Fintech startups have leveraged technology to lower transaction costs and reach underserved populations. These technologies can <a href="https://www.worldbank.org/en/results/2013/04/01/banking-on-women-extending-womens-access-to-financial-services" target="_blank" rel="noopener noreferrer">expand</a> financial services to women, who are often <a href="https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/bridging+the+gender+gap+in+access+to+finance" target="_blank" rel="noopener noreferrer">excluded</a> from formal financial services. The COVID-19 pandemic makes it even more critical to address gender equity, as <a href="https://www.womensworldbanking.org/insights-and-impact/building-resilience-how-to-ensure-women-are-not-left-behind-as-a-result-of-covid-19/" target="_blank" rel="noopener noreferrer">evidence</a> indicates women have been disproportionately impacted by the economic impacts of the virus. While fintechs can play an important role in designing accessible and meaningful solutions for marginalized populations, they can also run the risk of exacerbating the digital divide, including the mobile <a href="https://www.gsma.com/mobilefordevelopment/resources/mobile-gender-gap-report-2019/" target="_blank" rel="noopener noreferrer">gender gap</a>.

This two-part blog post explores data from <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50</a> and <a href="https://www.themix.org/publications/fintech-benchmarks-report" target="_blank" rel="noopener noreferrer">Results of the Fintech Benchmarks Proof-of-Concept</a> to shed light on current gender disparities in the fintech industry – both at the management level and in their customer base. We provide initial insights and recommendations for investors and fintechs on overcoming some of these challenges. We hope the research community digs deeper into the disparities we highlight to understand the nuanced and sometimes intertwined barriers that female founders face, as well as how fintechs can serve the needs and preferences of female clients.

Two key insights emerge from the data focusing on early-stage fintechs:
<ul>
 	<li>Female-led fintechs face unique challenges when raising funds, but when they do, they demonstrate greater revenue generating potential compared to fintechs without women in leadership positions.</li>
 	<li>Perhaps not surprisingly, there is a gender gap in the customer base served by fintechs, and there is significant room for them to grow by addressing this gap.</li>
</ul>
In this first post, we will focus on the first point. Below are five broad observations.
<h2>1. Women are underrepresented among fintech CEOs and founders.</h2>
Female-founded companies are traditionally underrepresented in venture capital funding, and the fintech industry is no exception. In 2019, companies with a female CEO <a href="https://www.allraise.org/assets/pitchbook_all_raise_2019_all_in_women_in_the_vc_ecosystem.pdf" target="_blank" rel="noopener noreferrer">represented 11 percent of all venture capital deals</a> made globally (this increases to 20 percent if a female founder is included). However, only 7 percent of fintech VC deals had a woman in a CEO position.
<blockquote>Women are particularly underrepresented in fintechs founded in certain regions.</blockquote>
The 2019 Inclusive Fintech 50 data present a similar trend: 19 percent of the 400 applicants are female led, as defined by at least one female founder or executive. Women are particularly underrepresented in fintechs founded in certain regions – Middle East and North Africa (MENA) has the lowest share of female-led fintechs (only 8 percent), while Latin America and Caribbean and Sub-Saharan Africa stand marginally better at 15 percent and 11 percent, respectively. Furthermore, the data does not examine founders by country of origin, and female founders from developing countries may face unique barriers. As one female fintech founder from Sub-Saharan Africa explained: “A lot of the funding goes to foreign male founders. That’s one of the biggest challenges.”

<img class="aligncenter size-full wp-image-39748" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/08/Number-of-female-fintech-leaders-region.png" alt="graph" width="887" height="641" />

It’s important to put this data in the broader context of women’s representation in the workforce. Financial services have long been <a href="https://www.ftadviser.com/opinion/2019/12/04/financial-services-15-year-gender-diversity-failure/" target="_blank" rel="noopener noreferrer">dominated by men</a>. There is a misconception and unconscious bias that women do “better” in roles like HR, marketing and implementation versus strategy and innovation. For instance, according the <a href="http://www3.weforum.org/docs/WEF_GGGR_2020.pdf" target="_blank" rel="noopener noreferrer">World Economic Forum</a>, women make up about 26 percent of workers in data and AI roles, 15 percent in engineering roles and 12 percent in cloud computing roles, compared to 40 percent in marketing, 37 percent in sales, and 35 percent in product development.

