Co-creating value-driven offerings via Fintech

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The Nigeria Fintech gathering, though not insulated from challenges, can provide a robust platform for strengthening partnerships to promote innovation and product diversification while building resilience for scalable and sustainable impact, writes JOSEPH INOKOTONG.

The sixth edition of the Nigeria Fintech Week has come and gone but the memory continues to linger. It was aptly described as having emerged as the “go to event” for financial sector and fintech leaders not only in Nigeria but also across the continental fintech industry.

This was reflected in the theme chosen for this year’s Fintech Week “Resilience, Innovation, and Diversification”, which resonates particularly well with the imperatives of the times as many fintech companies are said to be grappling with the need to adapt to a fast-changing landscape in the wake of the downturn in the global economy, characterised by volatility, heightened risks and uncertainty.

Closer home in Nigeria and other African countries, this is manifested in macro-economic instability, rapid currency depreciation and rising inflation, said in a keynote address by Mr. Lamin Barrow Director General, Nigeria Country Department African Development Bank (AfDB).

He pointed out that coupled with the slowdown in Foreign Direct Investment (FDI) flows into Africa, these developments are weighing down on Africa’s growth momentum, with real Gross Domestic Product (GDP) growth rate estimated at 3.8 percent in 2022, down from 4.8 percent in 2021. Arising from this, the need to build resilience through innovation and product diversification has never been more urgent.

Indeed, Africa’s fintech sector has a key role to play in building this resilience. Innovation in the sector is driving financial inclusion across sub-Saharan Africa, where recent statistics indicates that 33 percent of adults have a mobile money account, the largest share of any region in the world, more than threefold the global average. The 2022 GSMA report highlighted that Africa now accounts for 621 million registered mobile money accounts, which represents 46 percent of the global total, and around 70 percent of the world’s $1 trillion mobile money transactions in 2021, by value.

The spread of mobile money accounts has created new opportunities to better serve the underserved population traditionally excluded from the formal financial system. The COVID-19 pandemic also underscored the important role that digital technology can play in managing shocks as countries with advanced digital financial service ecosystems were able to scale up emergency cash transfer programmes, which rely mainly on digital platforms.

Experts say the impact of African fintechs extends well beyond banking and payments for underserved populations. Whether it is health-tech solutions ensuring that healthcare is just a click away; agri-tech platforms connecting farmers to markets, weather forecasts and real time information on market prices; or edu-tech applications helping to ensure access to affordable education services, innovation is driving inclusion and providing solutions to Africa’s needs.

Also, the African FinTech’s capacity to innovate has attracted investors globally. According to Disrupt Africa and International Finance Cooperation reports, there were 26 reported fintech acquisitions in Africa between June 2021 and July 2022, while 63 percent of tech funding on the continent in 2021 for $2.7 billion went to the fintech industry.

Nigeria reputed as the hub of the African fintech industry, home to five of the 11 digital companies that have reached unicorn status, and the most attractive destination for fintech investments, can witness rapid growth in the fintech industries by further integrating tech into business activities.

This, the AfDB said, will require domestication of the StartUp Act and implementation of reform measures to ease the regulatory burden for Small and Medium Enterprises (SMEs) to be better integrated into e-commerce, simplifying procedures for cross-border trade transactions and enhancing access to finance for startups, among others.

According to Barrow, the African Development Bank strongly believes that a resilient, innovative and diversified Fintech sector is key to accelerating economic transformation in Africa.

In the words of President Akinwumi Adesina, “With the right investments in innovation and smart digital technology growth, the obstacles to achieving financial inclusion and greater economic opportunity for all will be overcome”.

That is why, Barrow stated, the Bank is supporting African countries to bridge the digital infrastructure and knowledge gaps, create conducive business environments to promote entrepreneurship and innovation in fintech industries, and upskilling our youths to prepare for the jobs of the future.

It is on record that since 2012, the African Development Bank has invested about $2 billion in 40 innovation and ICT investment projects across the continent. These include the $170 million financing for the Investment in Digital and Creative Enterprises (I-DICE) project in Nigeria, one of whose major components is the establishment of a venture capital fund(s) to finance startups in the digital and creative industries. Other examples include the EUR 72 million loan for the Digital Tunisia 2020 National Strategic Plan; the EUR 124 million support for the Central Africa Terrestrial Fibre Optic Backbone project, which covers Cameroon, Central African Republic and Republic of Congo; the EUR 96 million financing for Technology Parks in Cabo Verde and Senegal; and $25 million support for development of the regional payment system in the West African Monetary Zone.

