FINCA Ventures Makes Three Investments in Financial and Economic Inclusion

This article was originally published on ImpactAlpha

The impact investing arm of microfinance organization FINCA International added three companies to its portfolio of early-stage tech companies targeting services for informal and low-income emerging markets’ workers. South Africa-based Kuunda Digital offers overdraft coverage for mobile money agents. Amsterdam-based Meridia uses mapping to help smallholder farmers secure title to their land. And Nairobi-based ImaliPay provides financial services for emerging-market gig workers.

The three companies join FINCA Ventures’ portfolio of nine early-stage tech companies enabling financial inclusion, economic productivity and livelihoods security for informal and low-income emerging markets’ workers.

FINCA Ventures, which launched in 2018, commits early capital to help promising impact startups build traction. The firm is also expanding a pilot program of FINCA International to prove out commercial opportunities for financial inclusion. The program, FINCA Forward, provides grant capital and technical assistance to fintechs for three-to-six month long proof-of-concept projects increasing access to formal financial services for low-income consumers.

“In cases where a proof of concept demonstrates a clear and compelling value proposition, FINCA Forward supports those companies to reach commercial scale in partnership with financial institutions in FINCA International’s network,” FINCA’s Josh Kirton told ImpactAlpha.

FINCA Ventures is looking to raise $25 million to expand FINCA Forward and add on with debt and equity investments.

Test case

FINCA Forward backed Kuunda Digital’s HapaCash Overdraft product to ease liquidity challenges for small and informal money agents. Such agents provide essential cash services for low-income consumers needing to convert mobile money into cash and vice versa. The agents themselves face short-term cash-crunches, however, that prevent them from serving customers.

“If the agents are unavailable due to a lack of liquidity, customers cannot meaningfully engage with digital financial services,” explained Kirton.

Kuunda offers money agents daily overdraft protection, so they can complete the day’s customer requests and settle up their cash accounts. Kuunda provided 300,000 overdraft disbursements to M-Pesa mobile money agents totaling $2.2 million during its six-month pilot in Tanzania last year.

“That’s $2.2 million in customer transactions that would have otherwise been denied,” said Kirton. Agents used the overdraft 19 times per month on average—more than FINCA Forward’s viability baseline of 15 times.

FINCA is supporting Kuunda’s expansion of the product to Pakistan and Malawi. “Allowing Kuunda to clearly demonstrate their value proposition has been instrumental in facilitating their path to scale,” added Kirton. “It’s really proven this proof-of-concept approach.”