It’s also no secret that women – particularly women of color – are underrepresented in educational programs, like MBAs, that can provide them a stepping stone into the financial services industry. While 2019 saw an increase in the number of female MBA applicants, socio-cultural values and norms can influence a woman’s ability and decision to attend higher educational programs. Programs like <a href="https://girlswhocode.com/">Girls who Code</a> and <a href="https://girlsintech.org/">Girls in Tech</a> are working towards eliminating the gender gap in technology and recruiting/encouraging young women to enter the tech industry.
<h2>2. Female-led fintechs generate higher revenues than those without women in leadership positions.</h2>
The 2019 Inclusive Fintech 50 data did not survey fintechs on revenue per customer, but preliminary evidence from the Fintech Benchmarks Proof-of-Concept reveals that female-led fintechs generate higher revenues. Among the sample of 45 fintechs, female-led ones had nearly three times the revenue per customer of non-female-led fintechs, but also three times the cost per customer. This year’s Inclusive Fintech 50 data will examine whether this trend holds true in a larger sample.
<blockquote>Among the sample of 45 fintechs, female-led ones had nearly three times the revenue per customer.</blockquote>
These findings add to the evidence of the strong relative performance of female-led fintechs, and are consistent with research across sectors demonstrating the revenue potential of female-led companies. For example, <a href="https://www.bcg.com/publications/2018/why-women-owned-startups-are-better-bet.aspx" target="_blank" rel="noopener noreferrer">research from BCG</a> finds that female-founded startups generate 10 percent higher revenue than their male peers over a five-year period. Similarly, a study of 3,000 top global companies by Credit Suisse shows that female leadership is associated with <a href="https://www.wgea.gov.au/sites/default/files/documents/csri-gender-3000.pdf" target="_blank" rel="noopener noreferrer">higher profitability and superior financial returns</a>.
<h2>3. Female-led fintechs are able to raise funds at similar rates to their counterparts, but disparities persist in certain regions, namely, those with wide financial inclusion gender gaps.</h2>
The BCG study also revealed that female-founded startups raise less than half of what male-founded startups raise. A Harvard Business Review piece <a href="https://hbr.org/2017/06/male-and-female-entrepreneurs-get-asked-different-questions-by-vcs-and-it-affects-how-much-funding-they-get" target="_blank" rel="noopener noreferrer">echoes</a> the same conclusion – female founders are asked more challenging and skeptical questions during pitches, which leads to lower funding. This practice may be traced back to the stereotypes women face of not being the “right fit” for the role/sector.
<blockquote>Female-led inclusive fintechs raise 24 percent more than non-female-led startups.</blockquote>
The data from Inclusive Fintech 50 presents a more optimistic picture. At the median, female-led inclusive fintechs raise 24 percent more than non-female-led startups. This trend is largely driven by funding in formal investment rounds, echoing research in the U.S. from the <a href="https://startupsusa.org/women-founded-venture-backed-startups/#main-findings" target="_blank" rel="noopener noreferrer">Center for American Entrepreneurship</a> that once a female-founded startup is funded, it receives similar funding to male-founded startups in additional fundraising rounds.

<img class="aligncenter wp-image-39735 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/08/meadian-annual-amount-raised-by-female-fintech-leaders-1.png" alt="" width="899" height="654" />

However, we again see that there are stark differences across geographies. The median female-led fintech raises approximately three-fourths as much as non-female-led fintechs in Latin America, two-thirds as much in East Asia and Pacific, and nearly one-third as much in South Asia. In Sub-Saharan Africa and North America, female-led fintechs raise more at the median than non-female-led fintechs, though they raise 74 percent as much in Sub-Saharan Africa when measuring the average rather than the median, as noted in this <a href="https://www.themix.org/publications/measuring-funding-flows-for-digital-financial-inclusion" target="_blank" rel="noopener noreferrer">white paper</a>. In Europe and Central Asia, there is no observed gap in funding.

Perhaps it is not surprising that these regions also have a large gender gap in broader financial inclusion. For instance, the <a href="https://www.gsma.com/mobilefordevelopment/blog/the-promise-of-mobile-money-for-further-advancing-womens-financial-inclusion/#_ftn2" target="_blank" rel="noopener noreferrer">gender gap in mobile money usage</a> is 25 percent in Latin America, 21 percent in East Asia and Pacific, and 75 percent in South Asia. In these regions, the same <a href="https://blogs.worldbank.org/voices/gender-gap-financial-inclusion-three-ways-shrink-it" target="_blank" rel="noopener noreferrer">regulations and social norms</a> that prevent women from opening bank accounts may also provide additional hurdles for female entrepreneurship in a male-dominated industry.
<h2>4. Female-led fintechs have less funds available to get started, but receive a boost from angel investors.</h2>
During the initial stage, female-led fintechs have less capacity to invest personal funds into their ventures than non-female-led fintechs – they can put in only 19 percent of what a non-female-led fintech does (see figure below). As a result, many female founders and CEOs can fail to make it to formal funding rounds, thereby reducing the number of female-led fintechs from the start.

<img class="aligncenter wp-image-39736 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/08/median-annual-amount-raised-female-led-fintech-BY-FUNDING-STAGE.png" alt="graph" width="891" height="647" />

These findings are consistent with a <a href="https://www.goldmansachs.com/citizenship/10000women/news-and-events/10kw-progress-report/progress-report-full.pdf" target="_blank" rel="noopener noreferrer">study by Goldman Sachs</a> that found that female entrepreneurs in emerging markets often do not seek external financing due to challenges of navigating the process or perceptions of likelihood of success.

Female-led fintechs have performed particularly well with angel investors. Another recent <a href="https://www.tandfonline.com/doi/abs/10.1080/13691066.2020.1747692" target="_blank" rel="noopener noreferrer">study</a> found that female entrepreneurs have greater success receiving funding from angel funders than from early-stage and late-stage VCs. The Inclusive Fintech 50 data show a similar trend, with the median female-led fintech raising 80 percent more than non-female-led fintechs at the angel investor stage.
<h2>5. The network effect is weaker for female-led fintechs.</h2>
Fintechs that are “networked” – part of a fintech hub, incubator, accelerator, or award – raise <a href="https://www.themix.org/publications/measuring-funding-flows-for-digital-financial-inclusion" target="_blank" rel="noopener noreferrer">more funding than non-networked fintechs</a>. However, female-led fintechs managed to raise only 8 percent more if they were networked. Meanwhile non-female-led fintechs raised 43 percent more if they were networked. This trend is consistent with a report which found that <a href="https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/venture+capital/vc-resources/vc-gender-financing" target="_blank" rel="noopener noreferrer">accelerators widen the equity financing gap</a>, with male-led startups experiencing a 2.6 times increase in funding raised post-acceleration relative to female-led startups.
<blockquote>Female-led fintechs managed to raise only 8 percent more if they were networked.</blockquote>
Additionally, a study that employed network analysis to <a href="https://endeavor.org/content/uploads/2015/06/Fostering-Productive-Entrepreneurship-Communities.pdf" target="_blank" rel="noopener noreferrer">assess the collective impact of entrepreneurship communities</a> found that start-ups that received experience, mentorship, or investment from an entrepreneur who has led a company to scale were approximately two times more likely to achieve top performance. It would be prudent to explore further what this means for female entrepreneurs who may face barriers accessing entrepreneurship communities that may be male-dominated.

