Equity capital for African fintechs falls as loan finance rises

Equity capital raised by African fintech firms in the first half of 2023 plummeted 40% from the previous year.

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Equity capital raised by African fintech firms in the first half of 2023 plummeted 40% from the previous year. However, loan funding increased by more than 80%.

According to the Afridigest Fintech Transactions Database, the increase in debt is mostly attributable to two transactions: the MNT-Halan $140 million securitised bond offering and M-Kopa's $200 million in debt financing.

It observes that excluding these transactions would result in a small year-on-year increase in H1 debt funding.

The Afridigest tracked fintech deals from week one to week 26 of this year, as well as all agreements from the previous year.

It states this includes equity fund raises, debt fund raises, and mergers and acquisitions transactions – but excludes grants, in accordance with worldwide deal reporting best practices.

According to the research, 75 African fintech firms raised $1.2 billion in risk capital across 85 transactions in the first half of 2023.

It says that equates to 14 deals and $200 million in funding raised per month.

It adds that while the total amount raised was down 21% from H1 2022, there’s a bit more nuance to the story, as it diverges quite a bit when looking at equity versus debt.

Equity funding raised by African fintech firms in the first half of the year fell from last year, but debt funding was up in the period.

Afridigest provides a fast snapshot of fintech funding in Africa in the first half of the year:

Banking/lending led the way in terms of verticals, accounting for $0.66 of every dollar of equity raised and $0.96 of every dollar of debt raised in H1.

Lending platforms like MNT-Halan and Lulalend, digital banks like TymeBank and FairMoney, and asset financing platforms like M-Kopa and Planet42, are among the major participants in the banking/lending field.

According to Afridigest, in addition to equity and loan financing, there was a modest increase in fintech mergers and acquisitions across Africa in the first half of the year, with 15 acquisitions announced compared to 13 in the same period the previous year.