Credit, in its simplest form, is the trust that allows one party to provide resources to another party wherein the second party does not reimburse the first party immediately, but promises either to repay or return those resources at a later date. It is a fundamental pillar of modern economies, enabling individuals and businesses to make purchases or investments that they would not be able to afford upfront.

Credit is crucial for several reasons. Firstly, it facilitates business growth and expansion. Businesses often need to make significant investments in equipment, inventory, or property before they can generate profits. Credit allows them to make these investments and repay the cost over time. Secondly, credit enables individuals to make significant purchases, such as homes or cars, that they would not be able to afford otherwise. Thirdly, credit can act as a safety net, providing individuals and businesses with financial resources in times of need.

However, access to credit is not evenly distributed across the globe. In Africa, the credit landscape is particularly challenging. According to the World Bank, only 34% of adults in Sub-Saharan Africa have a bank account, and only 7% have access to formal credit. This is in stark contrast to developed countries in the West, where over 90% of adults have a bank account, and the majority have access to credit.

The lack of credit in Africa can be attributed to several factors. High levels of poverty and low levels of formal employment make it difficult for many Africans to meet the income and employment requirements of traditional lenders. Additionally, many Africans lack the necessary identification documents or credit history to access formal credit.

Despite these challenges, there is a significant credit opportunity in Africa. The continent's large and growing population, coupled with its increasing economic activity, presents a vast untapped market for credit providers.

Several startups are working to bridge the credit gap in Africa. One such startup is M-Kopa, founded in 2010, which provides 'pay-as-you-go' solar energy systems to off-grid households in East Africa. Customers make a small upfront payment for the solar system and then make regular payments via mobile money until they own the system outright. This model not only provides affordable and clean energy to households but also helps to build a credit history for customers, potentially opening up access to other forms of credit.

Another startup, Tala, founded in 2011, uses mobile technology to provide microloans to individuals in East Africa. Tala's app analyses a range of data on a user's smartphone, including call and SMS logs, to assess their creditworthiness. This innovative approach allows Tala to provide credit to individuals who would otherwise be excluded from the formal credit system.

Branch, founded in 2015, is another startup providing microloans in Africa. Branch uses machine learning algorithms to analyse a user's smartphone data and determine their creditworthiness. The app also allows users to build a credit history, which can help them access larger loans in the future.

These startups are just a few examples of the innovative approaches being used to bridge the credit gap in Africa. While significant challenges remain, the potential rewards for both credit providers and African consumers are enormous. As technology continues to evolve and more startups enter the market, the future of credit in Africa looks promising.