Welcome to Sati – Sourcing Africa to Invest

👋🏾 Marge and Ona here!

We’re both Ugandan 🇺🇬

Through Velocity Digital and Benue Capital, we invest in visionary founders building Africa’s next digital chapter.

Sati is our shared notebook—mapping the past, decoding the present, and imagining what’s next.

Learn with us and let curiosity lead you to action.

Authors note:

Over the last decade, fintech has been the golden child of investment opportunities in Africa.

Of the continent’s nine unicorns, eight are fintechs and the sector continues to attract the lion’s share of venture capital funding.

This momentum is often credited to familiar trends like rising smartphone ownership, expanding internet access, a young, urbanizing population and more fundamentally, persistently low levels of financial inclusion.

At it’s core, fintech promises more accessible, efficient, and affordable financial services. According to McKinsey, transaction costs can be up to 80% lower, remittance fees 6x cheaper, and savings returns up to 3x higher than traditional providers.

So, at the surface, it may seem obvious.

But like an iceberg, what we see is just the tip.

To comprehend how fintech became such a transformative force, we must dive deeper.

Sequentially, we will uncover:

• Part 1: how the core components of a fintech stack existed in Africa before digitization, through:

  • Trade and Finance Pre-colonization

  • The Influence of Colonization on Africa’s Banking Systems

  • Post-colonial Banking

• Part 2: the evolution of fintech, what’s been built, why, and where whitespace remains today.

First, let’s clarify what a fintech ecosystem actually needs to function.

The Fintech Stack

Adapted from Samora’s Frontier Fintech Newsletter

1. Identity: Identity verification is the entry point to financial services, from opening an account to accessing credit. Robust ID systems support compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) rules, which reduce fraud and build system-wide trust.

2. Digital Payments: Once identity is established, payments can flow from one account or wallet to another. Efficient payment systems allow real-time transfers at high volume and availability.

3. Cash in, Cash Out Infrastructure: With over 90% of payments in Africa still made in cash (McKinsey, 2022), fintech relies on physical-digital bridges, like bank branches, ATMs, and especially agent networks that act as “human ATMs”.

4. Banking as a Service (BaaS): BaaS lets non-banks offer financial services by plugging into licensed banks via APIs, which enable secure communication and data exchange across systems.

5. Credit Scoring Infrastructure: Weak credit infrastructure remains a major roadblock, contributing to a $330B SME lending and $110B trade financing gap across the continent.

6. Open Data/Banking: Open banking gives consumers control of their financial data. Consumers can authorize third parties to access their account information or initiate payments through APIs like you might with PayPal or a budgeting app.

As we move through history, we’ll highlight how each layer evolved, focusing on two recurring themes: who had access to financial services, and the infrastructure that enabled or denied it.

Now let’s dig in.

Trade and Finance Pre-Colonization

Early economies relied on barter trade, exchanging goods (like salt, animal skins, tools) or services. But this was slow and hard to scale, as both sides had to want what the other offered.

Around 3000 BC in Mesopotamia, the rise of farming and written records introduced grain as a medium of exchange. Granaries managed by states, temples, or merchants allowed people to deposit surplus grain and withdraw it later. These functioned as proto-banks: accepting deposits, issuing grain loans, transferring value across cities, and keeping records.

By 700 BC, metal coins emerged in Lydia (modern-day Turkey) and China, boosting trade efficiency. But widespread currency use wouldn’t reach most regions, including Africa, until the 1600s-1800s.

Egypt’s Early Banking System

Between 400 and 100 BC, under Greek rule, Egypt’s grain banks evolved into one of the world’s first centralized banking systems, eventually expanding to manage currency as well.

