Home Banking African Banking Evolution: From Mobile Banking to Fueling Fintechs, SME Growth and Expanding Middle Class

African Banking Evolution: From Mobile Banking to Fueling Fintechs, SME Growth and Expanding Middle Class

by internationalbanker

By Raymond Moodley, Senior Banking Director, Middle East & Africa, Oracle Financial Services




A decade or so ago, the big news coming out of Africa was mobile banking, a term used to describe very minimalistic, feature-phone-based banking. Today, mobile banking and services remain key initiatives to deliver financial access to unbanked populations, but these have evolved to mean richer digital experiences and a wealth of functionality—all made possible by the proliferation of smartphones. At the end of 2019, nearly half a billion people in Sub-Saharan Africa (or 45 percent of the population1) subscribed to mobile services. And although the pandemic has slowed some trends, there is evidence that demand is getting back on track: IDC (International Data Corporation) reported that in the fourth quarter of 2021, smartphone shipments amounted to 21.5 million units2, while more than 27 million feature phones were shipped.

This is all happening in a larger context: The continent as a whole is reeling from pandemic impacts, with the gross domestic product (GDP) contracting by 2.3 percent on average across Africa3 during 2020. While that may seem like a small fluctuation, the reality of those GDP contractions at a country-by-country level has deep ramifications for the growth of the middle class and banks’ willingness to take on riskier investments. However, the pandemic also had another (and opposite) impact: the uptake of digital services in banking and every other industry fuelled by branch closures to stop the spread of the COVID-19 virus. All African financial institutions now expect their customers (retail or corporate) to complete an increasing portion of their transactions online or via mobile services.

To its credit, the mobile industry has stepped in to engage with both businesses and governments throughout Africa. It has provided jobs, mobile money transaction-fee waivers, discounts on data tariffs for educational and health sites, and cash or equipment donations. In some countries, the combination of mobile access and internet technology has spurred the creation of fintech (financial technology) startups that aim to provide added services to this growing smartphone segment of the population.

Overall, Africa’s banking market continues to perform well in terms of growth and profitability, despite pandemic-related sluggishness and the withdrawal from the region of major European financial organisations. Rapidly evolving digital services and smartphone adoption have been crucial to lifting economies and providing a very real path to financial inclusion across Africa.

Microfinance that works: helping women and the underbanked get a solid start in Nigeria

In Nigeria, the LAPO (Lift Above Poverty Organization) microfinance bank is blazing the trail of offering financial services to low-income households and women. The organisation has focused on boosting women’s empowerment, whether they are clients or staff; of its more than 4.5 million customers in 2020, 73 percent were women. Women also comprise 57 percent of its approximately 7,500-strong workforce. LAPO’s success includes more than 490 branches across 34 out of 36 states within Nigeria. LAPO is, above all, a story of innovating on behalf of the target customer, with a community-first approach and a line of financial products designed for the low-income client base (low-entry requirements, provisions for one-year-free fire, burglar and disability insurance that seeks to provide additional coverage for mother and child, and more). Their annual reports4 are a testament to the hard work required for financial inclusion.

Fintech innovation and SME growth: a financial-inclusion and economic engine

Democratizing access to financial instruments is a vital step in economic growth, with a real, measurable impact on GDP. Ernst & Young (EY) estimated that financial inclusion could lead to a 30-percent increase in GDP5 in countries such as Kenya. This lift is key in other emerging markets, where access to affordable financial products can dramatically affect economic growth and social wellbeing.

2021 saw more and bigger funding deals close in Africa, as tech startups across the continent raised close to $5 billion. Among these, fintechs dominated fundraising, accounting for nearly $3 billion, or two-thirds of all the investment realised by startups across the continent last year, a report6 by market-insights firm Briter Bridges showed. This amount was also more than double the $1.35-billion7 investment that fintechs in Africa raised in 2020 and triple the amount in 2019. And there are states where fintechs have taken root in higher numbers, according to a Disrupt Africa8 study: South Africa, Nigeria, Kenya, Egypt and Ghana are among the top countries.

But fintech numbers alone don’t tell the whole story—inclusion starts with a rise in SME (small and medium enterprises) numbers throughout the continent. As an IMF report pointed out9, small, growing businesses create approximately 80 percent of the region’s employment, establishing a new middle class and driving demand for new goods and services. Access to financing as an SME is a well-known problem and one that many financial organisations are trying to solve while also keeping risk concerns under control. In Côte d’Ivoire, COFINA(Compagnie Financière Africaine) focuses on mesofinance, a relatively new concept that offers small loans starting at 1,000 euros specifically to small and mid-sized businesses. COFINA’s strategy focuses on leveraging digital channels to serve its clients and has invested heavily in the technology that underpins next-generation digital capabilities for SMEs10.

