In Africa, 80% of people living on the continent are connected to a mobile phone network, but only 20% have a bank account. At the same time, the explosive growth of fintechs in emerging economies allows millions of people to overcome daily difficulties related to access to electricity, healthcare, education or to obtain venture capital or cash. Another even more important aspect is that fintechs provide an affordable range of financial services and practical uses for people who benefit little or not at all from banking services. They therefore pave the way for universal financial inclusion.
In this context, AFD Group considers fintechs as key partners in its efforts to reduce extreme poverty and promote shared prosperity in developing countries. In April 2018, PROPARCO, AFD’s private sector financing arm, made a USD 3m equity investment in JUMO, a start-up providing access to credit and savings in real time via a simple mobile phone. The company’s services are available in Tanzania, Kenya, Uganda, Zambia, Ghana and Pakistan.
At the end of 2017, there were over 300 fintech start-ups in Africa. This sector has seen investments rise from USD 12.2bn in 2014 to USD 19bn worldwide in 2016. The increase in the number of development finance institutions joining the pool of investors in fintechs with a social impact reflects this growth and investor confidence.
“PROPARCO’s investment in JUMO – which is also our first investment in a fintech company – is a natural extension of our work to promote financial inclusion via microfinance institutions, loans to small and medium-sized enterprises – and now mobile technology”, explains Grégory Clemente, Chief Executive Officer of PROPARCO. “This project uses mobile phone technology to reach a larger number of people in a much wider area.”
JUMO was set up by Andrew Watkins-Ball in 2014 in South Africa. It has grown from a team of 7 people to some 300 people in 2018, selling its products in six countries. In 2017 alone, JUMO granted 12.2 million loans to its customers all over the world.
“JUMO has started to solve the problem of access to good quality financial services for people in emerging economies”, says Andrew Watkins-Bell, CEO of JUMO. “It’s unacceptable for people to have difficulties making transactions, saving or finding capital to finance their company.”
Despite the steady growth of investment in start-ups worldwide, only USD 560m were invested in these companies in Africa in 2017, against USD 2bn and USD 60bn in their counterparts in Latin America and Asia. Access to financing remains an obstacle for African start-ups, as shown by a recent study, which says that less than 4% of them have access to it.
In this context, PROPARCO is a major catalyzer of private investment in African start-ups, either directly, or through the Investment and Support Fund for Businesses in Africa (FISEA). This fund makes equity investments in businesses, banks, microfinance institutions and investment funds operating in Sub-Saharan Africa.
Since 2015, PROPARCO has supported four venture capital funds for an amount of some USD 20m. In addition, PROPARCO has directly invested in four start-ups – including JUMO – which use technology to lower the cost of access to goods and services for local populations.
Finally, our subsidiary has set up a service dedicated to equity financing for innovative African start-ups. The aim is to identify and finance the best venture capital funds and the best start-ups which share the same development objectives as PROPARCO, with a particular focus on the fintech, energy, education and health sectors.