Run by wealthy citizens and coordinated through a central office in Alexandria, these banks:

• Verified identity and witnessed official documents (similar to notarization today)

• Received payments, collected taxes, and disbursed funds on behalf of the state, transferring money to the head office via bills of exchange

• Managed individual accounts

• Handled currency exchange, deposits, and transfers (cash in/out)

• Issued short- and medium-term loans, often for land purchases or political gain

The Unintended Consequences of Growth

By the 700s, trans-Saharan trade routes were thriving, connecting North Africa and the Mediterranean with West African empires like Ghana and Mali. Camel caravans carried gold, salt, textiles, and enslaved people across desert paths aligned with wells and oases.

As Egypt sat at the intersection of the Mediterranean (Europe), the Red Sea and Indian Ocean (Arabia, India, East Africa), and trans-Saharan routes (West Africa), its financial systems advanced rapidly.

Trade at this scale required sophisticated financial instruments and services.

Enter the Karimi merchants: wealthy Egyptian financiers operating across continents. They often partnered with the Jahbadh, typically Jewish or Christian professionals, who specialized in financial services for both state and private merchants. Together, they provided:

• Currency exchange

• Deposits and withdrawals

• Transfers via cheques and bills

• Discounting money orders (a precursor to invoice financing)

• Investment management

By the 1100s, moneylenders and exchange brokers had become central to this expanding economy. Loans were backed by kinship guarantees or pledged property. And despite religious restrictions on charging interest, rates soared to reflect the risks of long-distance trade.

Global trade soon took a much darker turn

Slavery in Africa had long existed in various forms including domestic servitude, debt bondage (pawnship), and wartime captivity, often with paths to assimilation or eventual freedom.

But growing demand from Islamic empires for eunuchs, soldiers, and plantation labor intensified exploitation.

Then from the 1400s, Portuguese and other European powers escalated it to a whole new level.

They established trading posts along Africa’s coasts, opening new Atlantic and Indian Ocean routes which reduced reliance on Mediterranean trade.

As maritime trade grew, human beings became the primary export. Africans were commoditized as permanent property and forcibly shipped overseas.

• From West and Central Africa, millions were transported across the Atlantic to plantations in the Caribbean, Brazil, and the Americas.

• From East Africa, people were trafficked across the Indian Ocean to labor in the Middle East, South Asia, and Southeast Asia.

African kingdoms that controlled inland routes played a key role as intermediaries, capturing and selling people in exchange for firearms, textiles, and alcohol. Cowry shells, imported in bulk from Asia, also became widely used as currency due to their portability and consistent value.

But the adoption of new currencies was minor in comparison to the broader financial transformation underway.

The Influence of Colonization on Africa’s Banking Systems

The Dutch Claim the Cape

In 1652, the Dutch East India Company (VOC) set up a resupply station at the Cape of Good Hope (now South Africa) to service ships sailing between Europe and Asia.

The VOC was no ordinary trading company.

It was backed by public shareholders, held monopoly rights over Dutch trade with Asia, and wielded state-like powers: minting currency, waging war, negotiating treaties, and establishing colonies.

Within three decades, they had turned the Cape into a permanent settlement.

Former VOC employees, known as vrijburgers (“free citizens”), were granted farmland, loans, and tax exemptions in exchange for selling crops back to the Company at fixed prices. VOC traders brought in thousands of slaves from Madagascar, Mozambique, and Asia to work the land, along with hundreds of French Huguenots who had fled to the Netherlands from religious persecution.

However, strict controls on trade, prices, and movement drove settlers inland, where genocidal conflicts with native farmers ensued. In response, the VOC tightened control, reinforced segregation and redrew colonial boundaries.

The Rise of Imperial Banks

In 1793, the Cape government founded Africa’s first European bank: the Lombard Bank. It operated as a mortgage bank, issuing loans backed by property and precious metals. To improve liquidity, it introduced paper currency (rix dollars), shifting the colony away from commodity-based exchange.

Two years later, Britain seized control of the Cape, as the VOC collapsed under pressure at home and abroad.

In 1807, the British replaced Lombard with the Discount Bank, which accepted deposits and discounted bills of sale to boost trade and economic activity.