<img class="aligncenter wp-image-39737 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/08/networked-multiplier-of-female-led-fintechs.png" alt="graph" width="845" height="614" />
<h2>Recommendations</h2>
<h3>For Investors</h3>
<ul>
 	<li>Investors have the potential to address this underrepresentation by investing in more female-led, early-stage fintechs, particularly in regions such as Asia and Latin America. Investors can not only seek out fintechs with strong programs that support female leadership, but also screen out those that do not. As described above, there is evidence that female-led fintechs produce higher revenues.</li>
 	<li>In order to address funding disparities for female-led fintechs in early stages, investors can adopt gender lens investing, particularly when providing grant funding. This will build upon work done by DFS Lab, Flourish Ventures, FinEquity, and Women’s World Banking, who have sponsored a female-focused fintech competition.</li>
 	<li>Incubators and accelerators can also support early-stage, female-led fintechs by actively recruiting female startups and supporting them in raising funding and also assessing whether their programs themselves are female-friendly.</li>
 	<li>Gender-diverse hiring practices and implicit bias training are vital for investors and incubators/accelerators to reach these goals. Moreover, while we were not able to distinguish between women of color founders and white women, evidence on the institutional barriers and discrimination that people of color face likely apply to the fintech space. Implicit bias trainings play an important role in raising awareness on lending practices.</li>
</ul>
<h3>For Researchers</h3>
<ul>
 	<li>Research organizations can provide valuable evidence to build a case for investment in female-led fintechs and the nuanced barriers that female-led fintechs face. Building upon work by organizations such as Women’s World Banking, researchers can demonstrate that female-led fintechs produce strong financial returns while also making unique contributions to financial inclusion.</li>
 	<li>Additional research is needed to examine the challenges faced by female fintech founders. Inclusive Fintech 50 data sheds light onto funding amounts received by female fintechs, but it does not address potential disparities in the likelihood of receiving funds, or other discrimination that female founders -- particularly women of color -- may face.</li>
</ul>
Be on the lookout for the next post, when we will discuss how fintechs may be able to close the gender gap in financial inclusion for their users.

Including Women in “Inclusive Fintech”

The impact investing world is an exciting place to be. Investors’ hopes of doing good and doing well are alive and well. As impact investing matures, veterans in the field are asking how to focus resources. Should we seek high returns in order to attract mainstream investors, or maintain a clear social bottom line, even if returns fall below the market average? Which direction should our unique blend of development and capitalism take?

Two recent articles attempt to answer this question: one is a <a href="https://ssir.org/articles/entry/almost_everything_you_know_about_impact_investing_is_wrong">longer essay in Stanford Social Innovation Review</a> – by <a href="https://www.poverty-action.org/people/wendy-abt">Wendy Abt</a> – the other an <a href="https://www.ft.com/content/b6c893d4-f48e-11e8-9623-d7f9881e729f">interview with Elizabeth Littlefield in the Financial Times</a>. Both these accomplished women are well positioned to reflect on and shape the future of impact investing.

Abt is the founder of <a href="https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=51828662">WPA, Inc.</a>, an investment advisory firm, and former deputy assistant of USAID. Littlefield was the director of CGAP before becoming president of the Overseas Private Investment Corporation, which has shaped her current role as Senior Counselor of the <a href="https://www.albrightstonebridge.com/team/elizabeth-l-littlefield">Albright Stonebridge Group</a>.

There is a lot to agree on in both articles, but I have some reservations about them as well.
<h2>Abt: Market Returns, Better Measurement, Bigger Players, and a Different Investment Paradigm</h2>
Abt is right that greater clarity is needed regarding impact investing’s key principles and practices.

She contrasts two investing paradigms that come from mainstream investing but are often applied in impact investing. The first is venture capital (and incubators), an approach that prioritizes rapid growth and a clear exit strategy for investors. The problem here is that fast growth and clear exits can be incompatible with attention to social impact. Abt prefers an approach that more closely resembles project finance. While the analogy may not be exactly appropriate, project finance takes a longer-term perspective and considers complementary investments by other players.

She also points out that too many impact investors surrender to concessionary business models before they even join the fight for market returns. They offer a plethora of rationales to justify concessionary returns, arguing, for example, that subsidies are necessary because impact-oriented businesses take a long time to become financially self-sustaining. Many social enterprise business models need to start off with concessionary funding (subsidies) because the timeline for revenue generation is unclear: these are, after all, new operating models tackling social problems that big business has not taken on. Often however, this concessionary capital becomes “permanent” because the goal of moving towards financial sustainability takes a back seat to other priorities. So I agree that impact investors should expect their investees to move towards sustainability and profitability, and that requires clearly negotiated timelines and diligent oversight.

