Africa’s high digital banking platforms sometimes come from high-growth, populous markets like Nigeria, South Africa, and Egypt. However Affinity Africa, an upstart from Ghana, needs to hitch the dialog. The startup has raised $8 million in seed funding to broaden its monetary merchandise additional throughout the nation, the place cellular cash is the dominant monetary software.
Whereas cellular cash has turn into the go-to for monetary transactions, the standard banking sector in Ghana and Africa as an entire stays extremely worthwhile. Because the pandemic, banks in Ghana have recorded development with an after-tax return on fairness (RoE) that exceeds the worldwide common.
Nevertheless, these income rely closely on charges, whereas inefficiencies like excessive operational prices, intensive in-person paperwork, and lengthy onboarding occasions have left hundreds of thousands underserved.
Right this moment, lower than 10% of companies in Africa have entry to credit score, and over 60% of adults lack formal monetary providers, per World Financial institution information. This rising hole has fueled demand for digital banking alternate options like Affinity, which provide a less expensive, extra inclusive mannequin.
Affinity has onboarded over 50,000 prospects since its launch final October, its founder and CEO Tarek Mougaine says. Notably, 65% of its customers had by no means accessed formal banking merchandise earlier than, and over 60% are ladies working within the casual sector.
So why has it taken this lengthy for a digital banking upstart to achieve such traction in Ghana? The nation’s strict banking rules play an enormous function. Not like neighbouring Nigeria, the place digital banks can simply function with microfinance licenses, such licenses are uncommon, costly and take time to get in Ghana, making it tough for fintechs to enter the area.
“Ghana’s regulator is targeted on defending shoppers, particularly in deposit-taking establishments,” Mougaine informed Fintech. “We needed to show robust danger administration, break at the same time as a microfinance establishment, and align our mission with the federal government’s aim of banking the unbanked. What in the end satisfied them was how our digital platform reduces friction and lowers banking prices for people and micro, small and medium enterprises (MSMEs.)”
From funding banking to fintech disruptor
Mougaine, who comes from a fourth-generation Ghanaian household of Lebanese descent, studied within the U.Okay., incomes a bachelor’s and grasp’s diploma earlier than launching his profession in academia and finance. He later labored as a Director at Man Group, a $160 billion international funding fund. There, he labored on main IPOs, together with Visa and Compartamos, Latin America’s largest microfinance establishment.
After returning to Ghana ten years in the past, Mougaine appeared to resolve Africa’s monetary inclusion drawback, a problem typically highlighted in international consulting experiences.
“Numbers like Africa’s $331 billion credit score hole are nonetheless being quoted at present,” he stated. “Nothing has actually modified. That made me obsessive about constructing a full-fledged retail financial institution for MSMEs, much like what Santander, Lloyds, or Chase Financial institution provide in Europe and the U.S.—however tailor-made for Africa’s majority.”
He and a bunch of family and friends raised $2 million to accumulate a microfinance financial institution in 2020. They included funds from promoting his London home, he claims. The entity, which acquired a financial savings and loans license, first of its form granted in over 10 years, served as a testing floor for its present banking options.
By 2022, Affinity raised a further $3 million in a pre-seed spherical to improve this license. Following months of stealth testing, the fintech formally launched its app final October after receiving approval from Financial institution of Ghana, the nation’s apex financial institution.
The Ghanaian fintech serves each people and micro-enterprises, which are sometimes indistinguishable in Africa. Clients get free financial savings and present accounts with no transaction limits, and the platform instantly begins credit-scoring customers based mostly on their transaction historical past.
After a couple of months of utilization, Affinity extends traces of credit score with month-to-month rates of interest of 3-7%. The Accra-based fintech has disbursed over $15 million in loans throughout numerous merchandise, with immediate loans rising 30% month-over-month and a non-performing mortgage (NPL) fee of three%.
A hybrid method: digital banking with a bodily contact
Clients may also entry different banking providers, together with financial savings, funds, investments, and transfers to banks and cellular cash wallets. Final month, 89% of deposit inflows, which have grown 54% month-over-month since its launch, got here from cellular cash top-ups, with the remaining 11% from financial institution transfers.
Loans account for over 90% of Affinity’s income, with the remaining 10% coming from charges and commissions on providers like utility invoice and web funds by way of USSD and the cellular app. Its income has elevated 37% month-over-month during the last six months, based on Mougaine.
Like many digital banks in Africa, Affinity blends on-line banking with offline touchpoints by way of its agent community. These brokers, about 30 of them, meet small companies in particular person, onboard them to the app, and assist bridge the belief hole for first-time digital banking customers.
Out of its 50,000 prospects, 26,000 joined by way of the company community, and 24,000 signed up utilizing the cellular app. Notably, 55% of agent-acquired prospects have transitioned to the app, exhibiting robust digital adoption after onboarding.
“This shift has led us to rethink our company technique—specializing in utilizing brokers for onboarding, preliminary schooling, and driving digital literacy to encourage app adoption. We’re excited to refine this hybrid development method as we scale,” Mougaine stated.
Affinity’s $8 million seed spherical was led by European VC companies Grazia Fairness (Germany) and BACKED VC (London), marking their first African funding. Different traders embody Enza Capital, Launch Africa, Renew Capital, Finca Worldwide, Attijariwafa Ventures, Affect Property, becoming a member of Eldon Capital an early backer.
“At Backed, we’re founder-first, and we couldn’t consider a greater particular person to construct Africa’s native financial institution than Tarek,” stated Andre de Haes, founder and managing companion at Backed. “He began his profession investing in banks by way of the 2008 monetary disaster, grew to become an skilled in regulation and technique, and has constructed a world-class banking software program stack for Affinity from the bottom up. His potential to attach with and perceive prospects has pushed spectacular early consumer numbers.”
