The DRC's fintech sector is growing, with a 5 per cent rise in mobile money users in Q1 2024 and $62 million raised in start-up funding in 2023. Despite this, 80 per cent of the population remains unbanked due to low internet and infrastructure challenges. While still in its early stages compared to markets like Kenya or Nigeria, the DRC's fintech sector shows significant potential. For more insights, CNBC Africa spoke to Rocky Abdoul Milingita, Digital Financial Services Consultant at Microsave Consulting.
The DRC's fintech sector is growing, with a 5 per cent rise in mobile money users in Q1 2024 and $62 million raised in start-up funding in 2023. Despite this, 80 per cent of the population remains unbanked due to low internet and infrastructure challenges. While still in its early stages compared to markets like Kenya or Nigeria, the DRC's fintech sector shows significant potential. For more insights, we spoke to Rocky Abdoul Milingita, Digital Financial Services Consultant at Microsave Consulting. The fintech ecosystem in the DRC has experienced significant growth in recent years, driven by the need for financial inclusion and the rapid adoption of mobile technology. This was more trained by mobile money expansion, which has been a booming tool for financial inclusion in the DRC. Mobile services, for instance, for Q1 2024, saw a 5 per cent increase in the number of active users, and the revenue also followed this trend. There is also the fintech start-ups, because there has been a surge of fintech start-ups focusing on payment, lending and microfinance solutions. These start-ups leverage mobile platforms to offer services like payment aggregation, microloan savings and insurance. There is also a regulator support, because the Central Bank of Congo has introduced regulations to support electronic payment and encourage innovation in the financial sector. Earlier this month, the Central Bank issued Instruction 58 on the interoperability of electronic payment systems and participation in the national suite. This regulation established guidelines for payment interoperability, which is also beneficial for fintechs as they are already recognised as institutions subject to this instruction. Support from the Central Bank of Congo is very important when it comes to deepening the fintech services in the country, but let us look at some of the challenges that still remain and also how to navigate them. Actually, there are a lot of challenges that are primary challenges faced by fintech in the DRC. First of all, there is the infrastructure limitation, because actually only 19 per cent of the population had access to electricity. This limits really the use of electronic services. There is also a challenge related to low internet penetration. The internet penetration actually stands approximately at 70 per cent, which also limited the access to online fintech services. Also, there is a low mobile network coverage. In other countries, the low internet penetration is mitigated by alternative solutions, such as the use of UACSD technology. However, in the DRC, there are regions where even UACSD access is unavailable. There is also a problem related to financial literacy. There is a lack of understanding of digital financial products that reduces the adoption rate among potential users. There is also a challenge related to the trust issues, because in some regions of the DRC, the population has been exploited by so-called digital investment platforms, which have fraudulently taken large amounts of money and vanished, leaving the population uncertain about where to seek help. This also reduces the trust in digital platforms. The last one is more regarding the regulatory barriers, because there is the complexity and the length of processes of granting authorizations to fintech that create barriers to entry and also the expansion of fintech companies. Rocky, that's quite a big number you mentioned there, looking at some of those challenges. But there is also an 80% number that we're seeing that is still unbanked in DRC. So, how do we see fintech transforming the financial sector here? First of all, it's more to leverage some customer-centered design products, because we noticed that more products that are developed by banks are not more client-centered. And here, fintechs are more leveraging this gap by providing solutions that are more customer-centered. And also, it's more about the prices, because fintechs came with some solutions that are low-cost for the population and are more suitable for the population. This makes fintech to cover this gap. But also, there is a trend. Actually, in the DRC world, there is some partnership between classic financial institutions with fintech to see how to make this partnership, and to see how they can reach more population on the last miles and also to increase this financial inclusion rate. Let us also look at some of the sub-sectors that you're seeing that are attracting the highest level of investment from investors. And also, what makes them particularly appealing to investors in the DRC? First of all, I would like to mention that in 2023, the DRC raised more than 62 million in startup funds, and we are also a single largest contributor to startup funding growth, about 33% year-on-year in the Central African region. And also, if we have to talk about securing financing, we have those that are more both for local and international investors, are showing the increased interest in the DRC fintech sectors. And also, there is also one component more related on the challenges organized by financial institutions, like ecobank, where there are some findings in winning prices that fintechs also are relying on to get more funds. But there are also some development funds, for instance, from IFC and African Development Bank to provide more funding