However, Abt makes some assertions that I disagree with.

Abt insists that the purpose of impact investing is to solve major social problems – like income inequality or global warming – by attracting non-concessionary capital into a competitive marketplace. I’m not on board with several parts of that claim. Impact investors should not have to carry the weight of building more competitive markets, and do not have to aim exclusively at non-concessionary capital sources. These are grand aims, but often they are too much to ask of investors wishing to use their own capital in socially positive ways.

As a result of her focus on non-concessionary capital, the only source of below-market capital Abt is willing to entertain is government, on the grounds that if impact investors do not anchor themselves to market returns, they risk serious misallocation of resources. I disagree. In fact, many impact investors, especially foundations, prioritize social return over market returns especially if their money can be used in a catalytic way to create a business with a social good. Why should they not be considered legitimate investors?
<blockquote>Many impact investors prioritize social return over market returns, especially if their money can be used in a catalytic way to create a business with a social good.</blockquote>
Because Abt’s vision is all about major social problems, she defers to the biggest corporations in a way I find a bit troubling. She asserts that only large regional and global companies, not small ventures, can make a difference in the complex sectors most critical to the poor, namely infrastructure, health, agriculture and logistics. She states, “impact investors are noticing the advantages that global and large regional firms have over smaller firms in low-income and fragile countries.” She cites successes of Carlos Slim in Mexico, Aliko Dangote in Nigeria, and Jack Ma in China.

It may be true that behemoths have advantages, but it’s simplistic and unrealistic to apply that thinking wholesale. It sends a message that impact investing is all about co-investing with or exiting to Alibaba or Dangote, who were themselves small disruptors at one time. But do the behemoths value social impact? What should happen in countries where big companies don’t invest? It’s true that the goal of many a small innovator is to sell to a global company – and that proves my point: impact investing is needed precisely for these smaller firms to innovate and test their ideas before large multinationals will give them a second glance.
<h2>Littlefield: Market Returns Not Necessary?</h2>
I put myself more in Littlefield’s camp, agreeing with her assertion that the impact investment sector should accommodate all investors, whether large or small, institutional or individual, philanthropic or commercial. Millennials are demanding investment opportunities, and not all are looking for above market rates of return. The “investment experience” is important along with social and financial returns. Research suggests that the demand for sustainability is <a href="https://www.inc.com/melanie-curtin/73-percent-of-millennials-are-willing-to-spend-more-money-on-this-1-type-of-product.html">firmly entrenched in mainstream millennial attitudes toward money</a>. As these millennials gain seniority in the business world, they won’t hesitate to advocate investment decisions that promote sustainability above traditional market returns, and data-driven decision making will help shape these investment decisions, even if it means their money grows more slowly. Many millennial investors are willing to experiment and refine. Time, of course, is on their side.

Moreover, a below-market return doesn’t mean a loss. Investors who prioritize social returns are also looking for the investee to grow and become profitable. With this in mind, I agree with Littlefield that the universe of impact investors has to be broadened, which is why I appreciate her wider definition of “impact investor” vis a vis Abt. There is no one type of impact investor, so there is no single approach or type of funding that will ensure success.
<blockquote>the universe of impact investors has to be broadened.</blockquote>
Abt’s search for a big business fix is not realistic. Yes, there is a lot to say for economies of scale, access to cheap capital and the big data that big players bring, but can we trust these companies to care for small impact investment projects, especially in cases of global economic headwinds? Will they let them fall by the wayside when they need to make revenue projections for a particular quarter? To succeed, the impact investment sector will need a broad and diverse community of investors. As we move forward, millennials will drive this diversification.

<em>If you’ve read this article, chances are you have a lot on your mind regarding the impact investing and how it affects financial inclusion. We’d like to hear from you! Please write your opinions in the comments below and let the world know what you think.</em>

The Future of Impact Investing: CFI’s Take on Dueling Views

This virtual dialogue provides an opportunity for the <a href="/about/what-we-do/africa-board-fellowship-program/">Africa Board Fellowship</a> (ABF) network and <a href="/about/what-we-do/fiec/">Financial Inclusion Equity Council</a> (FIEC) members to discuss the role disruptive technologies play in advancing financial inclusion. This dialogue will also provide opportunities for peer exchange on investment evaluation and which technology solutions have the potential to be the most disruptive.

<strong>Discussion Topics:</strong>
<ul>
 	<li>The theme of financial inclusion week is “getting inclusion right”. What role do disruptive technologies have in advancing that agenda?</li>
 	<li>What are the most innovative and disruptive technologies that you are seeing in the FI sector?</li>
 	<li>Are there technologies from other sector that we should be watching/following?</li>
 	<li>How can investors evaluate different technologies for financial inclusion? What criteria to you use to assess which technology solutions have the potential to be the most disruptive?</li>
</ul>
<strong>Featuring:</strong>
<ul>
 	<li>Wayne Hennessy-Barrett, CEO, 4G Capital, ABF Fellow</li>
 	<li>Ami Dalal, Managing Director, FINCA Ventures, FIEC Member</li>
</ul>
<strong>Moderator:</strong>
<ul>
 	<li><a href="/bio/danielle-piskadlo">Danielle Piskadlo</a>, Director, Investing in Inclusive Finance, CFI</li>
</ul>
&nbsp;

&nbsp;

Webinar: Disruptive Technologies Advancing Financial Inclusion

Lately it seems that everyone wants in on sustainable, responsible impact investing (SRI). Encapsulating a broad swath of investment styles, from environmental, social, and governance (ESG) screening to shareholder resolutions and community investing, SRI has become the darling of the social impact community.

