Financial technology in Africa has really boomed since the onset of products such as MPesa and Ushahidi, changing the demographics of mobile innovation.
In Sub-Saharan Africa alone, overall mobile subscriber penetration reached 44% in 2017. Mobile Broadband connections (wide bandwidth data transmission which transports multiple signals and traffic types) was at 38% in 2017 and is projected to reach 87% by 2025(GSMA).
Access to mobile connectivity is vital to empowering consumers and driving economic growth which presents a lot of opportunity for innovation around health care, financial services, education, transport, communication, agriculture and government. In the financial services industry, mobile technology has created a lot of opportunities to capture the informal sector; one great example is informal investment groups or what is commonly referred to as chamas in the East African region.
In the past few years, informal investment groups have gained a lot of popularity in Africa and especially in East Africa. They originally started exclusively as women groups, but have recently been adopted by men, youth and old alike. Chamas mainly take the form of small investment groups or micro-savings groups.
A few years ago, Facebook, MasterCard, safaricom and fintech companies convened in Nairobi to figure out how to digitize these investment groups. Only a few companies have been able to figure out how to digitize these investment groups, key among them being Cellulant’s Tingg Chama & Changa and Chad West Africa’s TigoPaare.
So why are African fintechs determined to digitize chamas, here are three thoughts.
The numbers are amazing
In Kenya alone, there’s an estimated 300,000 chamas that manage an average of ksh 300 billion in assets. This presents a great opportunity for fintechs to capitalize on
Business customer engagement tactics have recently taken to community building. Communities/groups are more resilient and effective in driving business agendas. Chamas are the fabric of social-economic communities in Africa and if well leveraged, present a great opportunity for fintechs.
Market disruption is a great competitive strategy that has been adopted by many organizations world over especially in the financial services sector. Chamas are a great form of alternative banking and are a great way to capture the informal sector.