Britain formalized its hold in 1814 through the Anglo-Dutch Treaty and began gradually liberalizing the colony. Some basic rights were extended to the Black African population, and slavery was abolished in 1833. In 1837, private banks were permitted, starting with the Cape of Good Hope Bank, followed by a wave of others, including merchant-run banks.

But many of these banks were undercapitalized, vulnerable to cyclical downturns, and especially exposed because they issued banknotes (prone to counterfeiting) and extended overdrafts to farmers. When the wool market collapsed in the 1860s, all but the Stellenbosch District Bank failed.

Into this vacuum stepped British banks.

The London and South African Bank (LSAB) opened in 1860, followed by the Standard Bank of South Africa in 1862. However, LSAB struggled under remote management from London and eventually merged with Standard Bank in 1877.

By the turn of the century, imperial banks dominated southern Africa’s financial sector.

The Scramble for Africa and the Financial Legacy we Inherited

Following the Industrial Revolution, European powers ramped up their pursuit of territorial control to secure raw materials and new markets.

At the 1885 Berlin Conference, they carved up the African continent.

By the start of World War I, nearly all of Africa was under colonial rule.

With colonization came financial systems built to serve imperial interests.

Heads-up: The table above looks at sub-Saharan Africa (our focus from here on) and omits British colonies, which followed a unique banking trajectory, especially Nigeria.

Banking in British Colonies

A handful of powerful banks extended their reach across Southern, Eastern, and Western Africa.

• Standard Bank, founded in 1862 in the Cape Colony, entered Kenya in 1911 to finance settler agriculture and trade along new rail lines.

• Bank of British West Africa (BBWA), formally First Bank, launched in 1894 by British shipping firms, handled government accounts, customs revenues, and trade finance along the West African coast.

• Barclays Bank (Dominion, Colonial and Overseas), formed in 1925 through the merger of the Colonial Bank, the Anglo-Egyptian Bank, and the National Bank of South Africa, consolidated Barclays’ African operations and deepened British financial dominance.

Bank branches clustered in colonial capitals, ports, and settler towns. For example:

• In Kenya: Nairobi, Mombasa, and towns along the railway

• In Ghana: Accra, Sekondi, Kumasi (key cocoa trade and admin centers)

• In Nigeria: Lagos, Calabar, and major coastal trade routes

Across British colonies, a few patterns held:

• English Common Law

• Chartered banks tied to London’s capital markets

• Banking policies that prioritized merchants, expatriates, and government agencies

African participation was minimal.

Racist assumptions about African financial behavior were baked into policy. Credit access required land titles, which Africans were rarely granted. In places like Kenya, the law capped how much Africans could borrow, locking them out of credit even when they had the means. So, most were left with small deposit accounts and basic remittance services.

Nigeria broke the mold

Unlike settler colonies where banking was tightly controlled to protect white interests, Nigeria (an extractive colony) had more legal flexibility and economic diversity.

As export markets grew, the urban merchant class in Lagos, Ibadan, and Kano needed financial services foreign banks didn’t provide. With fewer racial barriers to licensing and shareholding, local elites mobilized capital and stepped in.

Between 1929 and 1960, over 27 indigenous banks were founded. They issued loans, held deposits, and in some cases, collected taxes.

But most were undercapitalized and poorly governed, leading to frequent collapses.

In 1952, the British colonial administration introduced the Banking Ordinance to stabilize the sector, setting capital requirements, licensing rules, and reporting standards. Many African-owned banks couldn’t comply and were forced to shut down or merge.

As a result, banking remained tied to colonial priorities and inaccessible to most Nigerians.

Although many indigenous banks eventually failed, the very fact that they were founded at all speaks to a distinct enabling environment.

Post-Colonial Banking

Between the 1950s and 1990s, newly independent African nations faced the monumental task of reforming financial systems inherited from colonial rule. This journey unfolded in two major phases.

