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<p data-beyondwords-marker="de7adfb7-f714-4a37-9cca-13a9f2bf6657">The Nigerian fintech space, indeed, the African fintech has continued to be hit with incidents of fraud and startup shutdowns in 2023. This devastating trend has been attributed to various reasons. These include regulatory challenges, market fluctuations, lack of funding, competition, over-bloated valuation, high-handed founders and a plethora of other reasons.</p>
<p data-beyondwords-marker="9c4816ef-9699-4db4-b139-96ed33d39d45">Founder and CEO of <a href="https://www.firstfounders.cc/" target="_blank" rel="noopener noreferrer nofollow">FirstFounders</a>, David Lanre Messan believes at the core of the challenges faced by fintech companies is an obvious absence of corporate governance. In a chat with Technext, the seasoned venture builder and angel investor said as long as fintechs keep getting corporate governance wrong, incidents of fraud and shutdowns will continue.</p>
<blockquote class="wp-block-quote" data-beyondwords-marker="72c20381-8dbc-467a-833c-69dc851604af">
 <p>“The Fintech space is evolving truly and there is a lot of work to be done. Effective governance ensures that robust internal controls, risk management practices, and compliance measures are in place. This can help detect and deter fraudulent activities beyond just KYC (Know Your Customer) checks,” he said.</p>
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<p data-beyondwords-marker="534a6954-6b55-41db-a524-2b6ee8e10593">According to Messan, Corporate governance is crucial in fintech because it affects decision-making, risk management, and compliance. While mismanagement or negligence can lead to financial troubles, improved corporate governance can help in prudent decision-making and adherence to regulatory standards, ultimately enhancing the stability of fintech companies.</p>
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 <figure class="aligncenter size-full is-resized" data-beyondwords-marker="69ab8395-ec2c-4d06-83f4-9d3f392f85b2"><img src="https://technext24.com/wp-content/uploads/2023/11/David-Lanre-Messan.jpg" alt="Corporate governance can save Nigerian fintechs from fraud and collapse-" class="wp-image-220202" width="577" height="861">
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   David Lanre Messan
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<h4 id="corporate-governance-and-fintech-shutdowns" data-beyondwords-marker="7da413c7-144f-4cba-8e67-94d4a6167d3d">Corporate governance and fintech shutdowns</h4>
<p data-beyondwords-marker="b3e53179-5650-4247-8989-2d5cf236b8a5">2023 appears to be the year of numerous fintech ‘exits’ in the negative sense of it. Many financial technology companies have run into trouble that have led to their shutdowns or that have threatened to. A Disrupt Africa report describes it as “Africa’s startup graveyard” that is growing in size.</p>
<p data-beyondwords-marker="6d0809af-5836-4a29-b519-cbccf81eec74">Nigerian financial technology companies that have joined that graveyard include Lazerpay, an African crypto payment company. Touted as the Stripe of Africa, the crypto platform shut down after it failed to close a funding round. The startup had previously raised $1.1 million in a seed funding round.</p>
<p data-beyondwords-marker="6963fab6-4426-4e39-b75e-f312b5925dd5">Another fintech which shut down in 2023 was Eyowo, a digital microfinance bank. Although the company continues to maintain it pivoted to something of an advisory company, the truth is that it no longer offers direct financial services, can no longer collect or hold funds, and is listed on the website of Nigeria’s Deposit Insurance Corporation as “closed”. The corporation is also <a href="https://technext24.com/2023/08/18/ndic-to-investigate-eyowo-and-182-mfbs/" rel="noopener noreferrer nofollow">set to investigate its directors</a>.</p>
<p data-beyondwords-marker="fb213ded-b9a3-4dcf-8112-1fe546218231"><strong>Read also: <a href="https://technext24.com/2023/08/18/ndic-to-investigate-eyowo-and-182-mfbs/" data-type="post" data-id="208890" rel="noopener noreferrer nofollow">NDIC set to investigate Directors of Eyowo and 182 other MFBs</a></strong></p>
<p data-beyondwords-marker="fea33e91-829a-4d95-abb1-48397c5cdb76">Vibra is another Nigerian crypto fintech that shut down in 2023. Although Patricia is yet to shut down, it has however been hit with a hellacious incident of fraud that has all but crippled its operations. This was a result of a <a href="https://technext24.com/2023/05/26/patricia-funds-due-to-a-security-breach/" data-type="post" data-id="194541" rel="noopener noreferrer nofollow">security breach that saw the crypto exchange lose more than N2 billion of investor funds</a>.</p>
<p data-beyondwords-marker="85592da7-c609-40e8-b1b0-cc106240d3d7">The situation isn’t very different across Africa. In Ghana, Dash crumbled and joined the startup graveyard after raising $86 million in funding. Sendy, a Kenyan fintech that raised more than $20 million folded up after hitting a monthly burn rate of $1 million. Similarly, Zumi, an e-commerce company shut down in 2023.</p>