and support to fintech ecosystem. But also, there are some partnerships also, which are collaboration with the telecommunication companies and banks that offer financial and infrastructural support to financial technology fintechs. Looking ahead, what are some of the emerging trends you're seeing in the fintech space in the DRC? And also, maybe some of the policy shifts that you're seeing, looking at the investors that are coming in the regulatory landscape in the country at the same time. What are we seeing here? Yes. The business environment in DRC is improving because of more policies that are being promulgated in DRC to see how they can be more business and also to see how they can support fintechs. But there are some trends that are more related to digital financial expression because traditional banks are likely to collaborate more with fintechs to offer these digital services in DRC. Because some five or ten years ago, there was a lot of competition and there was no room for collaboration between the financial institutions and fintech. There's also this regulatory evolution where the government now introduces more supportive regulations including sandbox to foster innovation. And also, as I said, the instruction that was published earlier this month, the 58th instruction, which is more about interoperability and bring all digital finance actors on a table to discuss but also to be linked to see how to improve the financial inclusion. There's also more trends regarding the technology adoption because there is this increased use of smartphones and also the improved internet connectivity which enhances the reach of fintech services. But also, there is more focus on fraud and cybersecurity because as digital services expand also there will be a greater emphasis on this securing platform against fraud and cyber threats.
Theme: The growth of the fintech sector in the DRC and its impact on financial inclusion
The Democratic Republic of Congo (DRC) has seen a remarkable growth in its fintech sector, with a notable 5 per cent increase in mobile money users in the first quarter of 2024 and a substantial $62 million raised in start-up funding in 2023. Despite these advancements, a staggering 80 per cent of the population remains unbanked due to challenges such as low internet penetration and inadequate infrastructure. Although still in its early stages compared to regional counterparts like Kenya and Nigeria, the DRC's fintech industry presents substantial potential for growth and innovation. Rocky Abdoul Milingita, a Digital Financial Services Consultant at Microsave Consulting, shed light on the burgeoning fintech landscape in the DRC. One of the key drivers of this growth has been the expansion of mobile money services, which have played a pivotal role in enhancing financial inclusion in the country. The rise in active users and revenue in mobile services underscore the increasing adoption of digital financial solutions in the DRC. Moreover, the emergence of fintech start-ups focusing on payment, lending, and microfinance services has further diversified the financial services market in the country. Regulatory support from the Central Bank of Congo has also been instrumental in fostering the development of the fintech sector. The introduction of guidelines like Instruction 58 on payment system interoperability has created a conducive environment for fintech companies to thrive. In addition to regulatory backing, there has been a surge in partnerships between traditional financial institutions and fintech firms to extend financial services to underserved populations. However, the flourishing fintech industry in the DRC is not without its challenges. Infrastructure limitations, including low levels of electricity access and internet penetration, pose significant barriers to the widespread adoption of digital financial services. Moreover, issues such as financial literacy, lack of trust in digital platforms, and regulatory complexities hinder the seamless operation and expansion of fintech companies in the country. In addressing the issue of financial inclusion in the DRC, fintech companies are focusing on customer-centric product design and offering low-cost solutions tailored to the needs of the population. Collaborations between traditional financial institutions and fintech start-ups are also bridging the gap to reach unbanked segments of the population. In terms of investment, the fintech sector in the DRC has attracted substantial funding, with over $62 million raised in startup funds in 2023. The growing interest from both local and international investors, as well as partnerships with financial institutions and development funds, has provided a significant boost to the fintech ecosystem in the country. Looking ahead, some emerging trends in the DRC's fintech space include increased collaboration between traditional banks and fintech firms, regulatory advancements to support innovation, and a focus on technology adoption and cybersecurity. The growing use of smartphones and improved internet connectivity are expected to further drive the accessibility of fintech services, while measures to enhance cybersecurity will safeguard digital platforms against potential threats. Overall, the trajectory of the fintech sector in the DRC signals a promising future, with innovation, collaboration, and regulatory support playing key roles in unlocking financial inclusion and driving economic growth in the country.
"The growing interest from both local and international investors, as well as partnerships with financial institutions and development funds, has provided a significant boost to the fintech ecosystem in the country."
['DRC', 'fintech sector', 'financial inclusion', 'mobile money', 'regulatory support', 'investment', 'technology adoption', 'cybersecurity']