According to former UN Secretary General Ban Ki-moon, “the next century belongs to Africa.” The future is bright due in part to the the strategy of leapfrogging over the intermediary stages of technological transformation that other countries had to see through — especially in the realm of FinTech.

It’s undeniable that FinTech is playing a significant role in this economic and technological acceleration. In fact, FinTech is predicted to contribute an astonishing $150 billion to Africa’s GDP by 2022.

In developed countries, FinTech companies are established to disrupt an already existing financial infrastructure. In Africa, their function is mainly to plug the gaps left by traditional financial services. African economic development has already made great strides thanks to FinTech, creating a boom around mobile money; the next phase of innovation looks set to focus on lending services and wealth management.

This means that as well as driving the development of the technology on the continent, FinTech companies also deliver on social impact for low-income or unbanked business-owners looking to gain access to services that were before unattainable. Here are three ways FinTech startups are changing the face of the African economy for small businesses.


Greater access to loans

FinTech companies providing lower-middle class citizens with access to lending services are having a huge impact on their economic power. Now, small business owners have access to markets that were before only accessible by banks.

For example, digital financial inclusion group Baobab focuses on serving micro and small businesses in Africa and China, helping them get the capital they need to sustain their projects and contribute towards sustainable economic development. nd with startups like Branch offering loans for as little as $2 (which has the purchasing power of $40 in cities like Lagos and Nairobi), small businesses can build credit by starting off with microloans, and then work their way up to applying for larger amounts of credit.

Services such as these are becoming integral for African small businesses, as they can get a loan instantly, whereas before they’d have to go through bureaucratic systems of submitting applications in banks and waiting for the verdict.

And while micro, small and medium enterprises (MSMEs) in Africa have generally formed the most marginalized business segment in terms of access to funds and technical support, they make up a significant share of growth in GDP and jobs and are a vital component of the African economy.


Easier client verification for startups

Another way in which FinTech is driving African economic development is by allowing startups to easily verify their clients without having to undergo rigorous background checks.

This means startups can increase their clients and expand their businesses, as they’re in a better position to plan financially by being aware of prospective clients’ income status.

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Inclusive has created a single financial data application programming interface (API) that powers financial services to “onboard, verify and monitor identities remotely, by tapping into last mile data sets, offline and regular government databases.” This allows local, pan-African and global business models to expand the reach of their services, without the need to build their own infrastructure.

Inclusive state their ultimate goal to be able to enable a rural farmer in Zambia to buy stocks of a Fortune 500 company on the New York Stock Exchange, right from their phone: “Inclusive will be the trust entity enabling this transaction.”

And for individuals who are keen to invest in foreign markets, wealth management advisors like Dwealth are providing Africa-based investors with an alternative source for portfolio diversification in the U.S., giving them an option for international investment exposure that they didn’t have before.


More options for businesses to scale

As well as expanding many small businesses’ access to capital, FinTech startups are also allowing businesses to scale by offering them the opportunity to outsource their loan and investment options to individuals. Companies like Farmcrowdy enable farmers to get sponsored by high-middle networth individuals across Nigeria, in exchange for a share of their returns.

These agricultural organizations are thus able to scale much easier, increasing their output and the amount of people they employ, due to the availability of investment from sponsors. So far, Farmcrowdy has empowered 7,124 farmers and sponsored 15,887 farms, and investors can also use the Nigerian startup’s platform to track the performance of their sponsorships.

So, how do foreign FinTech companies benefit from investing in Africa?

Africa’s population is set to reach 1.6 billion by 2050, with a high proportion of that being made up of young adults. The continent’s middle class is growing faster than any other in the world, and is looking likely to explode in talent and wealth over the next few decades, thanks to technological innovation, a commodities boom and a stark increase in foreign direct investment.

So, for foreign FinTech businesses that are looking for opportunity in a region that’s bursting with economic and technological potential, now is the time to get their foot in the door. FinTech firms stand to generate a lot of revenue as technology is still relatively new to the continent, making it significantly less saturated than other more developed areas.

Not only this, but gaining access to these new workforces and markets provides the opportunity for companies to interact with financial solutions and lending options that aren’t built on the traditional structures that developed countries are used to.

It also means coming into contact with the different minds, perspectives, and debates that are at play within the African economy, which can ultimately only be a great thing for a business looking to expand their horizons.

With all this in mind, it’s clear that the potential for both foreign and African FinTech companies is still in its infancy. But, there’s no doubt that the contribution they’ve already made to the economic power of many MSMEs is drastically changing the economic landscape for countless low-middle-income Africans.

Evidently, the field of FinTech and its relationship to small African enterprises is integral to maintaining high growth and development levels on the continent.