This report, jointly produced by the Cambridge Centre for Alternative Finance (CCAF) and Energy 4 Impact with the support of UKAid and CME Group Foundation, is the first study of its kind that systematically and comprehensively reports the size and growth of crowdfunding and peer-to-peer lending markets in Africa and the Middle East. This is the fifth in a series of impactful industry reports that the CCAF, based at the University of Cambridge, has published in 2016 together with its regional research partners, including those in the Asia-Pacific region, the Americas, Europe, and the UK.
The new report, covering 46 countries in Africa and 12 countries in the Middle East, gathered survey data from over 70 alternative finance platforms between 2013- 2015. The study details the types of online alternative finance, ranging from reward-based crowdfunding to peer-to-peer business lending, that are prevailing in African and Middle Eastern countries. It captures the industry volumes in key markets, documents the growth of alternative funding for start-ups and SMEs, analyses the latest market trends and explores the changing regulatory landscape in Africa and the Middle East.
Unlike our other regional reports, this study includes additional chapters on the emerging alternative payment systems (e.g. mobile payment and cryptocurrencies), crowdfunding and peer-to-peer lending regulatory landscapes in Africa and the Middle East (drawing on our recent regulatory research with the FSD Africa) and on renewable energy crowdfunding, with insights from the DIFD funded CrowdPower Programme, carried out by Energy 4 Impact.
- A total of $242m in online alternative finance funds was raised across both Africa and the Middle East in 2015, of which Africa registered $83.2m and the Middle East $158.8m.
- In 2015, over 75 per cent of the total online alternative finance raised from Africa and the Middle East region was funding for start-ups and SMEs, with $62.2m raised across Africa, and $132m raised across the Middle East.
- In Africa, 90 per cent of online alternative finance was originated from platforms headquartered outside of the continent, whilst in the Middle East the reverse is true as 92.6 per cent of online funding originated from home-grown platforms headquartered within the region.
- Equity-based crowdfunding accounted for 67 per cent of the total market volume in the Middle East, while microfinance is the leading model in Africa accounting for 42 per cent of the total market volume. Donation-based crowdfunding also features strongly in Africa, accounting for 17 per cent of market share, whilst reward-based crowdfunding accounts for 10 per cent.
- Relatively low levels of peer-to-peer consumer and business lending activities exist in Africa and the Middle East. Specifically, peer-to-peer business lending accounted for only 17 per cent of total market volume in Africa, whilst peer-to-peer consumer lending accounted for only 6 per cent of the total market volume in the Middle East.
- Both the African and Middle Eastern online alternative finance markets are showing signs of decelerating growth. The Middle East experienced an annual growth rate of 152 per cent from 2013-2014, but from 2014-2015 that rate fell to 75 per cent. The African market grew 38 per cent from 2013-14 and 36 per cent between 2014-2015
- Israel is the clear market leader in the Middle East with $124.3m raised in 2015. Kenya and South Africa are the market leaders in Africa with $16.7m and $15m raised respectively from online channels in 2015.
- The East Africa region has the largest market share of the African alternative finance market. In 2015 East Africa accounted for 41 per cent of total African market share, while West Africa accounted for 24 per cent and Southern Africa accounted for 19 per cent.
- The lack of bespoke regulatory regimes and specific alternative finance policy developments is affecting alternative finance industry growth in both Africa and the Middle East. The greatest perceived risk by the industry in Africa and the Middle East region is ‘fraud’.
- There are tremendous yet unrealised potentials in both alternative payment systems and renewable energy financing in Africa and the Middle East.