Phase 1: Reclaiming Economic Sovereignty and Redirecting Capital Toward National Priorities (1950s–1980s)

Africanization and Nationalization

The first step was shifting control of banking from foreign hands to local governments and citizens. Some countries nationalized existing banks; others pushed foreign firms to sell stakes or launched new state-owned banks.

• Ethiopia (never colonized) set the tone. In 1943, Emperor Haile Selassie nationalized Barclays Bank to form the State Bank of Ethiopia.

• Nigeria established its Central Bank in 1958. In line with the Companies Decree of 1968, Standard Bank of West Africa (a merger between BBWA and Standard Bank) was incorporated locally as Standard Bank of Nigeria Limited, later renamed First Bank of Nigeria Limited in 1979. The 1970s Indigenization Decrees forced other foreign banks to cede majority ownership (e.g. Barclays became Union Bank).

• Ghana, Tanzania, and Uganda brought banking under state control. Ghana nationalized its main bank after 1957 and created new state banks to fund industrialization. Tanzania merged all banks into the National Bank of Commerce in 1967 to centrally direct credit in line with the Arusha Declaration. Uganda consolidated its banks under the Uganda Commercial Bank in the late 1960s.

• Kenya took a gradual approach. After independence, the government pushed foreign banks to localize leadership, then acquired National and Grindlays Bank, eventually nationalizing and rebranding it as Kenya Commercial Bank (KCB) in 1970.

• Senegal nationalized its main bank in 1962, forming Banque Nationale de Développement du Sénégal, though it stayed tied to the CFA franc zone.

• South Africa was the exception. Under apartheid, white-owned banks like Standard Bank and Barclays (later ABSA) continued to dominate. A modern financial system served the white minority, while the Black majority was shut out.

Banking as a Tool of Nation-Building

Ownership wasn’t the only battleground.

States saw banks as vehicles to drive economic transformation.

So they created development banks to finance agriculture, industry, and infrastructure. They imposed credit quotas, capped interest rates, and used currency controls and monopoly protections to preserve and steer capital.

In addition, global institutions like the African Development Bank, World Bank, and Arab Development Funds supported through concessional loans.

This fueled growth but also deepened dependency on external capital.

This Period Brought Real Gains

For the first time, farmers, cooperatives, and small industries long excluded from formal finance could access credit.

But it was far from perfect.

Political interference often skewed lending decisions. Subsidized credit masked poor performance. Many state banks became overstaffed, inefficient, and uncompetitive.

By the 1980s, defaults and losses piled up, and bailouts became routine.

These cracks set the stage for the next phase.

Phase 2: Liberalizing and Restructuring (1980s–2000)

By the 1980s, many African economies were in crisis. Bloated public sectors, unsustainable debt, and failing state-owned enterprises led governments to adopt Structural Adjustment Programs (SAPs) under pressure from the IMF and World Bank.

SAPs pushed sweeping reforms: privatizing state-owned banks, deregulating interest rates, and liberalizing capital flows. Central banks were restructured for greater autonomy. Private and foreign banks entered the scene. And slowly, the foundation for digital transformation was laid.

These reforms brought some stability and competition. A wider range of financial institutions emerged including merchant banks, microfinance institutions, SACCOs, and foreign subsidiaries.

But access remained narrow. Banks still catered to salaried employees, large corporations, and urban elites. Most Africans, especially in rural and informal sectors, were left out.

Before fintech could rewrite the rules, it inherited a mess: decades of patchwork infrastructure with shallow functionality and reach.

What Infrastructure Had Actually Been Built by 2000?

Colonial Banking Infrastructure (Pre-1950s)

Colonial banks established a thin but deliberate footprint with branches in ports, capitals, and extraction zones. They served imperial trade, not the local population.

Banking was entirely branch-based and staffed almost exclusively by Europeans. Clients had to be physically present and literate in the language of the colonizer.

