Before the fintech boom, microfinance, rural finance, and small business finance agencies were the key channels of financial inclusion for hundreds of millions of un- and underbanked businesses and households worldwide. Accion’s Digital Transformation Fund is helping such institutions reach more customers with tech updates for underwriting, loan disbursement and management.
“Fintechs have done a fantastic job reaching scale in urban areas, but reaching rural and digitally illiterate customers is a much tougher job,” Accion’s Njord Andrewes told ImpactAlpha. “Traditional microfinance banks are well positioned there.”
The nonprofit impact investor has raised $152.5 million for the fund, which will make equity investments in up to a dozen companies in Africa, Asia and Latin America. Backers include Mastercard, IDB Invest, the International Finance Corp., and the development finance institutions of the UK, Netherlands, Austria and Sweden.
Accion will take board seats at each company and help them develop a digitalization roadmap. The work builds on Accion Advisory’s support for microfinance institutions.
Its first investments are in India-based Annapurna Finance and IKF Finance. The Digital Transformation Fund is helping Annapurna build a mobile emergency-loan service that uses GPS to help customers get cash quickly from the nearest agent.
Established financial institutions can leverage simple digital tools to “be more hands on and useful for rural populations,” said Andrewes.