“The Africa Digital Financial Inclusion Facility (ADFI), a partnership between the Bank and Partners – namely the Bill and Melinda Gates Foundation, Agence Française de Développement, the French and Luxemburg Governments, Women Entrepreneurs Finance Initiative (We-Fi); and more recently the Government of India – will support catalytic investments in digital infrastructure, policy and regulatory development, and the design of innovative solutions in the public and private sectors’, Barrow explained.

Continuing, he stated “In April this year, I had the honour to sign a grant agreement with Mr. Segun Aina, President of the Africa Fintech Network, for $525,000 in support of the “Africa Fintech Hub” through the ADFI. Upon completion in 2025, it is envisaged that at least 70 percent of Africa Fintech Network members will actively use and benefit from this digital One-Stop-Shop online platform for all things fintech in Africa.

“Also, in 2016, we launched the Boost Africa Programme, together with the European Investment Bank, to support venture capital fund managers and entrepreneurs address obstacles faced by start-ups”.

It is recognised that the regulatory landscape for fintech in Africa is evolving rapidly. In recent years, the continent has witnessed the establishment of regulatory sandboxes to encourage innovation in several countries, including Nigeria, Angola, Ghana, Kenya, Mauritius, Rwanda and South Africa, among others.

Working with Smart Africa, the AfDB said it is supporting the “Institutional Support for Digital Payments and e-Commerce Policies for Cross-border Trade (IDECT) project” to harmonise policies for e-payments. This has the potential to drive the growth of the African e-commerce market and expand intra-Africa trade, taking advantage of opportunities from the Africa Continental Free Trade Agreement (AfCFTA).

The Bank, Barrow further stated is also investing in projects to help African countries close the gender gap, strengthen customer protection and improve cyber resilience of financial institutions, including fintechs. For instance, the technical assistance project for the West Africa Monetary Agency (WAMA) seeks to mainstream gender in digital financial services regulatory frameworks in the ECOWAS region. The African Cybersecurity Resources Centre project, co-financed with the Luxembourg House of Cybersecurity, will support the creation of a shared cyber-risk monitoring platform, boost the cyber resilience of the continent’s financial services and support talent development to meet Africa’s cybersecurity needs.

“We are also partnering with global technology businesses such as Microsoft, Google, MasterCard and the Consultative Group to Assist the Poor (CGAP) to promote financial inclusion and accelerate digital transformation in Africa”, the Director General, Nigeria Country Department of African Development Bank said.

While we celebrate progress in the fintech space, some challenges persist. The regulatory framework, according to Mr. Barrow needs to keep abreast with technological advances while providing space for innovation and disruption. Cybersecurity also remains a concern, and the digital divide, while shrinking, still exists. Fintech companies must also invest in knowledge and learning to enhance capacity for risk management and regulatory compliance.

However, these challenges present opportunities to be harnessed through collaboration, inclusivity and education. Strengthened partnerships between banks and the fintech ecosystem will help drive harmonisation, combining legacy trust with new-age agility.

As fintech solutions are taken to scale, there is a moral imperative to ensure that they cater to the needs of all stakeholders; from the bustling streets of Lagos to remote villages in Borno. Fintech can and should bridge the gap, ensuring no one is left behind in this digital revolution.

“It is also crucial to build a strong talent pool and improve digital literacy. By empowering people with knowledge and skills, we are not just promoting fintech, we’re also paving the way for a brighter, more inclusive African future”, Barrow stated.

The Nigeria Fintech Week therefore provides a robust platform for strengthening partnerships to promote innovation and product diversification while building resilience for scalable and sustainable impact. In this regard, the African Development Bank has reiterated its strong committed to this partnership to accelerate Nigeria’s and Africa’s transition into the digital future.

Working together, the innovation potential and co-create value-driven offerings in the fintech industries can be unleashed on the continent and in Nigeria in particular.

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