In the U.S. alone, over one-fifth of professionally-managed funds (held by institutional investors, money managers, and community investment institutions), or a total of $8.7 trillion, consider ESG factors. This figure is up from $6.57 trillion in 2014 according to the U.S. Forum for Sustainable and Responsible Investment (USSIF)’s <a href="https://www.ussif.org/trends">2016 SRI Investing Trends Report</a>. A much smaller proportion is in impact investments. According to the Global Impact Investing Network’s <a href="https://thegiin.org/knowledge/publication/annualsurvey2017">2017 Annual Impact Investor Survey</a>, which polls 209 institutional investors making impact investments, capital invested in impact investments rose by 17 percent last year from $22 billion to $26 billion.

While SRI growth trends are impressive, USSIF claims that the total potential market for professionally-managed assets in the U.S. could be as much as $40.3 trillion, an indication that there is still a great deal of room for SRI investing to grow. Three trends are especially encouraging: investing and a wider variety of investment vehicles are becoming more accessible to more people, community focused investments are one of the fastest-growing segments, and millennials are nudging investment managers toward SRI.

<strong>Expanding access through new investment vehicles: </strong>With the expansion of investors who offer SRI investments to include foundations, public funds, venture capital, community development financial institutions (CDFI), money managers and institutional investors, there has also been an increase in the types of investment products on offer. Individuals’ desire for greater control over their investments and variety of choice has resulted in a growing online investment platform landscape. Offerings such as <a href="https://www.openinvest.co/">OpenInvest</a> and <a href="https://www.swellinvesting.com/homepage">Swell</a> are focused solely on impact investments, providing investors the choice of SRI products from exchange traded funds (ETFs), mutual funds, stocks, bonds, and index funds, and traditional platforms are beginning to offer their own impact investment products in order to compete. Many of these vehicles are open to individuals below the high net worth level.

<strong>Community impact investments are on the rise: </strong>It is an encouraging trend within SRI investing that community impact investments, which direct capital to underserved communities, are one of the fastest growing segments. (SRI investments held by institutional money managers is the other fast-growing category.) According to the USSIF, community investments by credit unions, CDFIs, and others doubled in just two years, from $64 billion in 2014 to $122 billion in 2016.

Community capital allows individuals and small business owners to appeal directly to potential funders for investment capital to pursue community-driven opportunities. <a href="https://investibule.co/">Investibule</a>, a B Corp that aggregates investment opportunities on a crowdfunding site, sees making these opportunities available for individual investors as a means to meet the growing interest in socially responsible investment while also plugging a funding gap for underserved communities and businesses.

One recent example is a partnership between the NAACP, YMCA, and Impact Shares (a nonprofit investment manager). In November 2017, the group <a href="http://www.naacp.org/latest/naacp-ywca-partner-impact-shares-investing-social-justice/">announced</a> the offering of two exchange traded funds (ETFs) in Chicago, one focused on investing in social justice and one focused on women. The Minority Empowerment ETF will invest in companies that empower minorities through their hiring and compensation practices, and the Women’s Empowerment ETF will invest in companies that promote the advancement of women and workplace equity.

<strong>Interest in sustainable investing is rising, especially among millennials:</strong> According to Morgan Stanley’s 2017 report, <a href="http://www.morganstanley.com/pub/content/dam/msdotcom/ideas/sustainable-signals/pdf/Sustainable_Signals_Whitepaper.pdf">Sustainable Signals: New Data from the Individual Investor</a>, 75 percent of individual investors are interested in pursuing investments that “aim to achieve market-rate financial returns while pursuing positive social and/or environmental impact.” This interest is even higher among millennials, with 86 percent interested in sustainable investing, and women, with 84 percent interested in sustainable investing – as compared to 67 percent of men.  As millennials stand to inherit from aging baby boomer parents, more investment capital will be in their hands, and this transfer of wealth, given their interest in SRI, has the power to nudge more institutional investors into sustainable investing. For example, employers offering 401(k)s and other retirement savings plans will need to consider that, according to Morgan Stanley, 90 percent of millennials would be interested in choosing sustainable investment as part of their 401(k), if it was an option, as compared to 72 percent of the total individual investor population.

Yet, despite these favorable trends, two challenges slow the pace of its growth.

<strong>Continuing belief that impact comes at the expense of financial returns.</strong> A <a href="http://www.tandfonline.com/doi/pdf/10.1080/20430795.2015.1118917">2015 study</a> by Deutsche Asset &amp; Wealth Management and Hamburg University found that across 2000 empirical studies on ESG performance, 90 percent show a positive correlation between ESG and corporate financial performance. Yet many Americans still hold the perception that investing based on ESG impact comes at the expense of financial gain. Fifty-nine percent of millennials surveyed for Morgan Stanley’s report consider sustainable investing to involve a financial trade-off, and that makes funds hesitant to emphasize impact. The recent announcement of the Rise of the Rest Fund, a seed fund to invest in small businesses across the U.S. outside the pockets of NYC and Silicon Valley, was quick to point out that <a href="https://www.nytimes.com/2017/12/04/business/dealbook/midwest-start-ups.html">its purpose</a> is financial performance not impact.

