Fintech sector key to economic development in Africa despite downgrades to growth
ICON Corporate Finance, which recently advised mobile money provider Beyonic on its sale to MSF Africa, believes that despite the turmoil of the Covid-19 pandemic and IMF forecast that Africa’s economy is likely to contract by 3.2% this year, the fintech sector remains a key driver of the region’s economic growth.
The World Bank projects FDI flows into Africa will drop 35% this year. ICON believes the buoyant fintech sector is well-positioned to offset some of the economic impact. In particular, remittances remain significant with only a 23% projected contraction and are poised to lead the recovery from the crisis..
Commenting on the Beyonic deal and its importance to the future buoyancy of the Africa economy, Monica Shupikai Simmons, who led the transaction for ICON, says that the company will provide the financial access to small businesses in 35 countries across Africa which are at the heart of the region’s economic growth:
“Increasing access to mobile wallet services will accelerate financial inclusion and boost economic growth on the continent. Sub-Saharan Africa is amongst the most expensive for sending money in the world. This transaction will accelerate and simplify remittances from African diaspora to their home countries, benefiting their local economies by increasing the disposable incomes of recipients” she said.
The largest cross-border transaction of its type, MSF Africa’s acquisition of Beyonic creates a single payments platform for banks, money transfer operators, mobile money operators and merchants, creating access to mobile wallets across Africa and allowing businesses from micro to SME to manage digital transactions with business and individuals around the world.
Monica Shupikai Simmons added: “Sub-Saharan Africa now leads the world in mobile money, leapfrogging legacy banking systems used in the West, to account for almost 10% of GDP. As a sector, fintech is expected to contribute USD 150bn to Africa’s GDP by 2022 and Covid-19 is expected to accelerate fintech development in the region.
“Fintech is the region’s biggest net contributor to GDP. With 66% of its population unbanked, and with the world’s youngest workforce, mobile money transactions in Africa are the highest in the world. That’s what makes the Beyonic deal so interesting, and provides further reason to forecast economic growth on the back of disruptive technology enabling the region.”
Dare Okoudjou, founder and CEO of MSF Africa, adds: “Africa has a strong base of connected entrepreneurs and businesspeople who are generating new ideas to create prosperity for themselves and across the continent. By combining MFS Africa’s and Beyonic’s assets and capabilities, we can unleash for them the wealth of opportunity through business with the wider world. ”
Remittance inflows stimulate economic growth through greater local spending power, as well as a country’s balance of payments and tax receipts. Last year Africa received $50-75bn in remittances and as other sources of inward flows slow down fintech solutions such as those accelerated by the MSF Africa acquisition of Beyonic, are seen as key to the region’s continued development.