With over 300 tech startups in Kenya, fintech dominates over 30 percent of the ecosystem, making the sub-sector the biggest.
Kenya is a vibrant center of innovation, especially in financial technology. Dubbed the “Silicon Savannah,” the nation has received the accolade of the poster child for Kenya’s startup ecosystem, ushering in the era of fintech innovation.
From mobile money behemoths like M-Pesa to up-and-coming players like Pezesha and Tala, fintech companies in Kenya are revolutionizing financial inclusion across the continent.
Here are five practical ways to get started with your fintech startup in Kenya and the most essential details about fintech startups in Kenya.
STEP 1: Understand the Fintech Landscape in Kenya and Define Your Niche
To get into this space, first, you need to understand which areas in fintech you are interested in, and second, which problem sets you want to solve within that area in Kenya.
Kenya is home to Africa’s world-class fintech due to the role of M-Pesa, a mobile money transfer pioneer, and how it transformed the space.
Fintech startups in Kenya now offer many services, including digital lending, payments, insurance, remittances, and blockchain solutions.
What does it take to become a Fintech Startup in Kenya?
A Kenya-based fintech startup could be a tech-based company offering new financial products or better ways to manage money.
In contrast to conventional banks, fintech firms in Kenya use digital mediums, mobile applications, and data analytics to provide solutions that are accessible, cheap, and efficient.
For instance, M-Pesa allows users to send money, pay bills, and get loans via mobile phone, and Pezesha links small business owners to working capital through a digital marketplace.
The fintech industry is big in Kenya. Here are some of the best fintech companies in Kenya across various subsectors:
- Mobile payments: Services such as Pesapal and Cellulant enable online and mobile transactions.
- Digital lending: Firms like Tala and Branch rely on alternative data to offer immediate loans.
- Insurtech: Startups like Turaco are providing micro-insurance for low-income individuals.
- Cross-border Payments: Cross-border payments are a cost-effective way of sending money across borders with BitPesa and Eastpesa.
Definition and Difference Between a Fintech and a Startup
A startup is an enterprise attempting to succeed in a new industry or scale up a new idea. Kenya is home to agriculture, health, and e-commerce startups.
However, a fintech startup is just a type of startup in the financial services industry, using technology to rearrange or improve traditional monetary systems.
The key differences include:
Focus
Fintech startups in Kenya exclusively target financial services, whereas general startups in Kenya could focus on any sector, e.g., healthcare startups or agricultural startups.
Regulation
Fintech startups in Kenya typically need licenses from bodies such as the Central Bank of Kenya (CBK), while other startups could deal with less regulation.
Technology
Fintech startups depend on digital platforms, AI, and blockchain; technology use by other startups in Kenya may be less specialized.
To niche down, research the pain points in Kenya’s ecosystem. For example, 82.9% of Kenyans have at least one financial product, yet many still don’t have access to cheap credit or insurance.
Consider gaps such as financial inclusion in rural areas, SME financing, and remittances via blockchain.
Interacting with the Association of Fintech in Kenya (FINTAK) will give you a view of industry trends and a stock of licensed fintech in Kenya.
STEP 2: Develop a Solid Business Plan and Secure Funding
When you’ve defined your niche, develop a comprehensive business plan that captures your vision, customer profile, revenue plan, and growth approach.
A finely tuned plan is required to excite investors and compete in Kenya’s startup jungle.
Critical Parts of Your Company’s Business Plan
Market Analysis
Emphasize the need for your fintech offering. For example, Kenya has 29.1 million active mobile money accounts, showing a ripe digital financial services market.
Value Proposition
Describe how your fintech startup addresses a problem, such as offering short-term credit to small family farms for farming inputs or making international payments more manageable.
Revenue Model
Kenya’s usual fintech revenue models include transaction fees, subscription plans, and loan interest.
Regulatory Compliance
Explain how you will secure any licenses the CBK or other relevant regulators require to function as a licensed fintech in Kenya.
Know who your Team is
Know that you will need professionals in fintech areas such as software developers, data analysts, and compliance (fintech in Kenya jobs).
Securing Funding for Startups in Kenya
This is important for fintech startups in Kenya, where building tech platforms and reaching scale usually requires much funding.
Kenyan fintechs raised $124 million in 2022, five times more than in 2021. Here’s how to get fintech financing in Kenya:
Venture Capital
Companies like Partech Africa and Quona Capital invest in fintech in Kenya. M-Kopa, for instance, raised $75 million in 2022 to build out its pay-as-you-go financing model.