<strong>How to measure and what’s most important? </strong>Measuring the impact of SRI investments is tricky. A framework which measures investments in a way that fully captures social results alongside financial performance is still developing. Investors care about both market rate returns and impact, but with some types of investments and investors higher returns are not always the primary goal. A more nuanced system of measurement is required, based on the investors’ individual investment priorities, that also accommodates the diversity of investment offerings and definitions of what constitutes SRI (e.g., impact investment, shareholder resolution, or ESG screen).

What next? The SRI field is still evolving, yet the acceleration of investments into SRI and the increased interest by both individuals and institutional investors are encouraging. Hopefully, SRI investors will continue to listen to what investees are asking: provide more ways for individuals to invest in a variety of products and platforms; invest in women, minorities, small businesses and communities; and combat perception biases through more rigorous investment objectives and measurement.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/04/27/time-to-ditch-impact-investings-unproductive-self-analysis/">Time to Ditch Impact Investing's Unproductive Self Analysis</a>

<a href="https://cfi-blog.org/2017/10/24/bridging-islamic-finance-and-impact-investing/">Bridging Islamic Finance and Impact Investing</a>

<a href="https://cfi-blog.org/2017/03/22/how-water-org-took-a-leap-of-faith-into-social-impact-investing/">How Water.org Took a "Leap of Faith" into Social Impact Investing</a>

&nbsp;

Impact Where? Socially Responsible Investing (SRI) in the U.S.

<a href="https://www.centerforfinancialinclusion.org/offshore-financial-centers-for-financial-inclusion"><img class="alignright wp-image-23798" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/07/offshore.png" alt="" width="300" height="384" /></a>In the aftermath of the Panama Papers, the words “offshore” and “tax-haven” are often taboo rhetoric within the investment industry. Perhaps even more so in the impact investing space, where fund managers have both fiduciary and social responsibilities. The <a href="http://fiecouncil.com/">Financial Inclusion Equity Council</a> (FIEC; of which CFI is the secretariat) recently published the report <em><a href="https://www.centerforfinancialinclusion.org/offshore-financial-centers-for-financial-inclusion">Offshore Financial Centers for Financial Inclusion: A Marriage of Convenience</a></em> to better understand attitudes and practices when it comes to how equity impact investors use offshore financial centers (OFCs). To dive into this topic, CFI and consultants Daniel Rozas and Sam Mendelson interviewed FIEC members from the U.S. and Europe. Conversations resulted in varying opinions on the practice of using OFCs, with three key considerations for doing so: administrative efficiency, tax liabilities, and transparency and ethics.

Among all FIEC members interviewed,<strong> administrative efficiency</strong> was unanimously a primary driver in making the decision about where to domicile funds. Fund managers cited the importance of understanding local regulatory requirements, the presence of embassies, bank relationships, management facilities, remittance corridors, and convenience of location as important considerations in their decision. The reality is many low income offshore countries lack the infrastructure and capacity for supporting the administrative requirements of investments. Additionally, there are increasingly stringent AML/KYC requirements that disproportionately affect lower-income countries creating administrative burdens. The new CFI report states: “…this is at least one of the goals of using OFCs – not to avoid the regulators, but to outsource some of the reporting burden to entities that specialize in this service that have relationships to do it efficiently.”

When discussing OFCs, it’s impossible to not talk about <strong>tax liabilities</strong>, which is where opinions of North American and European FIEC investors were strikingly different. It comes down to a difference in philosophy on paying taxes. Most European investors interviewed emphasized the positive impact of taxes paid to support local infrastructure and economy. While across the Atlantic, the U.S. investor’s perspective is more focused on the investor and investee. Taxes are seen as burdensome that get in the way of “the primary objective – social investments to benefit the end-client.” The view is that tax treaties are in place for a reason and investors have a fiduciary responsibility to their investors. Doing otherwise would reduce funds available to their investees.

While OFCs might seem unethical as a means to reduce tax, all investors interviewed were aligned on the <strong>importance of transparency.</strong> There is no interest in hiding operations. This includes transparency to the target country, to the source country and to their public reputation. Efforts have been made in recent years to disincentivize countries from offering unclear banking services. Industry associations like the Organization for Economic Co-Operation and Development (OECD) work with governments to promote policies that improve economic and social standards through transparency.

A few weeks ago FIEC members met in Copenhagen for an annual meeting to discuss topics like this and other questions challenging the impact investing space. The group conversation about offshore incorporation was less polarizing than the previously-received feedback of individual interviews with members, who felt the Atlantic divide about tax justification was overstated in the paper.

Everyone agreed this is an area that is misunderstood, and that investors should aim for a structure that supports paying an appropriate amount of taxes. This means avoiding double taxation, while responsibly paying the fair share. There was less importance attributed in the conversation to deciding where to domicile and more emphasis on assessing the character of who to invest with.

Debates about OFCs and taxes will become increasingly interesting as more impact funds exit their investments and consider how to do so responsibly, a topic CFI has <a href="https://cfi-blog.org/2014/02/05/the-art-of-the-responsible-exit-in-microfinance-equity-sales/">already explored</a> and will continue to dig into this year.

