Fintech’s Promise – and the Ongoing Funding Challenge

Fintech is revolutionizing Africa’s financial landscape, offering an alternative to traditional banking systems that have long excluded many, particularly women. By harnessing digital solutions, fintech companies are breaking down barriers that have historically limited access to financial services. Mobile banking, digital wallets, and peer-to-peer lending are now empowering women by providing them with a range of financial services without the need for physical bank branches or cumbersome documentation—issues that have disproportionately affected them.

However, despite these advancements, the fundamental ingredients of entrepreneurship—equity and debt—remain elusive for many women. A 2023 PitchBook report revealed that female-only founded startups received a mere 2% of total U.S. venture capital funding. The situation is likely even more dire in Africa. A 2018 Boston Consulting Group report indicated that women-founded businesses typically generate more than double the revenue per dollar invested compared to those founded by men. The persistent decline in venture capital investment in women-led businesses seems illogical, especially given this evidence of superior performance.

Mind the Gap – Why Women Remain Underserved

In Africa, the narrative is similar. Women have proven to be responsible custodians of capital. At RealFi, our team disbursed over 2 million loans to small businesses across Kenya, Uganda, and Rwanda last year, with 65% of those loans going to women-owned businesses. Our analysis showed that women were 11% less likely to default on their loans and repaid them faster than their male counterparts, a trend consistent across both rural and urban areas.

The promise of fintech has always been about financial and gender inclusion. Yet, despite the evidence that lending to women-owned businesses is a sound investment, only 15% of loans to small and medium-sized enterprises in Africa are directed toward women-owned ventures. Systemic barriers such as digital skills gaps, entrenched gender norms, and a lack of collateral contribute to this disparity. However, it’s also true that financial outcomes tend to follow the flow of capital. With sufficient funding offered at low interest rates, we would expect to see a significant increase in lending to women-owned businesses.

So if fintech has failed, can crypto do better?

Crypto’s Role in Democratising Access to Finance

When it comes to financial autonomy, cryptocurrency offers a compelling value proposition: direct access to a decentralized financial system that transcends borders. The ability to hold keys to assets without needing permission from a government, bank, or male relative is both revolutionary and empowering. For instance, when the Taliban regained control in Afghanistan in 2021, Afghan women turned to Bitcoin to preserve their wealth and maintain economic independence. However, while individual key management can provide autonomy, it also introduces new risks, and local digital banks may offer a more user-friendly experience for the majority.

We believe that the most transformative potential of crypto lies in its ability to create an open capital market that is not constrained by traditional finance norms. Our research indicates that some of the best risk-adjusted returns globally can be found in lending to women-owned small and medium-sized businesses in Africa. Yet, fintech companies providing these loans face the same challenges in accessing funding as their borrowers. The question remains: who finances the financers? Without the ability to collect deposits through retail banking, these fintechs are at the mercy of a global financial market that often overlooks them. Initiatives like Goldfinch aim to address this gap, having provided over $100 million in loans to borrowers in emerging markets by tapping into cryptocurrency markets.

A Pivotal Moment for Female Entrepreneurs

Despite these efforts, the scale of funding needed to bridge the financing gap is immense. Currently, stablecoins represent a burgeoning market, with approximately $250 billion in circulation. This growth is driven by their increasing importance in providing liquidity and stability to investors and their adoption as a means of payment for global trade. Tether, the market leader, is on track to compete with major financial institutions, all while operating with a lean workforce. As the market evolves, users are beginning to demand interest rates on stablecoin holdings, similar to traditional savings accounts. This demand creates a lucrative opportunity for private credit portfolios, which could include lending to women-owned businesses.

This moment presents a generational opportunity for fintechs that have established solid foundations—effective fraud mitigation, robust data management, and competitive pricing. The challenge has always been accessing scalable capital. By 2030, it is projected that there will be $250 billion in yield-bearing stablecoins seeking real-world assets to generate returns. This figure aligns closely with the estimated financing gap in Africa. The portfolios supporting these stablecoins could potentially be composed of various assets, but there is a compelling case for directing this capital toward women-owned entrepreneurs across the continent.

Author: John O’Connor, CEO of RealFi

RealFi is a blockchain-based financial technology platform focused on bridging decentralized finance (DeFi) with real-world financial services. Our mission is to solve financial exclusion by providing accessible, transparent, and efficient financial services to individuals and businesses, particularly in emerging markets. By leveraging blockchain technology, we aim to connect capital providers with real-world borrowers in a secure, low-cost, and globally scalable manner. RealFi is a subsidiary of Input Output (IOG), a leading global blockchain research and engineering firm committed to advancing financial inclusion worldwide.