EIB Finance in Africa 2024: Fintech transforms African financial services, but high funding costs hinder climate and digital transitions

• Number of fintech companies in Africa almost triples in 2024 compared with 2020
• Banks report better loan performance among women-led firms, with more lenders planning gender strategy
• African financial conditions ease, but funding costs are obstacle
• One-third of African banks report lack of capital and cost or availability of funding as problem

Fintech companies in Africa have nearly tripled in number since 2020 , improving access to finance for people and businesses across the continent, according to a new EIB report released today. The report, Finance in Africa 2024 , highlights improvements in the African financial sector as well as constraints for the region’s economic growth.

“Fintech is revolutionising the way we think about finance in Africa,” said EIB Vice-President Thomas Östros. “By leveraging technology, we can improve access to finance for millions and foster sustainable economic growth.”

Africa’s fintech sector is thriving as digital finance expands much faster than traditional banking. The number of African companies offering new products and services in the area of finance jumped to 1,263 at the start of 2024 from 450 in 2020.

Yet obstacles to finance remain a significant constraint on economic development, with private-sector credit falling from 56% of gross domestic product in 2007 to 36% in 2022. The decline hinders growth in productive economic assets, impeding industrialisation on the continent.

Increasing trade among African countries could boost development because the industrial share of intra-African exports is nearly double that of other destinations, according to the report.

The Finance in Africa report includes data from the ninth annual EIB Banking in Africa survey that details diverse challenges and confirms resilience of the African banking sector.

The analysis shows that among sub-Saharan African banks, 77% of survey respondents report that current economic conditions are their main concern, followed by asset quality (53% of banks).  Concerns about funding also persist, with about one-third of banks citing lack of capital and the cost or availability of funding as a problem.

“While we see some signs of improvement, the high cost of finance remains a source of concern,” said EIB Chief Economist Debora Revoltella. “As we navigate the dual challenges of climate change and the digital transformation, the role of multilateral development bank lending is even more relevant in supporting sustainable growth on the continent.”

A decline in sovereign bond yields has allowed several African nations to regain access to international bond markets. Although the EIB Financial Conditions Index indicates some easing, financial conditions remain tight, posing challenges for private-sector development.

The report also delves into the climate perceptions of African banks. Based on the EIB Climate Risk Scores, Africa is amongst the most exposed regions in the world to the physical risks stemming from climate change. 34% of the banks in our survey report asset quality deterioration due to extreme weather events and identify SMEs as the most affected borrowers.

At the same time, nine out of 10 banks could soon have a gender strategy in place as they continue to report better loan performances among women-led firms. Nearly 70% of banks have lower rates of non-performing loans for these businesses. The report shows the advantage of lending to women and 17% of African banks plan to introduce a dedicated gender strategy in their operations.

Source: EIB
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