<em>For more, read <a href="https://www.centerforfinancialinclusion.org/offshore-financial-centers-for-financial-inclusion">Offshore Financial Centers for Financial Inclusion</a>.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/05/11/fintech-in-microfinance-in-search-of-the-high-tech-high-touch-unicorn/">Fintech in Microfinance: In Search of the High-Tech High-Touch Unicorn?</a>

<a href="https://cfi-blog.org/2017/03/17/whats-responsible-about-impact-investing-exits/">What's "Responsible" about Impact Investing Exits?
</a>

<a href="https://cfi-blog.org/2017/01/26/a-tale-of-four-ipos-is-public-investment-in-microfinance-becoming-ok-again/">A Tale of Four IPOs: Is Public Investment in Microfinance Becoming OK Again?</a>

Offshore Financial Centers for Financial Inclusion: An Aligned Industry or Oceans Apart?

The words “offshore” and “tax-haven” are often taboo rhetoric within the investment space. In this paper, the Financial Inclusion Equity Council (FIEC), with support from CFI, explores why and how equity impact investors use offshore vehicles. Our findings reveal that offshore vehicles offer key operational, legal, tax and reputational advantages and are a key part of the impact investment landscape.

Through interviews with Financial Inclusion Equity Council (FIEC) members, we sought to better understand the scope of offshore usage in financial inclusion and the factors at play when impact investors select a fund domicile. Convenience, transparency and reputational advantages are among the strongest drivers for choosing to offshore. However, divergent views exist among FIEC members regarding the tax implications of offshore vehicles.
<h3>Major Findings</h3>
<ul>
 	<li>Impact investors have legitimate reasons for using offshore financial centers (OFCs)—and tax status is not the driving factor. The main factors for choosing OFCs include:
<ul>
 	<li>Administrative Efficiency: OFCs have the legal, financial and administrative infrastructure in place to facilitate investment.</li>
 	<li>Human Capital: Accordingly, OFCs have specialized staff on hand to manage investments, such as lawyers, accountants and auditors.</li>
 	<li>Reputation: OFCs are reputable vehicles in international investing, which helps to validate their use for financial inclusion.</li>
 	<li>Convenience: OFCs may serve as a neutral base for multiple investors. Favorable time zones, shared language and currency also add to their accessibility.</li>
</ul>
</li>
 	<li>Two divergent perspectives exist between North American and European investors regarding the tax implications of OFCs. The North American perspective prioritizes tax minimization for shareholders/investors, while the European perspective prioritizes paying their fair share of taxes to the offshore country.</li>
</ul>
Challenge your assumptions about offshore funds and learn more about how these financial instruments contribute to financial inclusion.<span class="wf_file_text">
</span>

&nbsp;

&nbsp;

Offshore Financial Centers for Financial Inclusion

Since 1992, when Accion created BancoSol in Bolivia, the first private commercial bank dedicated to microfinance, Accion’s aim has been to create a financially inclusive world, primarily through building financial institutions that serve the base of the pyramid. Accion has contributed to the birth, growth, or strengthening of 66 microfinance institutions in 34 countries, which together serve millions of clients with a broad array of financial services.

Through the years, Accion has gradually evolved its own unique microfinance institution partnership model. I recently spoke with Michael Schlein, Accion’s president and CEO, Esteban Altschul, chief operating officer, and John Fischer, chief investment officer. I asked them how and why Accion’s model for working with microfinance partners has taken its current form, and what has been learned along the way.

Michael Schlein said that the starting premise for Accion’s model was, “the recognition that charity – though very important – is insufficient to the task of building a financially inclusive world. You have to tap the capital markets.” As a non-profit organization originating in the international development arena, this premise set Accion onto a path that was “disruptive” in the 1990s, though it is widely adapted today in the impact investing movement.

The model assembles private investors around the common purpose to build a healthy and profitable financial institution that can grow and provide services over time. To succeed for investors, it must produce adequate financial returns and an exit path so the returns can be realized. To succeed for Accion’s mission it must result in quality financial services for people who would otherwise be excluded. Accion also looks for a demonstration effect. When business success inspires others to enter the market and thus creates an industry, that’s how Accion’s broader vision advances.

What has now crystalized is a model of partnership in which a web of incentives meets the needs of each organization involved, aligns all the players behind the mission, and elicits strong performance from each partner – including Accion itself.

Here’s how it operates.

The tools are common enough: equity investment, governance, management services, and technical assistance; but the key is how they are assembled into a mutually reinforcing package. Accion’s ideal model couples a significant minority equity investment and seat on the board with secondment of one or more Accion staff members to a senior management position, supplemented by technical assistance on special topics, from credit scoring to crisis management. As Schlein remarked, “It is not rocket science to realize that we can have greater impact when we provide services as a package. Each part of the puzzle significantly strengthens the others and our impact overall.”

As a shareholder, Accion has a financial stake that aligns it with other investors and requires that Accion takes financial returns seriously. Management services allow Accion to give the institution the technical know-how it needs, particularly in the early years. Its day-to-day inside presence, coupled with active shareholding, gives investors confidence in the institution’s future. And with this package, Accion can invest in institutions with capacity gaps that might not otherwise attract investors – and strengthen them.

Accion also relies on agile donated resources devoted to sharpening and expanding technical knowledge, pushing into marginal markets and client segments, and contributing to industry strengthening, among other purposes.

The cornerstone of Accion’s model, and its most unique feature, is the decision to take a significant minority stake, typically between 20 and 40 percent. This level of ownership gives Accion a leading but not exclusively dominant voice in the boardroom, which management and technical services reinforce. As Fischer said, “We prefer to influence others rather than to direct them. We like the situation in which Accion is first among equals, but with no one party able to call the shots.”

