UN project clears path for Tanzanian fintech startups

WHEN the United Nations Capital Development Fund (UNCDF) first facilitated a dialogue at the end of last year to help stakeholders understand fintech business models, market risks and the legal and regulatory environment, the idea was to boost the growth of fintech start-up ecosystem in the country.

The dialogue had given special spotlight on a few start-ups in the PesaTech accelerator program but the general focus was on the wider fintech community in the country.

During the event, UNCDF Policy Specialist, Aneth Kasebele, said that through the dialogue, participants were able to identify gaps and champion initiatives to improve Tanzania’s digital infrastructure and the policies and regulations that govern the fintech innovation ecosystem.

“Participants also had ample time to network in one-on-one and small group settings. This is the first in a series of events that will bring together a diverse group of stakeholders to facilitate new partnerships and drive growth in the fintech start-up sector,” she said.

“The event provided a platform for start-ups, government, investors and others to build relationships and build on the momentum of a busy year-end,” noted Kasebele.

A fintech startup is a company that relies on technologies to address the consumer needs in financial management. They usually aim to compete with or completely replace the traditional financial service providers by offering a superior experience or simply more efficient solutions to the existing problems.

UNCDF Tanzania partnered with Sahara Ventures to run an accelerator program for Tanzanian fintech startups with the aim of building fintech’s capacity to raise investment through Investor-Readiness Program (IRP) and a marketplace between the startups, strategic partners and investors.

One of the beneficiaries, Agnes Mollel, the Co-founder of Mipango Fintech, says that her company has created an application which offers personalized financial advice.

She says that the personal financial application enables their customers to track their transactions and investments through the application and at the same time create their own personal budget and goals.

“Through the data that we collect from our customers, we are able to offer them personalized financial advice, which means we offer advice depending on their personal needs,” she says.

She says that through their technology-driven, innovative solutions, they have the potential to offer broad social benefits to the markets they operate in, particularly when it comes to providing financial services to those who have traditionally been underserved.

Another beneficiary, Emmanuel Kimaro who founded Bizzey Company, currently helps to connect small entrepreneurs with financial institutions so that they can access soft business loans.

He says that although the startup sector in Tanzania is growing, there is still room for more growth with the presence of a friendly system advanced by the government.

“With more support from the government, especially the Bank of Tanzania, it will empower fintechs and entrepreneurs to showcase the most ground-breaking, impactful solutions in the world of payments and commerce,” he says.

Mr Kimaro further says that their startup company, apart from linking small and medium entrepreneurs to financial services, they also seek innovative and ambitious entrepreneurs who are uplifting communities by solving payment and commerce challenges faced by businesses of all sizes and sectors.

According to UNCDF, Tanzania’s fintech start-up sector has developed rapidly in the last ten years and with that growth, a dynamic innovation ecosystem and close-knit community of founders has emerged.

“Many of these founders have benefitted from participation in various early-stage incubation, acceleration and mentorship programs—and they are ready for the next level of growth and a new kind of accelerator,” the fund notes.

However, research conducted by UNCDF Tanzania highlighted that while there are a number of high-quality startup accelerator programs in Tanzania, many do not provide incremental, follow-on support from one year—or growth-stage—to the next.

When a founder completes one program, or as her business grows, she does not ‘graduate’ with opportunities for higher-level support, but is rather left with other programs that offer similar types of capacity building.

Additionally, while many programs focus on investment-readiness, offering startups the opportunity to pitch their ideas, the funding awarded is typically small (less than $10,000) and few programs address start-ups’ need for the business skills they’ll need over the longer-term, if/when they do grow—like financial management and modeling, due diligence and complex project management.

Moreover, because there are almost no early or late-stage startup investors in Tanzania, startups that do win existing competitions are still constrained in accessing catalytic growth capital. As a result, there has been a recycling of candidates in competitions, leaving less room for new entrants.

PesaTech Accelerator program is designed to tackle some of these challenges. The program targets early-stage start-ups with a minimum viable product (MVP) and later-stage post-revenue start-ups with a tested business model—some of whom may had prior engagement with other innovation hubs—that are close-to-ready for investment.

When the program was launched, Commission for Science and Technology (COSTECH) Director General, Dr Amos Nungu, reiterated the government’s commitment to creating an enabling environment for innovators in the country, saying that he believes the program will help Tanzanian innovators have meaningful growth through increased knowledge and networks.