Investors are backing fintech ventures to crack a huge market: the global poor
"The world's refugee camps are often home to displaced entrepreneurs who set up small enterprises, driving the business case for financial services. But getting providers to take notice is a tough call, exacerbated by problems of access and identity, James King reports."
Through its investments and global partnerships, the Omidyar Network is tackling one of the biggest obstacles around refugee IDs – that of interoperability. In essence, this is the difficulty facing a refugee or migrant when every service provider or agency they encounter requires a different form of identification. Developing a foundational and interoperable form of ID would enable refugees to access a far wider suite of services and opportunities. But to achieve this, regional and global co-operation from various stakeholders is needed.
“We want governance structures that allow the interoperability and portability of digital IDs across multiple markets,” says Ms Anderson. “There are a variety of stakeholders working to address somewhat different aspects of a similar problem but often in silos. Identity is an issue that needs to be solved at scale. For this to happen, actors must work in a more collaborative and consensus-building way,” she adds.
Reaching this endpoint will take time and will demand an effective intersection between technology and regulation. In the meantime, other private sector actors are looking at the steps that can be taken on the ground. Increasingly, issues of refugee financing are attracting the attention of fintechs and start-ups who have been sold on the business case. Leaf Global Fintech, a Nashville-based business, is a case in point.
Co-founded by Nat Robinson and Tori Samples, both of whom had prior experience working with refugees in Africa and the US, Leaf aims to address the refugee challenge virtually. The company, which is focusing on Rwanda and the Democratic Republic of the Congo, partners with local banks and mobile money operators to ensure the safe passage of funds for a refugee crossing the border between two jurisdictions. It achieves this by using blockchain technology.
Ms Samples says: “There’s a lot of hype around blockchain. We are using it to facilitate cross-border transfers rather than storing any value on it.” For example, a user in the Democratic Republic of the Congo can open an account with Leaf via SMS, cross the border to Rwanda and receive their savings through a partner institution. In doing so, the company is addressing one of the key impediments facing mobile money networks in the region.
“Mobile phone penetration across east Africa is high. Mobile money accounts are growing much faster than bank accounts. That’s also an avenue that we are looking to tap into. But the issue with mobile money is that it doesn’t cross borders. The issue with that is that it’s offered through national telcos,” says Mr Robinson.
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(Leaf is a #CF20 company and is an integrated financial services provider whose mobile platform enables the conversion of physical to digital fiat currency through blockchain technology. Refugees deposit cash at a mobile money agent in their home country and then send that money into a Leaf account. The company stores the transaction on the blockchain and works in partnership with regional banks to safeguard currency.)
Inclusive Fintech Companies Are Creating and Scaling Solutions to the Widespread Unmet Need for the Full Range of Financial Services In Emerging Markets
New York, July 31, 2018 — Catalyst Fund has added another 5 “inclusive fintech” companies to its early-stage accelerator, now totaling 20 companies that leverage innovative technologies, in order to deploy financial service solutions in emerging markets where there is enormous pent-up demand. Mobile technology, machine learning, AI, and blockchain are making it possible and profitable to build the full range of financial services for previously underserved populations in places like Africa, India, and Southeast Asia. Catalyst Fund’s highly successful model de-risks companies and gets them investment ready — the 11 companies that sought follow-on funding after completing the program secured an average of $1.3 million each.
“Bank accounts and payment transfers are receiving a lot of attention and are growing in the number of subscribers, but they aren’t being used with the frequency that you’d expect,” said David del Ser, a Director at BFA. “We’re accelerating inclusive fintech companies whose solutions will achieve greater usage and help address the complete financial lives of these populations — there is great need and demand for these kinds of products and services in emerging markets.”
Inclusive Fintech refers to a wider range of modern financial services, beyond bank accounts and digital transfers, that are tailored to the unmet needs of emerging market customers to ensure adoption and to enable users to move up the financial ladder.
Catalyst Fund, a partnership between BFA, the Bill & Melinda Gates Foundation, JPMorgan Chase & Co., and Rockefeller Philanthropy Advisors, encompasses both B2B and B2C companies that either directly provide inclusive fintech solutions and services, or build the rails for needed technological and financial infrastructure. The five latest portfolio additions are:
● Hover’s proprietary and patent-pending technology enables mobile developers to turn an existing communications protocol, USSD, into an invisible transport layer, allowing the facilitation of in-app mobile payments so that users who can’t access or afford data plans can still connect to transact.