<div class="wp-block-image">
 <figure class="aligncenter size-full" data-beyondwords-marker="42b7c227-5636-44d8-a0cf-bca2c2e360b1"><img width="800" height="400" src="https://technext24.com/wp-content/uploads/2023/10/Untitled-design-2023-10-24T130714.693.png" alt="Patricia customers to protest against converting their assets into equity" class="wp-image-219111">
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   Patricia CEO, Hanu Fejiro
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<p data-beyondwords-marker="e39d5e90-02c5-4fd6-b410-a5343e2d3395">David Lanre Messan believes executing high-level corporate governance could have mitigated a lot of the challenges these startups faced and ultimately helped them survive.&nbsp;Corporate governance is <strong>the combination of rules, processes and laws by which a business is operated, regulated and controlled</strong>. The major principles of corporate governance are; accountability, transparency, responsibility and fairness.</p>
<p data-beyondwords-marker="c315347b-33c5-474e-a599-ad9a16252782">The responsibility of enforcing corporate governance typically falls on the company’s board of directors. But the African fintech space is riddled with big companies whose founders maintain god-like control over their companies.</p>
<p data-beyondwords-marker="0117475d-fafd-4478-87c8-69ba7b864626">This is hardly a good environment for solid corporate governance to take root. And David Messan captures this succinctly.</p>
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  <p>“The inefficiencies experienced are mostly as a result of lack of execution by the founders. Fintechs should know that they operate within a highly regulated space and the intentionality around implementing corporate governance is paramount and this is an indicator that accountability and transparency is a major requirement”</p><cite>David Lanre Messan</cite>
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<p data-beyondwords-marker="0e6ab8bc-8359-44ef-b2f6-85b2a6a26cc3">What this means, according to the early-stage startup investor, is that corporate governance should not be just some legally supported document for the data room but should be a breathing document with a high-level execution.</p>
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 <figure class="aligncenter size-full" data-beyondwords-marker="2c9ad5cf-6694-4e94-a633-0944a62f610e"><img width="800" height="400" src="https://technext24.com/wp-content/uploads/2023/07/Angel-investors-for-startup-founders.png" alt="" class="wp-image-200745">
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   Some investors are culpable
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<p data-beyondwords-marker="8f5640ed-e8d6-405a-b698-d3785db0b062">The challenges faced by fintech companies in 2023 are indeed concerning. It could be attributed to several factors, one of which is the pressure venture capitalists and other investors put on these young startups to succeed in a hurry and start making returns. This was particularly the case of the Ghanaian fintech, Dash which was reportedly suffocated by its overbearing investors until its demise.</p>
<p data-beyondwords-marker="aae40e83-e424-46d2-bd54-8dc81ad022ef">&nbsp;As an investor, Messan understands the reality of this kind of pressure but insists it is unhealthy.</p>
<blockquote class="wp-block-quote" data-beyondwords-marker="31e1ff0f-081d-43f3-a7ea-606c4c3277c0">
 <p>“ Their impatience may push for aggressive growth strategies that lead to overexpansion. Overbearing investors can contribute to the negative trend if they prioritise short-term gains over long-term stability. However, balancing growth with sustainability is essential and that is what corporate governance does,” he said.</p>
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<h4 id="in-conclusion" data-beyondwords-marker="f0a201cc-b9c8-4043-9d3f-6a79bc528197">In conclusion</h4>
<p data-beyondwords-marker="465391a1-3cf5-40ba-a2fe-3e3e2db49917">Given the clenched fist with which fintech founders control their companies, it isn’t tough to see why maintaining effective corporate governance might be difficult. Governance is effectively the prerogative of the board of directors. Granted, many of the larger fintechs have boards, however, the founders still control overwhelming equity which still gives them control.</p>
<p data-beyondwords-marker="67e9b514-0f85-4aa0-853d-430f0e524aca">More so, these boards often comprise their investors, many of whom are after safeguarding their investments, and not necessarily the business. These businesses fall victim to different situations, from regulatory, over-bloated valuation, spending problems etc.</p>
<p data-beyondwords-marker="7a5a9b90-f542-4912-bf6a-b3e2cf3fa28f">Overall, these highlight the need for a robust and adaptable business model in the fintech sector.</p>

“Corporate governance can save fintech companies from collapse”- David Messan, CEO, Firstfounders

Technext.ng

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