Angel Investors
Wealthy people in Nairobi tend to support early-stage startups in Kenya.
Grants for Startups in Kenya
Initiatives like the Alliance for a Green Revolution Africa (AGRA) offer grants, including the $500,000 granted to Umati Capital for farming in August 2015.
Incubators and Accelerators
Several startup incubators in Kenya, such as Nairobi Garage and iHub, offer mentorship, office space, and investor connections. Programs like Google’s Launchpad Accelerator Africa have helped support fintechs like Pezesha.
Crowdfunding
Platforms such as Ifarm360 link African startups to crowd investors worldwide.
To get funding for startups in Kenya, create a prototype or MVP to show investors what you are discussing.
You may find potential investors while networking at events organised by the Association of Fintech in Kenya.
STEP 3: Navigate Regulatory Requirements and Obtain Licenses
Fintech in Kenya is tightly regulated to safeguard consumers and maintain financial stability.
Being a regulated fintech in Kenya means one has to comply with rules set forth by the Central Bank of Kenya, the CMA, among others.
Key Regulatory Requirements
Payment Service Provider License
If your fintech startup has anything to do with mobile payments, such as Pesapal or Cellulant, you will need a license from the CBK under the National Payment System Act.
Money-Remittance License
For a platform of cross-border transactions such as Eastpesa, one needs a license from CBK.
Data privacy
Under the Data Protection Act, fintech startups in Kenya must protect customer data, especially for apps that deal with private finance data.
Anti Money Laundering (AML)
If AML and Know Your Customer (KYC) procedures are not in place, fraud can occur.
The CBK has created a sandbox that fintech startups can use to test their innovations in a controlled environment in Kenya.
For example, three fintechs were admitted to the sandbox to trial new products last year.
You can navigate these regulations and champion fintech-friendly policies by getting involved with the Association of Fintech in Kenya.
Tips for Compliance
Contact a fintech lawyer in Kenya to ensure your company is compliant.
Associate with established financial organisations, like M-Pesa, and partner with Safaricom so you can take advantage of existing licenses.
Keep track of new regulations with FINTAK, which aims to promote fintech in Nairobi and beyond.
Step 4: Build a Scalable Technology Platform
The technology is the heart and soul of any fintech startup in Kenya.
Whether you are building a mobile application for digital lending or a blockchain platform for remittances, your technology needs to be safe, have a great user experience, and scale.
What To Look For In Your Tech Platform
Mobile First
Your platform must be mobile-first in a high-mobile penetration market like Kenya. M-Pesa’s SMS-based model, in particular, ensured accessibility even to people with basic phones.
Security
Utilize security safeguards (e.g., encryption and two-factor authentication) to safeguard user data.
Scalability
Plan your platform for success and think big as you do so. Cellulant is one of the leading fintech companies in Kenya and processes transactions across 18 African nations.
Integration
Ensure your platform easily integrates with financial systems like M-Pesa or bank APIs. Start-ups like Kiba specialize in linking fintechs to banks across the continent.
Hiring for Fintech Jobs in Kenya
Creating a tech platform needs a talented team. Some of the fintech jobs in Kenya are:
- Software Developers: This is for your app or platform build and retention.
- Data Analyzers: You want to use alternate data for credit scoring or customer profiling.
- Regulatory Bodies: For legal and regulatory compliance as required by law.
Nairobi is a technology talent outpost, with universities like the University of Nairobi churning out graduates interested in computer science and finance. You can even leverage Kenya’s startup incubators for talent and training.
Step 5: Launch, Market, and Scale Your Fintech Startup
With the platform in place and licences acquired, it’s time to launch your fintech start-up in Kenya.
To launch, you need a planned marketing campaign and to gather customers.
1. Starting Your Fintech Company
Pilot Test
Get a few users and iterate on your product with their feedback. Tala, for example, started as a pilot project before growing to millions of users.
Partnerships
Partner with mobile operators, banks, or retailers and work with them to grow your brand.
Customer Education
A lot of Kenyans are ignorant about sophisticated fintech products. Provide tutorials or financial literacy programs, like Branch does, to help build trust.
2. Marketing Strategies
Digital Marketing
Target Kenya’s tech-savvy youth on social media and Google Ads. In Nairobi, fintech flows on platforms like X and Instagram.
Community
- Showcase your expertise: Show the world how great you are by attending industry events hosted by the Association of Fintech in Kenya.
- Referral Program: Encourage users to invite their friends; a strategy employed by key fintech companies in Kenya, such as M-Pesa.
