East Africa region’s gross domestic product is forecast to grow to 6.3%, reinforced by the development of Kenya’s financial technology (fintech) scene, a recent survey reveals.
The Economic Insight: Africa Q1 2019 report by the Institute of Chartered in England and Wales (ICEAW) also shows that fintech in Kenya may be on course to overtake traditional economic drivers.
Although traditional economic drivers remain strong performers, sectors such as agriculture could waver due to the delay in long rains in the country.
However, ICEAW Regional Director for the Middle East, Africa and South Asia Michael Armstrong said that Kenya’s economy is ripe for diversification with the growth of fintech.
“Growth in Kenya is currently driven mostly by traditional sectors, however, its strong FinTech scene provides an opportunity to diversify and increase growth avenues for the economy in general,” he says.
Mr Armstrong adds that this can foster inclusive development, “but it can only happen if it is managed properly.”
The East Africa region has already established itself as a global leader in mobile money transfer services. Kenya, propelled by M-Pesa, has been at the forefront of this growing sector.
According to the International Monetary Fund (IMF), the value of mobile money transactions in Kenya was equivalent to 47% of GDP in 2017.
Kenya’s Information Technology sector is also reinforced by the presence of global tech firms Google, Microsoft, IBM and Samsung. “Widespread mobile money usage has helped to smooth consumption, reduce poverty and boost economic growth in Kenya,” said Mr. Armstrong.
Mobile money accounts are also on the rise in neighbouring countries. In Rwanda, the ratio of mobile money accounts to persons stands at nearly 1,250 per 1,000 adults in Rwanda. Uganda’s is just over 1,000 per 1,000 adults.
Within Africa, other countries seeing a similar proliferation of mobile money accounts include Ivory Coast (1,700 accounts per 1,000 adults) and Ghana (1,350 accounts per 1,000 adults).
In terms of East Africa’s economic performance, Ethiopia, Rwanda and Uganda are all expected to record a real GDP growth of 6%. Infrastructure investment and the expansion of financial services and telecoms services continue to support growth in these countries.
Accountancy body ICEAW also forecasts that GDP growth is set to grow at 4.4% in West and Central Africa, 4.9% in Franc Zone and 1.5% in Southern Africa.