A select group of fintech companies from Latin America have been extending their reach into Africa, drawn by the continent’s burgeoning digital payments sector. Among the latest to venture into this space is Minka, a Colombian fintech firm that has received backing from the investment giant Tiger Global. Minka specializes in creating payment infrastructures that facilitate the transfer of funds between banks and various financial entities.
On a recent Tuesday, Minka announced its foray into the East African market, establishing operations in Kenya, Tanzania, Uganda, and Ethiopia. The company has also disclosed plans to broaden its presence into the Southern African nations of Mozambique, Zambia, and Malawi.
This move by Minka is part of a broader pattern of Latin American fintechs seeking opportunities in Africa. In the year 2022, EBANX expanded its services to 11 African countries, and two years prior, Uruguay’s dLocal made its entry into West Africa and Kenya. The strategic expansions by these companies are driven by the similar financial challenges faced in both regions. Notably, over 350 million African adults are currently underserved by financial institutions and predominantly engage in cash-based transactions.
In a statement, Minka expressed its intent to replicate the solutions it has been implementing across Latin America for the benefit of East African populations. Alexander Perko, the growth lead at Minka, highlighted the “real synergies” between the financial landscapes of Latin America and East Africa. Both regions grapple with significant financial exclusion and a reliance on cash transactions, particularly within their sizable informal economies.
Minka’s approach to addressing these challenges is to streamline the process of money transfers between banks and other financial institutions. By developing proprietary financial protocols, Minka facilitates a universal language that allows disparate payment systems to interact seamlessly, thereby reducing the complexity and necessity for intricate reconciliations.
Perko pointed out the fragmentation of global payment networks, with approximately 2,000 distinct systems and only a small fraction capable of interoperation.
The entry of fintechs like Minka, EBANX, and dLocal into Africa is pivotal for consumers who wish to access global products but face barriers due to the non-acceptance of their preferred payment methods, such as mobile money or cash, by international merchants. These fintechs bridge the gap by enabling global merchants to accept localized forms of payment from African consumers.
In Latin America, despite a higher penetration of credit card access, with 58% of the population having them, there remains a gap in the availability of other financial services such as loans or investment products. This gap is more pronounced among low-income and rural populations, as reported by the World Economic Forum.
With a robust base of over 1,500 registered fintech startups, progressive regulations, and a collaborative environment, Latin America has made significant strides in digital payments. These fintech companies believe that their regional experience, coupled with established relationships with global merchants, positions them well to assist Africa in advancing its digital payment systems and to successfully navigate the entry into new African markets.
