Inside Biz Journalist, Avite Mbabazi takes a look at the opportunities presented by Fintech to the youthful population of Eswatini. He argues that we should build on the Fintech momentum and provide new financial services in the country, thereby boosting the economic growth of the country. He, however, cautions that the country faces a brain drain challenge with 50% of Africa’s software developers based in just 5 countries namely: South Africa, Nigeria, Morocco, Kenya, and Egypt.

Review by Avite Mbabazi

In their report, Fintech in Africa: The End of the Beginning, Mckinsey & Company cites a number of factors that will boost growth in the financial services sector on the continent particularly financial technologies, also known as Fintech.  These factors include the young and urbanizing populations of African countries, mobile penetration, and the continued dominance of cash transactions.

With 72.9% of the population being 35 years and below in Eswatini, according to the United Nations Development Programme (UNDP) estimates, Fintech startups and investors can leverage the inherent higher levels of digital technology uptake amongst this group and the high rate of mobile smartphone penetration of 70% in the country to build on Fintech momentum and provide new financial services as well as much needed jobs and growth to the Eswatini economy.

“New generation of young and urbanized African consumers represent a large market of digitally-savvy individuals who have grown up in a time when digital technologies are flourishing. They provide a fast-growing customer base that is primed to adopt digital solutions to meet their financial needs.” The report by Mckinsey & Company states.

Additionally, the persisting dominance of cash transactions and traditional banking, furthermore, provide room for the expansion of financial technologies in Eswatini. According to a study by the Central Bank of Eswatini titled Eswatini CBDC Diagnostic Study published in February 2020, cash still dominates, especially in merchant payments and day-to-day financial activity in Eswatini, with 98% of person-to-business (P2B) payments still conducted in cash, and 76% of business expenses being paid physically or through a bank in 2018.

Although these figures are likely to have changed drastically, largely due to innovations in the financial sector stimulated by the Covid-19 pandemic, there certainly remains much room for expansion beyond bill payments and wallets and into digital lending, remittances, blockchain, and digital wealth management.

Eswatini, moreover, seemingly shares a number of characteristics with other African countries with a nascent Fintech sector and great potential for growth. “Cote d’Ivoire, Cameroon, and Senegal, where mobile money is still in the early stages of development and usage, are characterized by a high proportion of cash transactions, usually involving an agent. As such, they represent an opportunity for fintech with cheaper, faster, and more convenient financial service options. ‘’Mckinsey & Company declares.

Despite all the opportunities, however, fintech growth in Eswatini, like elsewhere in Africa could be limited by the brain drain that most African countries continue to experience. In fact, based on the same report released by Mckinsey & Company, 50% of Africa’s software developers are based in just 5 countries namely: South Africa, Nigeria, Morocco, Kenya, and Egypt. Furthermore, high unemployment and relatively low disposable income could also limit the penetration of financial technologies in Eswatini as in the rest of Africa.

Mckinsey & Company estimated that revenues of financial services in Africa will reach $230 Billion by 2025.

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