State Expansion (1950s–1970s)

After independence, African governments moved quickly to expand banking access. National banks opened hundreds of branches in secondary cities and rural towns, often tasked with collecting taxes, disbursing salaries, and extending state-backed loans.

Most banks still ran on handwritten ledgers and carbon-copy forms. A few urban branches introduced typewriters to reduce clerical errors. There were no central databases or inter-branch communication systems. Cheque clearing could take weeks.

The limitations ran deeper than tools. Maintaining rural branches required steady power, trained staff, and logistical support—resources in short supply. Many became glorified pay points. Access had expanded physically, but structurally the system was inconsistent, and ill-equipped to scale.

Reforms Meet Weak Systems (1970s - 1990s)

By the late 1970s, banking systems were bloated and underperforming. Under Structural Adjustment Programs, governments were pushed to privatize, liberalize, and deregulate.

Where modernization occurred, it was limited to head offices or flagship branches—typically through standalone mainframes or local digital ledgers. But these systems weren’t networked, and communication between branches still depended on paper, couriers, and unreliable landlines.

South Africa stood apart. Thanks to stronger telecoms and more concentrated capital, banks like Standard Bank and Nedbank began early automation and digital upgrades.

ATMs introduced by banks in the 1980s were connected to mainframe processors, could dispense cash and provide bank balance detail. Soon, they were capable of accepting deposits by cheque or in cash. Interoperability existed in pockets.

South Africa had hundreds of ATMs by the early ’90s. Kenya saw its first installed in 1996. Nigeria had just 68 nationwide by 2002.

Alongside ATMs, POS terminals, debit and credit cards emerged.

However, cash remained king.

Automation Begins, Slowly (1990s - 2000)

The 1990s marked the beginning of digital transformation with companies like Oracle (Flexcube) supplying African banks with core banking software.

Clearing and settlement infrastructure also began to evolve. Nigeria developed its first automated clearing house (NACS) in 2000, which went live in Lagos in 2002, reducing dependence on manual cheque processing.

In rural areas, branches remained manual. Weak telecom networks, unstable electricity, and limited IT capacity kept most of the system stagnant.

By the end of the decade, a digital divide had formed: only a few urban banks were connected and experimenting with innovation.

Automation had begun, but it was still islands of progress in a sea of paper.

Where This Leaves Us

If you’ve made it this far, we’re glad you leaned in.

We’ve traced a long arc, from barter trade to grain banks to banking as we know it today. In a nutshell:

• Trade and financial services were never separate stories. The value that moved in, out, and across Africa needed evolving systems to be exchanged, tracked, and stored.

• Financial services didn’t merely exist early on—they thrived. Egypt was a global center of excellence, and all over the continent, systems were built on trust and kinship.

• With colonization, “formal” finance was re-engineered to serve imperial interests: extraction, settler prosperity, and administrative control.

• Despite being denied access, local builders never took no for an answer. Informal lenders, savings groups, and co-ops filled the gaps. This was most pronounced in Nigeria, where looser colonial rules on ownership left room for an indigenous banking boom in the 1920s.

• After independence, African governments sought to bring the financial system back in line with national priorities. While reforms brought new banks and broader reach, the underlying infrastructure remained underdeveloped, and banking stayed inaccessible to most.

Coming Full Circle: The Fintech Stack by 2000

The components of a modern fintech stack existed but they were analog, disconnected, and out of reach for most.

This was the foundation fintech inherited.

Fintech didn’t arrive as a modern layer disrupting a functioning stack. It was a response to the absence of access, of interoperability, of inclusion.

And that’s what made it powerful.

When we regroup

We’ll pick up from here to explore the rise of fintech from ground zero in Nigeria to where the biggest opportunities still lie today.

If there’s anything else you’d like us to explore, send us a note. We’d love to hear from you! You can find us on:

• Twitter: Marge, Ona

• LinkedIn: Marge, Ona

• Email (Reply to this email)

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