The Development of FinTech in Nairobi: Contributions to Financial Inclusion and Barriers to Growth

Abstract: This in-depth study explores: why Nairobi has developed into a renowned FinTech hub; what the barriers are to further growth for FinTech companies; and how FinTech is perceived to be contributing to the broadening of Financial Inclusion. Our findings our that Nairobi has emerged as a Financial Technology (FinTech) hub due to the pioneering success of M-Pesa, the inadequacy of incumbent financial institutions and Kenya’s conducive business and regulatory environment. However, FinTech companies in Nairobi face a number of challenges inhibiting their growth, such as: shortages of managerial and software-development talent, poor access to data and information, and insufficient levels of credit and investment. In regard to financial inclusion, FinTech is undoubtedly allowing many formerly excluded Kenyans to access financial products and services. However, these Kenyans tend to be on the middle of the economic pyramid, and also owners of smartphones, whereas those at the bottom of the pyramid remain financially excluded. There is also evidence that some FinTech can actually do harm, notably due to a lack of regulation, which therefore permits companies to offer easy-access, high-interest credit to financially illiterate consumers.