Wealthtech and Investing in the Middle East and Africa 2024

Traditionally, wealth managers have provided professional financial services primarily to affluent clients, offering investment advice and financial planning. However, the emergence of fintech has disrupted this industry, leveraging robo-advisory and advanced artificial intelligence (AI) and machine learning to make wealth management more accessible.

Fintech has democratised wealth management, making it available to a broader audience, including those with more modest incomes.

Wealthtech and Investing Landscape in the Middle East and Africa – Sources: Richie Santosdiaz and The Fintech Times

The relatively low barriers to entry have made wealthtech an attractive investment for fintech startups, enabling them to offer wealth-management services at lower costs. Despite global economic challenges impacting the fintech sector, including wealthtech, investment in the wealthtech sector dropped to less than $200million in 2023. However, the total deal value and the number of wealthtech deals remained consistent with 2020 levels.

Significant opportunity

MEA presents a significant opportunity for wealthtech, catering to both the ultra-wealthy and individuals with more modest incomes. The Middle East, particularly the Gulf Cooperation Council (GCC) region, is home to some of the world’s wealthiest individuals. Additionally, Africa, often associated with poverty, also harbours some of the world’s wealthiest individuals. See the chart below for the top ten richest individuals for reference.

Recent times have been challenging for many, including the ultra-wealthy, who collectively saw a decline of $10trillion, or 10 per cent, in their net worth in 2022 due to global economic uncertainties such as the energy crisis and the Ukraine War. However, despite these challenges, opportunities still exist, particularly in regions like MEA, which many affluent individuals call home.

Setting aside the wealthy, much of MEA comprises average middle-class individuals. Over the past 30 years, the African continent’s population has seen a significant rise in the middle-class category, accounting for at least a third of the population.

Financial literacy

However, a significant challenge persists – financial literacy, particularly regarding concepts like savings. Many countries in Africa exhibit low levels of financial literacy, with only 38 per cent and 42 per cent of the populations in Kenya and South Africa, respectively, considered financially literate. Similar figures are observed in countries like Uganda (34 per cent) and Tanzania (40 per cent). Addressing this challenge is crucial for promoting financial inclusion and stability across the region.

Various scenarios illustrate this, but consider the story of a mother from a rural village in the MEA region. To support her family, she works as a nanny in the affluent Arabian Gulf for 20 years, sending money home regularly. However, upon returning to her village, she finds herself with little to no savings, having failed to plan for her retirement or future.

Across the MEA region, cultural norms, often influenced by instability, lead many to prefer tangible assets like gold, cash, or property, or to send money abroad. Instances of financial instability, such as those witnessed in Lebanon, further erode trust in traditional financial institutions, leading to the rise of alternative options like cryptocurrencies.

Wealthtech impact

Enter wealthtech, which caters not only to the wealthy but also to the middle class and even working-class and poor communities. This subsector has the potential to significantly impact lives across the MEA region, as evidenced by its growth depicted in the ecosystem landscape image.

Examples include EasyEquities in South Africa, boasting over 1.4 million registered users, Piggyvest in Nigeria, offering online savings platforms to previously underserved populations, and Amwalcom in Jordan, assisting consumers in comparing savings accounts.

In 2021, wealthtech ranked as the third-largest sector in Africa in terms of deals, despite a slight decline from the previous year. Similarly, the Middle East witnessed successes in the subsector, such as Hakbah from Saudi Arabia securing over $5million in Series A funding in December 2023. Despite prevailing uncertainties, opportunities abound in wealthtech, especially as the sector continues its digitalisation efforts.

This is an excerpt from The Fintech Times: Middle East and Africa (MEA) 2024 Report.

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