Africa is abuzz with fintech innovations and what makes the sector particularly exciting is how ot can help catapult other businesses as well.

Take Retail Capital for example. The firm provides retailers access to working capital based on monthly turnover rather than a traditional credit/risk profile.

What this means is that retailers can get credit as and when they need it. This removes the need for a small retailer to plead their case to a bank where loans and funding are not especially easy to qualify for.

“The challenge with traditional banks is that they are asset-based lenders,” explains chief executive officer at Retail Capital, Karl Westvig.

“They typically won’t do small loan sizes because it is costly to operate that way. Banks also won’t lend without security,” says Westvig.

With help from fintech, Retail Capital is able to plug this gap in the market by giving smaller retailers access to funding while still managing risk effectively.

“We work with the like of SureSwipe, Yoco and iKhokha. They provide us on a monthly basis all the transaction files for their customers. We then prequalify their customers based on their transaction history and make a funding line available through their portal,” Westvig explains.

The beauty of this solution is that it has a knock-on effect. With Retail Capital’s solution retailers can apply for working capital and offer greater value to customers due to being able to purchase new or indeed more products.

This use of fintech to overcome traditional barriers is something that is happening all throughout Africa, but help is needed.

“What the banks should be doing is funding fintech companies to roll out these kinds of models,” says Westvig, and banks are cottoning to this.

The CEO tells us that collaboration between banks and fintechs is getting better because the banks have realised there was a gap in the market that wasn’t being filled.

“The banks have realised they need to collaborate more. In the past it was all about competition. Now banks say ‘We’ll fund you for a while until we understand your model and then we’ll acquire you’,” explains Westvig

While banks might not have the skills, fintechs do and collaboration between the two sectors is vital for the progression of fintech.

“Fintech in Africa is alive and well. With the right backing, it has the opportunity to completely transform Africa,” Westvig concludes.

[Image – CC BY 2.0 GotCredit]