3. Scaling Your Startup
To become one of the best startups in Kenya, focus on scaling your operations:
Scale Geographically
Begin with Nairobi and then prioritize other regions or countries. Cellulant is currently in 18 African countries.
Diversify Services
To boost revenue, create complementary services like M-Pesa’s loans and savings offerings.
Raise More Capital
Utilize your success to bring more capital to Kenyan startups. In 2022, Pezesha raised $11 million to expand into Nigeria and Rwanda.
Challenges and Opportunities for Fintech Startups in Kenya
Kenya’s fintech scene has the potential of a hulk, but startups are grappling with issues such as:
- Competition: With 150+ fintech companies in Kenya, you must be innovative and deliver on customer satisfaction to make a mark.
- Regulatory Barriers: Compliance is slow, costly, and could take years to overcome.
- Customer Trust: Trust is a must, especially for digital-only platforms.
But there are openings:
- Financial Inclusion: Millions of Kenyans are still unbanked and uninsured, opening enormous opportunities for fintech in Africa.
- Government Support: The Kenyan government gives tax incentives and reduced licensing for businesses and start-ups in Kenya.
- Tech-Savvy: Dr. Hannigan notes that Kenya, with its young, technology-literate populace, is “very ready” to embrace new fintech offerings.
Resources for Fintech Startups in Kenya
Here is what you need to succeed:
Fintech-Association of Kenya (FINTAK): Connect for policy promotion/advocacy, networking, and industry knowledge sharing.
Entrepreneurship Incubation Hubs in Kenya: Nairobi Garage, iHub, and C4DLab provide mentorship and funding programs.
Startups Funding in Kenya: Discover venture capital, grants for startups in Kenya, and crowdfunding platforms.
Events: Join fintech conferences in Nairobi to meet investors and other fintech peers.
Best Legal Firm in Kenya for Fintech Compliance and Regulatory Issues
Chepchieng & Co. Advocates is Kenya’s number one law firm that helps startups navigate compliance and regulatory issues. It is an award-winning Fintech law firm in Kenya with a 5-year track record in financial services law brought to bear in assisting fintech companies in Kenya obtain mandatory licenses such as payment service provider and money remittance licenses from the Central Bank of Kenya (CBK).
With a solid understanding of the Data Protection Act and AML regulations, and unparalleled knowledge of the fintech industry in Kenya, they will help your startup navigate the requirements without any hassle.
Their proactive attitude enables the use of resources such as the CBK’s regulatory sandbox, which allows fintech startups in Kenya to field-test new products in controlled environments.
Through continuous involvement in the Association of Fintech of Kenya (FINTAK), lawyers from Chepchieng and Company advocates are up to date with fintech-friendly regulations and offer strategic advice that suits the changing fintech market in Nairobi.
Their dedication to honesty, client-first attitude, and holistic legal counsel makes them the legal partners of choice for aspiring fintech entrepreneurs in Kenya looking to get it right and right on the first go.
Conclusion
By adhering to these five steps, namely knowing the market, creating a business plan, traversing through regulations, developing a tech platform, and launching, you could set your startup as one of the best fintech companies in Kenya.
Kenya’s Fintech sector is a foundation of our startup ecosystem, and when done right, your fintech startup can fuel financial inclusion and help grow economies across Africa.
FAQs
What are the key steps to launching a fintech company in Kenya?
There are five main stages:
- Understanding the fintech space,
- Business planning and fundraising (you must pick measurable KPIs — key performance indicators to raise money)
- Navigating the regulatory landscape
- Constructing a scalable technology platform
- Launching and scaling your startup.
Why is Kenya a strong location for fintech startups?
The high mobile penetration in Kenya, the dynamic tech entrepreneurship ecosystem, and the position of a leader in fintech in Africa. That leads to a fertile ground for startups in Kenya, and it has been particularly friendly to fintech startups.
What funding sources are available for Kenyan fintech startups?
Investment in startups in Kenya comes from venture capital firms such as Partech Africa and others, grantmaking organizations such as AGRA, angel financiers, crowdfunding, and startup incubators in Kenya.
What is unique about a fintech startup compared to other startups in Kenya?
Fintech startups get unique focus and attention in delivering financial services through technology and are subject to more regulations. They depend more on digital platforms than other startups in Kenya, such as healthcare or agricultural startups.
What is the role of the Association of Fintech in Kenya for startups?
The Kenyan Fintech Association (Fintak) connects fintech startups in Kenya to a network of industry players. It provides policy advocacy, industry insights, and networking opportunities that keep you updated, as well as help you get in touch with investors and regulators.
