Many people in the start-up community here in Nairobi are aware that social impact is one of the most popular forms of investment in Africa. Impact investment is a way to put money in social ventures, and the outcomes of the investment are usually developmental in nature.
Typical recipients of impact investment and grants include education, agriculture, renewable energy and banking SMEs. Investments can come both from foreigners, who have recognised early on the vast growth potential here, and locals looking to grow with the community.
In the tech sphere, fintech is the biggest trend in Africa right now, using the most modern technologies to improve financial inclusion. In Sub-Saharan Africa, this is especially important as people in many rural communities do not have access to banks.
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For smallholder farmers, for example, lack of financial inclusion limits their ability to increase profitability by saving and investing money. Communities can easily be impoverished if crop yield during a particular season is low. They face difficulties keeping up with output when compared to larger farms who have the means to acquire expensive equipment.
This is but one example of how mobile money and digital lending can change individual lives, as well as our collective economy.
One of the pioneers in the fintech field is an app that almost all Kenyans are familiar with, M-Pesa. Along with other Nairobi-based fintech companies, growth has been stunning over the past few years. This is why venture capital firms from China, London and San Francisco are flocking to Kenya to invest in the sector lately.
Nigeria-based fintech start-up OPay just raised $120 million (Sh12 billion) in a Series B round from mostly Chinese investors. It will use the new funding to launch OPay services in Kenya and South Africa, where the growth trajectory could not be stronger.
These kinds of partnerships - between Africa’s three largest economies - are key to the financial development of our continent.
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Within our own country, those with means must do their part to inject their money back into the local economy as well. This should both be through the formal financial sector, as well as the less formal philanthropic sector.
If the wealthy do not have faith in Kenya’s economic growth, then smaller scale entrepreneurs will be less inspired to invest their money and their brains here.
The examples set by more well established individuals will prevent brain drain by Kenyan entrepreneurs and scientists to the US and Europe.
It will also prevent a situation similar to what plagued many Latin American economies in the 1980s and 90s, when people of means kept their money abroad because they lacked faith in their own economies. Keeping money outside of the country instead of investing it in new initiatives at home led to economic chaos.
Setting a good example for Kenyan business people was probably part of the president’s motive recently when he donated Sh100 million to the creation of a new school and library in Kapsisiywa, Nandi County.
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The complex will be located in Eliud Kipchoge’s hometown, honouring him for his significant achievements and his contribution to our nation’s athletic records. Setting up a new school is not only an opportunity to improve the education of children in a rural area of poverty.
It is also a chance to acknowledge local talent and invest in the growth of future homegrown high achievers.
Business executives should follow Uhuru’s lead. Why go abroad to develop your business when we already have all of the potential here? It simply needs to be cultivated.
One could either use the opportunities he or she is born with to maintain their status. Or they could use their position to give back to the community, to find gaps and fill them.
Impact investors are clamouring for the fintech industry because they know that it unlocks Africa’s growth potential. The same goes for the investment in the Kapsisiywa school and library - Uhuru put resources where they are most needed and where there is the most growth potential.