Financing the future

Not only has fintech and the financial sector played a big role in the increase in mergers and acquisitions (M&A) activity in East Africa over the past decade, but after showing a quick bounce-back from an initial Covid slowdown, it will also be a key factor in future regional growth, says Nduati-Mutero.

“Fintech is driving a lot of economic growth, and is providing a backbone for other industries in terms of being able to make digital payments,” explained Nduati-Mutero, a partner at ALN Kenya | Anjarwalla & Khanna. “Covid really accelerated digital payments and we’ve seen a lot of traditional banking and insurance moving to fintech platforms, so that has also driven growth in M&A as the traditional financial sectors try to transform themselves.”

Despite the impact of the pandemic on M&A markets worldwide, Nduati-Mutero explained that East Africa is one of the fastest growing regions, and showed great resilience by only experiencing a slight slowdown in Kenya, Tanzania and Uganda.

“Certain industries took a big hit, but financial services and fintech was not one of them, because people continued to transact, and people moved to digital platforms,” she clarified.

Even before the pandemic, Nduati-Mutero and her colleagues witnessed strong growth in the fintech sphere. Local and foreign investment to grow fintech companies necessitated a lot of M&A activity, both in terms of additional investors coming in for existing companies, and startups financed by venture capitalists and the like.

“Fintech is playing a very big role in a number of the large transactions we are doing currently, whether consolidation or capital raising etc in the capital markets space and also in the private acquisition space,” she said.

It has been an exciting time for Nduati-Mutero, with her firm involved in several large fintech consolidations and M&A transactions. She acted on the expansion of Kenya’s biggest financial group – Equity Group – into the Democratic Republic of the Congo, the acquisition of Giro Commercial Bank in Kenya by I&M Holdings and then their expansion into Uganda, and Nigeria’s Access Bank setting up in Kenya then expanding from there.

Along with the cross-border expansion and consolidation of financial institutions, Nduati-Mutero has seen plenty of local fintech growth. “The use of regional platforms is growing a lot, and as the economies grow and integration grows then fintech, which plays a critical role in ensuring cross-border trade and things like that, definitely has a great opportunity.”

She believes the future is bright for M&A and the fintech sector in East Africa in general.

“We have a very creative populace, particularly young people, many of whom just don’t have access to capital. Working with our banking clients, we see the work that they’re trying to do in terms of providing capital to youth to help them grow their ideas. I think it’s an area we should really focus on because we can leverage the creativity of young people to get into fintech and to come up with products that work for the region.”

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