SME financing: job creation and evolving beyond exporting raw materials

Helping African SMEs get access to the funding they so desperately need is crucial not only for Africa but for theglobal economy. SMEs are the engines behind generating a growing middle class with disposable income throughout the continent, in tandem with market opportunities for new investors. That said, access to credit has been and remains one of the largest challenges for SMEs in Africa, despite a series of efforts to make funding readily available. For example, the African Development Bank (AfDB) focuses on supporting micro, small and medium enterprises through a programme that provides $125 million of funding, combined with a $3.98-million technical-assistance package granted by the Fund for African Private Sector Assistance (FAPA). In addition, the FSDEA (Fundo Soberano de Angola) established a $250-million private-equity fund to support entrepreneurs who are struggling to make their projects bankable.

However, this funding isn’t at all evenly distributed, as is illustrated by the story of the Bioko Treats chocolate startup in Ghana. Although the US$100-billion cocoa industry began in Côte d’Ivoire and Ghana, many local farmers receive a tiny fraction of the revenue and never get a chance to taste the processed chocolate products. A growing movement of entrepreneurs and governments is joining forces to change this reality and move African businesses up the value chain into chocolate production.

A recent Bloomberg report11 highlighted the story of Bioko12, a venture focusing on producing Belgian-style chocolate in Ghana. Bioko hires its staff from Ghana and plans to both serve the growing regional middle-class taste for chocolate and export processed goods to Europe. Deemed too risky by local financial organizations, Bioko crowdfunded its enterprise and began operations. Its ambition is to move Ghana up from just exporting the raw product to retaining more of the profit in the region. While this is just one data point, it’s a heartening example of a future direction in which African businesses take centre stage in the world marketplace.

Bringing it all together: a digital banking strategy for Africa’s future

When people can participate in the financial ecosystem, they can take control of their livelihoods to support their families, start businesses, invest in education and plan for their futures. This generates a more stable society because more people can look to the future with hope and dignity. With more than half of the African population still unbanked, the door is wide open for fintechs and traditional banks committed to digital innovation to step in and influence significant social change.

Much like everywhere else around the globe, cloud technology is starting to fuel fintech innovation and next-generation financial experiences in Africa. With growing competition to acquire customers and government incentives, the winner is the consumer or SME owner who can now invest in a brighter future.



1 GSMA (Groupe Speciale Mobile Association): “The Mobile Economy Sub-Saharan Africa 2020.”

2 IDC (International Data Corporation): “Africa’s Smartphone Market Sees Shipments Decline Amid Global Supply Shortages, but Growth Is Tipped for 2022,” March 23, 2022.

3 IMF (International Monetary Fund): “World Economic and Financial Surveys: World Economic Outlook Database.”

4 LAPO (Lift Above Poverty Organization): “LAPO Annual Reports.”

5 EY (Ernst & Young): “How banks can play a stronger role in accelerating financial inclusion,” Jan Bellens, April 25, 2018.

6 Briter Bridges: “Africa Investment Report 2021.”

7 Bloomberg: “Fintech Bright Spot Africa Plays Catch-Up in Bumper Funding Year,” Roxanne Henderson, May 6, 2021.

8 Disrupt Africa: “Finnovating for Africa 2021: Reimagining the African financial services landscape.”

9 IMF (International Monetary Fund): “Regional Economic Outlook: Sub-Saharan Africa Navigating Headwinds,” April 2015.

10 The Guardian: “COFINA Banks on Oracle to Get Loans to Underserved Businesses Faster,” African Media Agency, April 4, 2022.

11 Bloomberg: “Africa’s Plan to Bring Chocolate Profits Home,” Africa Plus, March 31, 2022.

12 Bioko Treats: “Chocolate Is Our Akɔnɔdiɛ.”



Raymond Moodley is the Senior Banking Director for Middle East & Africa at Oracle Financial Services. With more than 25 years of experience in the African and international banking-technology space, Ray has developed deep expertise in establishing and scaling banking operations for multinational corporations. Before Oracle, Ray led teams at Microsoft, ACI Worldwide, Temenos and fintech startups.


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