Innovation: In-App Mobile Payments Classification: Rails/Infrastructure
● PayAgri is an agri-fintech startup that brings together key players in the Indian agriculture value chain to facilitate trade and funding flows to low-income farmers who struggle to access funding and establish credit history.
Innovation: Digitizing agricultural ecosystem Classification: Rails/Infrastructure
● Banco Mare is a digital bank, serving consumers in one of Rio de Janeiro’s largest favelas, who are excluded from the formal financial system. The mobile app allows users to pay their bills, make peer-to-peer transfers and pay at local merchants, using their own blockchain-based digital currency “Palafita.”
Innovation: Blockchain Classification: Product/Service
● Leaf was founded with the mission of helping refugees transfer their assets across borders safely using blockchain technology.
Innovation: Blockchain Classification: Product/Service
● Sokowatch is an e-commerce platform for African informal retailers that offers on-demand and free delivery of store products and credit lines to address common stockouts, lack of access to working capital and business management tools.
Innovation: Digitizing the informal retailer Classification: Product/Service
“Consider that just a few years ago there were 2.5 billion unbanked globally and even today, 3.8 billion people still do not have access to insurance — we haven’t begun to scratch the surface of the need for financial services among this demographic,” said Maelis Carraro, Catalyst Fund Program Manager and Senior Associate, BFA. “But pre-seed capital is a challenge here just as anywhere else, that’s why our model is set up in a way that de-risks the investment so that we can get these companies to market where they can have the greatest impact.”
The accounts of one-fifth of banked individuals worldwide are inactive. In India 80 percent of the population has a bank account but 48 percent of those accounts haven’t had a transaction in the past year. Another 190 million Indians remain unbanked.
“We are proud to invest in solutions that have the potential to transform the financial lives of people across the world and in technology that is reinventing the global financial services landscape,” said Janis Bowdler, President, JPMorgan Chase Foundation (NYSE: JPM). “We look forward to seeing the impact that the 20 Catalyst Fund companies will make on consumers’ lives.”
Participating Catalyst Fund cohort companies must first be nominated by a sponsoring investor in order to be considered, and a pre-selected group of investors can make follow-on investments once the companies have been de-risked by completing the program. The program draws on BFA’s business intel from 12 years of using finance to create solutions for low-income people in emerging markets. Companies receive flexible grant capital, tailored technical assistance, mentoring by potential investors and access to networks of follow-on investors. A fifth cohort is planned for later in 2018.
BFA is a global consulting firm specializing in using finance to create solutions for low-income people. Our approach is to seek out, create and implement financial solutions to help people manage challenges and seize opportunities. We partner with cutting-edge organizations that touch the lives of low-income consumers such as financial institutions, fintech companies and information providers. In creating solutions, we integrate our deep expertise in customer insights, business strategy, new technology, and growth-enabling policy and regulation. Founded in 2006, BFA’s clients include financial institutions, technology companies, donors, investors and policymakers. BFA has offices in Nairobi, Delhi, Boston, Medellín and New York. For more information, please visit: www.bfaglobal.com.
About Catalyst Fund
Catalyst Fund is a philanthropic grant fund at the forefront of Inclusive Fintech, an initiative supported by the Bill & Melinda Gates Foundation and JPMorgan Chase & Co. Since 2016, as a project managed by BFA and fiscally sponsored by Rockefeller Philanthropy Advisors, Catalyst Fund has been accelerating startups developing financial services for the needs of the low-income demographic. We also seek to build up industry knowledge and customized tools from our direct work supporting and accelerating that early-stage startups building digital financial services for the next billion.
Catalyst Fund Investee Harvesting, won the FMO FinTech for Microfinance Prize of EUR 10.000 at the African Microfinance Week (SAM) in Addis Ababa, Ethopia.
The jury consisting of FMO, the African Development Bank and Accion, chose Harvesting due to the scalability of its solution and that it uses satellite data information to fill a widespread information gap within the current financial system. This allows financial institutions to issue (new) loans to farmers and to better manage their agricultural portfolio since Harvesting provides information on farmers' crops, acres and production activities.
