How African FinTech entrepreneurs are securing their continent’s future

When Nigeria was struck by the worst floods for a decade in the summer of 2022, hundreds of thousands of acres of crops were destroyed, 25 million people were left at risk of food insecurity and 1.3 million people were displaced from their homes.

Aisha Raheem, founder and director at Farmz2U based in Nigeria, witnessed first-hand the impact on people. She recalls how one famer was left with no harvest and faced a year of uncertainty without a source of income. However, he had been able to procure insurance with the help of Farmz2U and was thankful for their support.

Many of the countries at the greatest risk from climate change, and with the fewest financial resources to deal with it, are in Africa. African countries make up eight of the 10 countries that will be most affected by climate change. The continent also has some of the highest toxic pollution risks and deaths resulting from toxic pollution, yet it is not the beneficiary of many of the industries that contribute to that pollution.

Africa’s climate challenges are complicated and linked to wider global issues. Industries like rare earth element mining create pollution, but the benefits of those industries are not seen locally. Plastic waste pollutes neighbourhoods, but there is limited infrastructure to collect and recycle it. Rising temperatures damage crops and result in food insecurity, but it’s wealthier nations that are contributing most to the causes of those rises.

What does it mean to be climate resilient in Africa?

The people well-placed to solve the climate challenges facing many African countries are the entrepreneurs developing their own solutions locally, which is why Catalyst Fund, a pre-seed venture capital (VC) fund and accelerator for early-stage tech founders in emerging markets, is investing in African startups that enable communities to thrive in a rapidly changing world.

Investments in businesses that build resilience against climate impacts are not only beneficial from an environmental and social perspective, they are sound commercial opportunities for investors too, says Maelis Carraro, managing partner at Catalyst Fund. Finding and supporting those entrepreneurs will help to secure the future of the continent. But African entrepreneurs who are committed to building a better future for their nations can be met with challenges when seeking investment.

Carraro is using the enormous power of the VC fund to boost communities in the most vulnerable areas by supporting innovators who are using their platform for good. “Our mission is to back start-ups creating a more resilient future,” she says. “And in particular, solutions that leverage technology to build the resilience of climate-vulnerable communities, for example in sectors such as agriculture, insurance and waste management.” The fund has backed 71 start-ups in 15 markets to date, primarily in Africa.

It's one of the things that makes this worth it, because you're changing lives

- Aisha Raheem

"Currently, most of our investments are in the agriculture tech space, which is a reflection of the fact that agriculture is still the major economic driver for African countries,” says Carraro. One example is Farmz2U, an organisation which encourages farmers to take up regenerative farming practices - a term used to describe a wide variety of agricultural techniques that aim to minimise environmental damage by avoiding intensive farming methods.

Aisha Raheem began her journey as an entrepreneur after having a health scare she believed was related to the food she was eating. Her experience encouraged her to address the poor nutritional value of food for some people in Nigeria, which is exacerbated by unsustainable farming methods. This personal story drew Catalyst Fund to Raheem. “When you know that a founder has had [a personal] story, a personal commitment, you know the drive is there,” says Carraro.

But farmers in Africa often face problems accessing funds to pay for changes to their farms. “If I want to access finance to grow my farm, it's very difficult to do that because I'll be asked questions like ‘what is my annual salary?’ or ‘what is my monthly cash flow’,” says Raheem. “But smallholder farmers tend to have more cyclical income flows. So the systems don't take into account the informal nature of their operations.”

Farmz2U also helps farmers navigate financing and insurance, so that if another disaster strikes they are better prepared. “It's one of the things that makes this worth it – because you're changing lives,” says Raheem.

Many people throughout Africa are under-insured, if not uninsured

- Souleymane Gning

Providing insurance is essential for preparing farmers for a climate-insecure future. “The fact of the matter is, [many people throughout Africa are] under-insured, if not uninsured, which is exposing them to further devastation – there's little social protection,” agrees Souleymane Gning, CEO at Assuraf, a digital insurance company based in Senegal and another of the Catalyst Fund members.

“Insurance is one piece of the equation that can unlock financial security, which might enable somebody to therefore take more risks in their own business,” adds Carraro. If farmers, for example, can insure against loss of income from a climate disaster, they can have more confidence investing any profits they make in next year's harvest, possibly adding employees and scaling up their operations. Insurance is an enabler to economic growth, says Gning.

Another potential cause of loss that can be insured against is illness, adds Gning. “Health is a core thing in our vision, and we really want to drive more health protection on the continent, to everyone.” Insurance against illness can allow consumers to seek the help they need.

”Health risks are also bound to increase because of rising temperatures, disasters and pollution,” says Carraro. According to the WHO, approximately 250,000 deaths a year linked to these climate challenges in Africa are anticipated from the year 2050.

A huge amount of waste in Africa is mishandled, being dumped or burned, which causes significant challenges, including crop and farm soil damage and health issues. Bekia, the waste collection solution from Egypt, is tackling this problem. “The majority of the population in Egypt face a common problem – we have a lot of waste,” says Alaa Afifi, founder and CEO at Bekia, adding that there are localised waste solutions in Egypt, but none at a larger scale.

We're changing people's mindset, but it's not easy

- Alaa Afifi

Bekia encourages users to hand in segregated waste for recycling or processing in return for a micropayment paid directly into their mobile banking app or digital wallet. “We’re changing people's mindsets to segregate the waste, but it’s not easy,” says Afifi. “People consider waste as a part of their life.”

Currently the app has 75,000 users, but “the growth potential is massive”, Carraro says. Egypt has a population of over 100 million people, and Afifi has plans to scale Bekia in other countries across Africa. “I'm super lucky to be a part of Catalyst Fund,” he adds.

The common thread across all of this is that FinTech has a big role to play for affordability and accessibility, adds Carraro. “We've primarily focused on FinTech for financial inclusion, but we saw how financial services were actually becoming embedded in many essential real economy sectors like energy and agriculture. [We thought] what can FinTech do here to make solutions radically affordable and accessible for climate-vulnerable populations?”

The Catalyst Fund portfolio also contains “moonshot” investments, like Octavia Carbon, a direct air carbon capture company that is the first of its kind in Kenya. Then there is Sand to Green in Morocco, which is leveraging desalination of seawater and brackish water, as well as agroforestry, to turn desert land into arable land. These are climate technology companies that rely less on fintech as an enabler “but they can have a huge impact on building stronger economies, energy systems and livelihoods,” says Carraro.

The support that Catalyst Fund provides is about more than just capital. Carraro emphasises the importance of having access to their in-house team of specialists covering product, marketing, sales, growth, fundraising, tech and data engineering. All of whom have lived and oriented their professional lives around Africa and emerging markets, more broadly. She says their portfolio companies historically have an 86% survival rate, which is “really, really high for accelerators that invest as early as us. We hear over and over again from the founders after they've gone through our acceleration phase how the capital [gives] them more fuel, but what they really found invaluable was the support and access to networks.”

In 2023, Catalyst Fund invested in 10 companies, but Carraro is hoping to invest in 40 companies over the next four years. The target is to scale the fund to $40m (£32.5m). “We're still fundraising but look to close by early next year,” she concludes.

Raheem adds that the farmers whose livelihoods Farmz2U protects are in a better position to prepare for the next year and might be more confident to make investments with this assurance. She is optimistic that the future looks brighter thanks to African innovators like her and the other Catalyst Fund members. “I implore everyone to take a role to try and leave the world a bit better than they found it,” she says. “We all have a responsibility to make sure that that doomsday future isn't actually what we find ourselves in. We're excited about what the future holds and can't wait to continue growing and making the communities we operate in better.”

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