, lags behind Nigeria, Egypt, and South Africa, per a report from Nigerian market intelligence firm Stears, specialising in African investments.
The report notes Kenya secured merely 8% of the continent’s fintech investments from 2019 to 2023. In contrast, Nigeria led with 39%, Egypt with 16%, and South Africa with 20%.
Possible factors contributing to Kenya’s lower fintech investment priority include the thriving green-tech sector, which has attracted 45% of Africa’s clean-tech investments since 2019. Stears also highlights Safaricom’s near-monopoly in the market, stating that the dominance of Kenya’s top telco in mobile money, via the ubiquitous M-Pesa platform, makes it unlikely for fintechs and banks in the country to displace Safaricom’s well-defended consumer payment empire anytime soon.
“The telco controls about 97 per cent of mobile money wallets market share, thus most fintechs would struggle to compete for the consumer market,” the report reads, thus making the consumer financial landscape less appealing to investors.
The report suggests fintechs and banks in Kenya face challenges beyond investor priority, including barriers for about 49% of local Micro, Small, and Medium-sized Enterprises (MSMEs) in accessing finance, exceeding the African average of 40%. Compliance constraints and funding issues contribute to the struggles of Kenyan startups.
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“Close to 80 per cent of start-ups often die within the first year of operation, while only three to five percent make it beyond the one year period of survival,” the Communications Authority of Kenya noted last year.
Safaricom’s dominance in the consumer payment sector is expected to persist, with fintechs likely focusing on other areas, rather than competing directly. “Fintechs would then tend to focus on other critical user segments: Merchants, large enterprises and legacy financial institutions,” the report reads.
To remain relevant, the report emphasizes Safaricom’s need to collaborate with financial institutions to deliver advanced financial services like insurance, pensions, and asset management. The Communications Authority of Kenya suggests that partnerships across sectors can alleviate challenges for MSMEs, enhancing financial control and operational efficiency.
Featured Image Credits: Consultancy Africa
