The Impact of the African Continental Free Trade Agreement on Fintech

Written by Katharina Dalka, Founder & CEO StellarOne

The African Continental Free Trade Area came into action in January 2021. According to the World Bank's report THE AFRICAN CONTINENTAL FREE TRADE AREA - Economic and Distributional Effects, it will lift 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day. Additionally, it will boost Africa’s income by $450 billion by 2035 (a gain of 7 percent) while adding $76 billion to the income of the rest of the world, and increase Africa’s exports by $560 billion to name some of the most prominent benefits.


Regarding the development of Fintech in the framework of AfCFTA, let’s keep in mind that Fintech needs a dedicated regulatory framework to be able to prosper.


When 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion join forces, this unravels unforeseen potential for the Fintech industry.

Payments: Alternative Payment Methods

Who says trade, also says payments. What that means in the context of AfCFTA, is that payment facilitations will be an absolute necessity. Hence, payment providers addressing this need, also address a huge opportunity. Wamkele Mene, secretary-general of the AfCFTA Secretariat told journalists in Nairobi that the trading bloc is working with the African Export and Import Bank (Afreximbank), to establish a payment and settlement platform to eliminate the need for currency convertibility. How that translates into a legal framework for payment providers is however yet to be seen.


(Source: http://www.xinhuanet.com/english/2021-02/05/c_139723986.htm)

Financing: Crowdfunding, Lending and Credit

With a potential market of the aforementioned 1.3 billion people, a common regulation, especially in the lending and (micro) credit space would not only allow access to an immense market, but also allow for substantial support to exit poverty.


According to research conducted by the The Fintech Times, The top ten largest banks in the African continent, have a total of $600 billion (based on assets) which include banks such as Standard Bank (South Africa), Absa Bank (South Africa), National Bank of Egypt and Zenith Bank (Nigeria)- to name a few.


Imagine the leverage of Fintech solutions around lending and credit in this context - a tremendous amount of possibilities.


Let’s keep in mind though that the lending space.


(Source: https://thefintechtimes.com/the-101-on-the-african-continental-free-trade-agreement-afcfta/)

Personal Banking: Robot-Advisory and Personal Finance Management

Let’s remember that the AfCFTA income by $450 billion by 2035 (a gain of 7 percent) - see intro of this article. That ultimately means an increasing number of people that move from the un(der)banked space to having a bank account, a growing middle class and hence an increasing need for banking and insurance solutions. It is a long shot, and like other fields, personal banking needs a framework. However, the development will be less dependent on overarching regulatory framework since it is only indirectly connected to AfCFTA - it’s a private matter. Also, challenger banks and solutions are already in place and can be developed. AfCFTA will most likely also emphasis the leap-frog effect that the African continent is experiencing anyway in this area of financial services.


This article is not fully comprehensive since we haven’t looked at the effect on/of blockchain insurtech in this context - blockchain/AfCFTA requires a whole new article.


However, we can safely say that the AfCFTA is a growth opportunity for the African Fintech community. Part of this opportunity will require time to materialize since they are bound to a regulatory framework, i.e. lending, others, i.e. in personal finance.


We are StellarOne, seasoned strategic and investment professionals based in London.

Focused on the technology sector, we advise investors and tech companies on all aspects of potential investment opportunities, from the viability of strategy and business plans, to the financial aspects of the investment on offer.

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