The Inclusive Fintech Track at SOCAP17
We are excited to announce that Catalyst Fund and JPMorgan Chase & Co. are supporting a content track on Inclusive Fintech at SOCAP17. David del Ser, Director of Inclusive Fintech for Catalyst Fund, and Colleen Briggs, Executive Director of Community Innovation at JPMorgan Chase & Co. sat down with the SOCAP organizers to discuss the state of the inclusive fintech field and the sessions they are developing for SOCAP17. Read the interview http://bfa.works/thest2ce2
Originally published on the SOCAP blog on September 12, 2017.
Catalyst Fund and JPMorgan Chase & Co. are sponsoring the Inclusive Fintech Track at SOCAP17
The seed round, led by Accion Venture Lab, will support expansion of alternative credit scoring services for the underserved
SANTIAGO, Chile, Jan. 18, 2017 /PRNewswire/ -- Chilean-based alternative credit scoring startup Destacame announced today that it has closed its seed round of financing. Funds will support the expansion of Destacame's services within Chile and into Mexico in 2017.
Destacame is an alternative credit scoring platform that uses alternative data – such as utilities payment transactions – to assess an individual's creditworthiness. Destacame's proprietary algorithm synthesizes this customer data to generate an alternative credit score that can be provided to financial institutions to extend credit and other financial products to thin-file and credit-invisible customers.
"We are thrilled to expand our work with a network of partners who are equally committed to building a more financially inclusive world," said Jorge Camus, Destacame´s Co-Founder. "This financial support, Accion Venture Lab's global experience in scaling businesses and working with companies in the alternative data space, and Mountain Nazca's expertise all over the region, can help scale Destacame's effort in Chile and throughout Latin America."
"In too many instances, thin-file borrowers are neglected by formal financial institutions because serving these customers can be expensive, time-consuming, and subjective," said Michael Schlein, CEO and President of Accion. "Destacame addresses this problem by reducing the time, cost, and uncertainty of working with the underserved. With its strong leadership team, innovative technology, and commitment to the underserved, Destacame can ultimately help more people benefit from the world's financial system."
Creditworthy applicants are often denied loans or credit cards because they lack the detailed credit histories on which banks rely to lend. Further, in Chile and throughout Latin America, for those who do have a credit history, credit scoring is primarily negative; it often over-accounts for negative behaviors, and does not factor in positive ones – such as a history of paying bills on time – that are not reported to credit bureaus. Destacame's algorithm factors in both positive and negative behaviors, helps thin- and no-file customers prove their ability to repay loans, and reduces the barriers that often prevent financial institutions from working with underserved individuals.
The round was led by Accion Venture Lab, the seed-stage investment vehicle of financial inclusion leader Accion, which provides seed capital and management support to innovative startups that expand financial access to the poor and underserved. Venture Lab has already provided strategic advisory services to Destacame as a mentor through the Catalyst Fund. Mountain Nazca and several Chilean angel investors also contributed to the round.
Destacame allows middle and lower socioeconomic segments to prove their credit worthiness by using positive data gathered from credit-like services such as utilities and telecoms companies. Destacame was launched in Chile on August 2015, currently has +170,000 users and has processed +10,000 credit applications. It was founded by Sebastian Ugarte, Augusto Ruiz-Tagle and Jorge Camus while they were finishing their MBA at MIT. It currently has 15 employees and offices in Chile and Mexico. More information, please visit www.destacame.cl.
Accion is a global nonprofit dedicated to building a financially inclusive world with economic opportunity for all, by giving people the financial tools they need to improve their lives. We are building the next generation of top-tier microfinance institutions, and over more than 50 years have helped build 65 such institutions in 32 countries on four continents that today reach millions of clients. Our impact investing initiatives are pushing beyond microfinance to catalyze more than 30 innovative start-ups dedicated to improving the efficiency, reach, and scope of financial services for the poor. And our Center for Financial Inclusion is helping to build a stronger industry with high standards and broad engagement. Currently, our work spans nearly two dozen countries, including the U.S., where we are the nation's largest nonprofit microfinance network. For further information, visit http://www.accion.org.