Understanding Youth Entrepreneurship In Kenya: Why FinTech Is An Attractive Sector

By Didi Onwu, Managing Editor of the Anzisha Prize

Boasting one of the fastest-growing economies in Africa, Kenya is on the rise to become a powerhouse of innovation on the continent. This is largely in part due to the country’s thriving culture of entrepreneurship and its significant startup ecosystem.

Kenya has a long and storied history with entrepreneurship as the country’s early start to independence led to the growth of its informal sector and meant many Kenyans were self-employed in their own small enterprises. As such, the government sought to facilitate the development of the informal sector and, in 1973, officially recognised the role of entrepreneurship in creating employment, driving innovation, and opening opportunities in the country.

Today, with access to unparalleled levels of support through some form of acceleration or incubation, Kenya’s around 308 startups have helped to position the country as one of the “Big Four” startup ecosystems in Africa, alongside Egypt, Nigeria and South Africa. In fact, 45.5% of startups in the country have taken part in either local or international accelerators or incubators compared to 45.1% of startups in Nigeria, 38.6% in Egypt and only 25% in South Africa.

While the country maintains a diverse startup ecosystem across industries such as mobility, logistics, agriculture, technology, and energy, as a pioneer of mobile money payments across the continent (which has since experienced a phenomenal boom) it’s no surprise that financial technology (FinTech) is the biggest sector of Kenya’s startup space, with FinTech ventures making up more than 30% of the country’s startups. FinTech currently constitutes three times the market share of the next biggest startup sectors in the country including Agri-Tech, e-health and e-commerce. 

Financial services innovation lies front and centre of Kenyan entrepreneurship

Since its emergence in Africa over a decade ago, FinTech has enraptured the continent by revolutionising the way consumers save, pay, invest, and access financial services. Today, the continent accounts for three quarters of the world’s mobile money and peer-to-peer transactions by volume and more than half the world’s mobile money customers can be found in Africa. This showcases significant appetite from consumers across the continent for fintech solutions.

One of the biggest reasons for FinTech’s rising popularity is that the sector has proven itself to be a major catalyst for enabling more inclusive and accessible financial services. With more than 400 million adults in Africa excluded from the formal financial services, or reluctant to use them due to excessive costs, mistrust, and because many feel these services are not really designed to serve them, fintech solutions are making great strides in lowering barriers to financial services, such as cost, while also increasing speed and accessibility. 

According to FT Partners’ latest FinTech in Africa Report, the Kenyan government’s commitment to financial inclusion and innovation has been the biggest driver in the growth of the country’s FinTech sector. Through initiatives such as the Regulatory Sandbox which enabled FinTech companies to operate in a testing environment for a year prior to regulatory approval, Kenya has ensured significant access to financial services – with a higher banked population than other countries in sub-Saharan Africa – while enabling the country to become one of the continent’s primary technology hubs. The growth and popularity of mobile payment service provider M-Pesa is one of the biggest testaments to the success of this government-led support of entrepreneurship and innovation.

Challenges and opportunities for young entrepreneurs

Young Kenyans are increasingly harnessing their country’s growing tech prowess to go into business for themselves. In particular, many young entrepreneurs across the country are leveraging the opportunities that the ever-expanding FinTech sector has to offer. 

At Kenya’s leading institution for business and accounting, Strathmore University, many students are interested in pursuing traditional career tracks like joining the ranks of major financial firms, but quite a few are just as eager to start their own enterprises. This includes entrepreneurs like the 20-year old Collins Kathuli who co-founded FinTech Kyanda in 2020 with the aim of offering the cheapest access to financial services for both businesses and individuals by leveraging the power of technology. Kyanda has since partnered with banks, telcos, and utility and financial institutions to offer consumers omnichannel payment solutions through a single platform enabling utility bill payments, payment collection and disbursements, and more. 

However, as startups need to continuously operate at an incredibly fast pace, driven by the need to innovate and deliver increased value to customers, maintaining a growth momentum often requires them to scale up as quickly and effectively as possible. But many challenges lie in the way of these entrepreneurs’ journeys to scaling up their businesses for their growth and development. This includes high taxes, unclear or burdensome regulatory requirements, and skills gaps in the workforce.

Young entrepreneurs therefore require access to the right tools and resources needed to do so, as well as easier connection to financing and opportunities. Supporting the local startup ecosystem is vital to accelerating access to opportunities for the country’s youth, as well as the positive impact that entrepreneurship continues to bring to local economies.

While startups might seem small, their impact on an economy can be astronomical. This impact can be seen not only in their contribution to a nation’s GDP but also in innovation, employment growth and opportunities, as well as cost benefits to consumers because of increased competition. 

Ensuring that startups in Kenya can scale effectively could see the country become a leading entrepreneurship hub in Africa, and lead to the growth of the country’s economy, competitiveness, and digital innovation.