East Africa is rapidly becoming the epicenter of Africa's financial growth, with Kenya and Tanzania providing the strongest returns for investors on the continent and challenging the long-standing dominance of traditional financial markets.
The new Future of Finance 2026 report from Boston Consulting Group (BCG) found that Tanzania recorded the highest total shareholder return (TSR) in Africa in the three years to December 2025, at an impressive 59 per cent. Kenya comes second with 36 percent, well ahead of the global average of 23 percent and South Africa at 24 percent.
Data show that East Africa is rapidly driving financial sector growth, driven by the expansion of digital services, strong investor confidence and widespread access to banking.
For Kenya, the report points to years of investment in digital finance as a key driver of its success. Mobile money services, led by M-Pesa, have reshaped the country's financial system by bringing millions of people into formal banking.
According to BCG, financial exclusion in Kenya has fallen from almost half the population two decades ago to one in ten today. That broader reach has allowed banks, payments firms and financial technology companies to reach more customers while improving their earnings.
“Tanzania and Kenya’s strong performance reflects more than just cyclical headwinds,” said Enoch Eyob, managing director and partner of BCG Kenya.
He said, “Kenya, a country that has reduced financial exclusion from 50 percent to 10 percent in two decades, is showing what a mature financial system can deliver. East African institutions have earned the right to be bolder on growth and innovation.”
While Kenya's progress is largely based on digital finance, Tanzania's strong performance is driven by growing investor confidence.
The report found that 99 percent of Tanzania's listed banks trade above equity book value, putting it in line with mature markets such as Canada and the United States. Such valuations often reflect investors' confidence in future earnings and the health of the banking sector.
The latest findings also build on earlier BCG research, which had already identified Kenya as one of Africa's strongest financial markets due to its advanced digital payments ecosystem. Tanzania has accelerated its growth, highlighting the growing competition in East Africa's financial sector.
According to the report, globally, the financial services industry was the best performing sector in 2025. It generated a total shareholder return of 30.2 per cent in the last 12 months, outperforming Information Technology and all other major industries.
The report also said African financial institutions have become more efficient over the past five years. Between 2020 and 2025, the continent recorded the world's second-largest improvement in operating expenditure-to-asset ratio, behind only China.
Still, BCG warns that future growth will require more than just cutting costs and increasing revenues.
The consultancy argues that banks should increase investment in artificial intelligence, modern technology platforms and strategic acquisitions if they are to maintain their momentum. It identifies digital assets, non-bank financial services and technology-driven banking as areas shaping the next phase of the industry's growth.
Meanwhile, the broader fintech sector in the Middle East and Africa continues to expand in 2025, growing by nearly 20 percent in 2025, according to BCG and FT Partners. Mobile money, digital wallets and broader financial inclusion remain the key drivers, while lending, insurance and business-focused financial services are seen as the biggest scope for future expansion.