Ghana’s Fintech Affinity Bag $8 million to expand digital banking in a mobile money-driven market

Africa’s top digital banking platforms usually come from high-growth and populous markets such as Nigeria, South Africa and Egypt. but Affinity Africastartups from Ghana want to participate in the conversation. The startup has raised $8 million in seed funding to further expand its financial products across the country, a dominant financial tool by mobile money.

Mobile money has become a go-to for financial transactions, but the traditional banking sectors in Ghana and Africa remain highly profitable overall. Banks in Ghana have been holding since the pandemic Recorded growth in Stock returns after tax (ROE) This is above the global average.

However, these benefits are heavily dependent on fees, but inefficiencies such as high operating costs, extensive in-person documents and long onboarding times have not been served by millions.

Today, less than 10% of African businesses have access to credit, and over 60% of adults lack formal financial services. World Bank data. This widening gap has driven the demand for digital banking alternatives such as affinity, which offers cheaper and comprehensive models.

Affinity has been carrying over 50,000 customers since its launch in October last year. Tarek Mougane say. In particular, 65% of users have never accessed official banking products before, and over 60% are women working in the informal sector.

So why did it take so long for digital banking startups to gain such traction in Ghana? The country’s strict banking regulations play a major role. Unlike its neighboring Nigeria, If your digital bank can be easily operated with a microfinance licensesuch licenses are rare and expensive, and it takes time to go to Ghana, making it difficult for Fintechs to enter the space.

“Ghanaian regulators are particularly focused on protecting consumers at depository agencies,” Moogain told TechCrunch. “We had to prove strong risk management, destroy it as a microfinance institution, and align our mission with the government’s goal of banking banks. We ultimately convinced them. It was a way our digital platform reduces friction and reduces banking costs for individuals and micro and small businesses (MSMEs).

From investment banking to fintech disruptors

From a fourth-generation Lebanese Ghanaian family, Mugain studied in the UK and began his academic and finance career after earning his bachelor’s and master’s degrees. He later worked as director of Man Group, a $160 billion global investment fund. There, he is working on major IPOs including Visa and Compamos, the largest microfinance institutions in Latin America.

After returning to Ghana a decade ago, Moogaine was aiming to solve the financial inclusion problem in Africa. This is an issue that is often highlighted in global consulting reports.

“Numbers like the $331 billion credit gap in Africa are still cited today,” he said. “Nothing has changed. It’s been obsessed with building a full-fledged retail bank for MSMES, just like what Santander, Lloyds or Chase Bank offers in Europe and the US. , it was tailored to the majority of Africa.”

He and a group of friends and family raised $2 million in 2020 to acquire Microfinance Bank. The entity, which received the savings and loan license, was first granted for over a decade and served as a testing ground for current banking solutions.

By 2022, Affinity had raised an additional $3 million in the pre-seed round to upgrade this license. After months of stealth testing, FinTech officially launched the app in October last year after receiving approval from the country’s Apex bank, Bank of Ghana.

Ghana’s Fintech serves both individuals and microenterprise. Customers get free savings and checking accounts without trading restrictions, and the platform immediately starts credit score users based on trading history.

After months of use, Affinity expands a credit line of 3-7% with monthly interest rates. Accra-based FinTech has spent more than $15 million in loans across a range of products, with immediate loans increasing by 30% months and a 3% bad debt (NPL) rate.

Hybrid Approach: Digital Banking for Physical Touch

Customers can also access other banking services, such as savings, payments, investments, transfers to banks and mobile money wallets. Last month, 89% of deposit inflows increased by 54% per month since launch, from Mobile Money Top-Up, with the remaining 11% from bank transfers.

Loans account for more than 90% of affinity revenue, with the remaining 10% coming from fees and fees related to services such as utility bills and internet payments via USSD and mobile apps. According to Mougaine, its revenues have increased by 37% per month over the past six months.

Like many digital banks in Africa, affinity Blend online banking and offline touchpoints Through the agent network. These agents will help approximately 30 people meet SMEs in person and put them in the app, helping them bridge the trust gap for first-time digital banking users.

Of the 50,000 customers, 26,000 joined through the agency network, and 24,000 signed up using the mobile app. In particular, 55% of the customers acquired by agents have migrated to the app, indicating strong digital adoption after onboarding.

“This shift allowed me to rethink the agency strategy. I focused on using agents to promote onboarding, early education and digital literacy to promote app adoption. We look forward to improving this hybrid growth approach as we expand,” Moogaine said.

Affinity’s $8 million seed round was led by European VC firms Grazia Equity (Germany) and Bucked VC (London) to mark the first African investment. Other investors will be participating in early supporters at Enza Capital, Launch Africa, Renewal Capital, Finka International, Attillariwafafafa Venture, Impact Assets and Eldon Capital.

“At Backed, we couldn’t think of anyone better at building a local African bank than Tarek,” said Andre de Haes, founder and managing partner of Backed. states. “He began investing in banks throughout the 2008 financial crisis, becoming a regulatory and strategy expert, and built a world-class banking software stack for affinity from scratch. He connects and understands with customers. The ability to drive an impressive early user count.”