Africa’s Informal Economy Is Becoming Bankable

That framing is starting to look outdated.

Across the continent, something quieter and more structural is happening: Africa’s informal economy is becoming bankable. Not because millions of businesses have suddenly formalised on paper, but because digital rails are making their activity visible, traceable and financeable.

The shift is less about paperwork and more about data.

From cash-only to data-rich

Historically, banks avoided informal businesses for a simple reason: there was nothing to measure. No accounts, no transaction history, no collateral, no credit records. Risk models had no inputs.

Today, that invisibility is fading.

Mobile money wallets, QR payments, POS devices, e-commerce platforms and digital tax systems are generating transaction trails for millions of micro and small enterprises. Every payment creates data. Every transfer builds history. Every invoice becomes a signal.

For lenders, this turns guesswork into underwriting.

A market that once looked opaque now looks quantifiable.

Fintech is doing what formalisation couldn’t

Traditional policy approaches tried to push informality into the formal sector through registration drives and compliance mandates. Progress was slow. Costs were high. Trust was limited.

Fintech is taking a different path.

Instead of forcing businesses to become formal first, platforms are embedding financial services directly into daily operations. A trader who accepts mobile payments already has a ledger. A shop that uses digital inventory tools already generates cash-flow data. A ride-hailing driver already has earnings history.

Credit can be built on behaviour rather than bureaucracy.

In effect, technology is formalising activity without demanding formal structures.

The lending opportunity is enormous

The numbers are hard to ignore. Informal and micro-enterprises account for the majority of employment in many African economies and represent a large share of urban commerce. Yet they remain dramatically underserved by banks.

As digital visibility improves, this segment becomes one of the largest untapped lending markets on the continent.

Working-capital loans, invoice financing, inventory credit and embedded insurance suddenly become viable products. Risk pricing improves. Default rates fall. Unit economics strengthen.

For fintechs and banks alike, the informal sector is no longer a social mission. It is a commercial opportunity.

Governments benefit too

The effects extend beyond finance.

When transactions move onto digital rails, tax compliance improves naturally. Revenue collection becomes more predictable. Policy design becomes data-driven rather than estimated.

At the same time, formal financial access strengthens resilience. Businesses with credit lines and savings buffers are less vulnerable to shocks, from currency swings to supply disruptions.

In short, bankability supports stability.

Risks remain — but so does momentum

The transition is not frictionless. Digital literacy gaps persist. Fraud risks grow. Regulatory frameworks struggle to keep pace. And excessive surveillance could erode trust if data governance is weak.

But the direction of travel is clear.

Every new payment terminal, every mobile wallet and every e-KYC system pulls another slice of the informal economy into measurable space. Once activity becomes measurable, capital follows.

Africa’s informal economy has never been small. It was simply unseen.

Now, it is becoming legible to lenders, investors and policymakers. And once legible, it becomes bankable.

The continent’s next wave of financial growth may not come from large corporates or headline startups. It may come from millions of small businesses that finally leave the shadows — not by changing who they are, but by becoming visible to the system.

That visibility could reshape Africa’s credit markets for a generation.

The post Africa’s Informal Economy Is Becoming Bankable appeared first on FurtherAfrica.