UK Government Announces Kshs 1.3 Billon of Investment to Catalyst Fund

The UK Government, through its Department for International Development, which is responsible for administering overseas aid, announced 1.3 billion shillings of investment to Catalyst Fund, a fund managed by US-based consulting firm, Bankable Frontier Associates (BFA).

According to Cytonn Investments, this investment is aimed at boosting the FinTech sector in the East Africa region, particularly Kenya, by providing access to growth capital.

Catalyst Fund specializes in early-stage venture building targeting low-income customers in emerging markets, with an aim of spurring innovation that is targeted at financial inclusion for the unbanked population in emerging markets.

Since its launch in 2016, Catalyst Fund has deployed 207.6 million shillings in grant capital and  103.8 million shillings in bespoke advisory services to over 20 global startup enterprises, of which 60% are located in Africa.

Its most recent investment was in June 2019, where they announced that they had on-boarded four finance startups into its incubator program, with three having an Africa focus, these being

• Chipper Cash, a mobile money transfer platform with operations in Kenya, Ghana and Nigeria,
• Salutat,  a Singapore-based startup that helps financial institutions to reach out to more underserved entrepreneurs, especially women, by offering lower-interest loans and financial literacy training, with operations in Thailand, Myanmar, Kenya, and Zimbabwe, and
• Turaco, a Kenyan low-cost insurance provider targeting low-income customers. The fund has garnered the support of firms such as the Bill & Melinda Gates Foundation and JPMorgan Chase & Co.

This investment is an indicator of the positive outlook for the FinTech sector.

Analysts from Cytonn Investments expect the FinTech sector to continue to witness more investments, given the untapped potential in credit and credit-related industries in Africa, highlighted by the significant difference in credit extension activity in Africa compared to other world regions, which results in slow growth of enterprises, especially MSMEs, both through a lack of access to growth capital as well as lack of access to consumption capital, thus limiting the spending power of consumers to the populations served by these enterprises.

FinTech lending addresses this by providing access to credit via convenient and already established channels.

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