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Financial inclusion remains main investment sector in Africa – Partech

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Investors’ attractiveness for the financial inclusion sector is evident in the 2018 annual report on the financing of African start-ups published by Partech, an investment platform for tech and digital companies.

The report revealed that out of the total $1.163 billion in Venture capital (VC) funding raised by African tech start-ups in 2018, $582 million from over 64 transactions was channelled to the financial inclusion sector. This represents half of the total fund raised in the year.

“Financial inclusion remains the main investment sector in the continent, attracting 50 percent of the total funding,” Partech said.

The breakdown of the sub-sectors under financial inclusion that got the fund include; Fintech, Off-Grid Tech, and InsurTech.

Analysis of the figures revealed that the Fintech start-up got the highest share of funds with year-on-year (YoY) growth of 218 percent, from $119.18 million in 2017 to $379 million in 2018.

Fintech therefore accounted for 33 percent of total funding from across 42 deals.

This was followed by Off-Grid Tech, which attracted $194 million or 17 percent of the sector funding across 17 deals. It also reported a growth by 62 percent, from $120 million funding in 2017 to $194million the year after.

InsurTech which attracted $8.9 million funding in 2018 reported a 36 percent decline in investment from the $13.91million it had reported the previous year. This was despite attracting 0.8 percent of total funding across 5 deals in 2018.

According to Partech, the Business-to-Business (B2B) & Tech Adoption continues its phenomenal growth to account for 30.4 percent at $ 353 Million (+397% YoY), across 55 transactions.

“This spectacular trend, again last year, goes mainly to Enterprise Software start-up,” the report said.

Out of this, enterprise attracted $333 million (+455% YoY), 29% of funding in 44 deals (+91% YoY) while connectivity & hardware and marketing Tech both attracted $11.6 million and S$ 8.4 million in 2018, respectively.

A further analysis of the VC funding raised by African tech start-ups in 2018 revealed it was up 108 percent compared to the $560million in corresponding period of 2017. The yearly funding amount is accelerating exponentially, from a year-on-year growth rate of 33 percent in 2016, 53 percent in 2017 to 2018 figures which represents a 4.2 times growth multiple in the last 36 months.

“It’s quite simply astonishing. When we started our journey to create the Partech Africa Fund in 2015, we had anticipated the $1 billion mark to be broken by 2020. We are now already 2 years ahead of our projections”, Cyril Collon, a general partner at Partech said.

The tech investments firm tracked a total of 164 rounds raised by 146 start-ups compared to 128 rounds from 124 start-ups last year, a 28 percent growth year-on-year.

According to Partech, a numbers of Private Equity investors (TPG, Helios, Goldman Sachs, Carlyle, etc.) as well as major corporate players (Naspers, Paypal, Pernod Ricard, etc.) are now joining “the game earlier, investing early & growth stage tickets in African tech start-ups.”

On the country comparison that got funding in the review year, the data from the report revealed that Kenya took the lead in 2018, attracting $348 million (+136% YoY) in funding over 44 deals (+76% YoY).

Nigeria attracted the second-highest Tech start-ups funding of $306 million (+167% YoY), across over 26 deals (+53% YoY), followed by South Africa, which slowed down compared to Kenya and Nigeria, with $250 million (+49% YoY) in funding over 37 deals (-12% YoY).

Meanwhile, Nigeria with the highest population in Africa has one of the region’s highest financial exclusion rate at 36.8 percent at the end of 2018.

The Central Bank of Nigeria (CBN), however has a target to ensure only 20 percent of the country’s adult population is financially excluded.

To that effect, the apex bank plans to give license to Banking agents, Mobile Money Operators (MMOs), Retail chains (Supermarkets), Telecommunications companies (Telcos) to enable them render payment service to especially rural dwellers where access to financial services are mostly difficult.

 

Endurance Okafor

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