Investors Avoid Kenyan Fintech Due to M-Pesa Dominance


In the last five years, Kenya has been overlooked by fintech investors, causing it to fall behind Nigeria, Egypt, and South Africa, according to a report by Nigerian market intelligence firm Stears, which specializes in African investments.

The report highlights that Kenya only captured 8% of the fintech investments in Africa between 2019 and 2023. In comparison, Nigeria dominated with 39%, followed by Egypt at 16%, and South Africa at 20%.

Possible factors contributing to Kenya’s lower priority for fintech investment may stem from the flourishing green-tech sector, which has captured 45% of Africa’s clean-tech investments since 2019. Additionally, Safaricom’s near-monopoly in the market, particularly its dominance in mobile money through the widely-used M-Pesa platform, poses a significant barrier for fintechs and banks seeking to challenge Safaricom’s entrenched position in consumer payments.

The telco’s dominance of 97% in the mobile money wallets market poses significant challenges for fintech companies seeking to enter the consumer market. This situation, as highlighted in the report, may deter investors from finding the consumer financial landscape attractive.

The report highlights the challenges faced by fintechs and banks in Kenya that extend beyond investor priorities. Approximately 49% of local Micro, Small, and Medium-sized Enterprises (MSMEs) encounter barriers in accessing finance, surpassing the African average of 40%. Compliance constraints and funding issues significantly impact the struggles of Kenyan startups.

According to the Communications Authority of Kenya, approximately 80% of start-ups fail within their first year of operation, with only 3-5% managing to survive beyond this critical period. This statistic underscores the challenging landscape that new businesses face in the market.

Safaricom’s stronghold in the consumer payment sector is projected to endure, as fintech companies are anticipated to shift their focus towards different sectors rather than engaging in direct competition. The report suggests that fintechs are likely to concentrate on other key user segments such as merchants, large enterprises, and traditional financial institutions.

To ensure continued relevance, the report highlights the importance of Safaricom partnering with financial institutions to offer sophisticated financial services such as insurance, pensions, and asset management. The Communications Authority of Kenya recommends cross-sector collaborations to address challenges faced by MSMEs, ultimately boosting financial management and operational effectiveness.




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