If you’re going to be a minority shareholder, you’d better be choosy about your co-investors. “We choose investors we admire,” says Schlein, and Fischer explains, “We want to have a diversified shareholder group of generally like-minded investors with a fairly long term horizon.”

Ideally, there are local or regional investors to whom the institution can be ceded over time. It’s not easy to find a local partner with the right combination of outlook, mission, and competence, especially in frontier markets. When it first began investing, in the 1990s, the local partners were non-profits created in concert with local businessmen. These NGOs started microfinance operations, then spun them off to become regulated financial institutions. Such were the origins of BancoSol in Bolivia, Mibanco in Peru, and Compartamos in Mexico, which were long Accion’s flagship banks. More recently, local owners include individual promoters like entrepreneur Veena Mankar, founder of Swadhaar in India, or banks like Ecobank, a partner in Accion Microfinance Bank Nigeria. Strong local partners know the culture and business environment, can rally local funds, and have standing in discussions with regulators.

The non-local shareholders in the mix also add value. They are often international investors that share Accion’s double bottom line, though purely commercial investors are sometimes involved. At Accion Microfinance Bank Nigeria, for example, the shareholders include IFC, a multilateral bank, Citi, a global bank, Ecobank, a regional bank, and Zenith, a local bank. A multilateral like IFC in a risky environment like Nigeria provides a quasi-official presence that can be of great value in solving regulatory and government relations problems. Major international shareholders like Citi bring global connections, resources, and prestige.

These investors sign up with Accion because they do not wish, or are not equipped, “to play a leadership role in terms of strategic direction,” said Altschul. “Just being an investor is an easier business model. More institutions can readily do that.”

If international investors sign up because they want Accion to lead, I asked, why doesn’t Accion go for majority ownership and let the other investors be passive?

“The other investors are there to hold us accountable for doing a good job. They provide a check on our ability to do whatever we want,” said Fischer. Altschul noted that if Accion were to become an owner-operator – the path ProCredit, Access Holdings, and Finca have taken – it would require retooling the organization to focus single-mindedly on operations. Altschul believes that the demands of running organizations require an all-absorbing and fairly inward focus that is at odds with Accion’s broader aims of developing a socially-beneficial industry. By engaging in partnerships with various organizations and co-investors Accion can spread its knowledge and promote its mission with a broader and lighter touch than if it were an owner-operator.

Ultimately, it’s healthy to have multiple voices at the table. “When you are in the majority,” said Altschul, “you only hear yourself speak.” In fact, Accion experimented with full control when it launched a new microfinance institution in Manaus, Brazil, an effort that encountered serious problems. “It’s good to have the other voices. To challenge, to question assumptions,” said Fischer.

The intent to leave the institution in local or regional hands puts exit on the horizon from the start, and exit is, of course, necessary for investors. “Exits are important as a mindset,” said Altschul. “In the back of your mind you are always thinking of an exit, whether in eight or fifteen years.” Fischer maintained that the idea of exiting to owners that will carry the mission forward focuses attention on long term institutional health rather than short term results. It’s different, he noted, from the “greater fool theory” of exit whereby the seller has no stake in the company’s future. If Accion leaves behind a poorly performing institution, its mission is compromised, as is its reputation with the global community of investors in microfinance.

Building institutions takes longer than the relatively short time horizon of most development projects and many commercial investors, and this is another way Accion’s non-profit status makes a difference. Most relationships last for at least 10 years, and unlike many investors, Accion can adjust its exit horizon as events demand. Accion has often chosen to allow its holdings to be reduced over time as institutions mature, rather than exiting entirely. For example, it currently holds less than 3 percent of Banco Compartamos. Accion shifts gradually from its early leadership position into a less intensive relationship in which it focuses on upholding the mission, ensuring that the institution has access to the latest know-how, and backing the institution in the event of problems.

Schlein emphasized that the dynamic aspect of the model is important to stakeholders. “Investors like to invest with us because we’re inside and we understand the relevance of exit. Local partners appreciate how we roll up our sleeves, add value, and then leave. And donors value the way we redeploy resources to where they can have the greatest impact.”

Over the years, Accion’s staff has developed an internal culture of ownership in which governance is the lynchpin. Accion takes governance very seriously. “In the early years, our board members are likely to be our own staff, but as the institution matures, we lean toward strong, independent board representatives,” commented Schlein. Governance is especially important because financial institutions are naturally prone to conflicts of interest and related party transactions, both of which are minimized by the transparency demanded in a multi-voiced partnership.

The value of any model is perhaps best demonstrated in times of stress, like the crisis that erupted in Nicaragua’s microfinance sector in 2009. Accion’s partner, FAMA, was a relatively mature organization with little day-to-day need for Accion technical support. But when Nicaragua’s populist government encouraged non-payment of microloans, defaults soared across the sector, and access to funding disappeared. The largest microlender, Banex, went under, and FAMA, with 17 percent of its portfolio at risk, was in danger of collapse if it could not raise funds. Accion stepped in with a $1 million loan and intensive technical assistance. Accion and FAMA’s local management worked zealously to secure funding from the other creditors. When Accion combined its own money with direct operational engagement, it sent a more powerful and convincing signal to other investors than with either intervention alone. As lead international shareholder, Accion and local management organized the other investors and crafted a turnaround plan. Since then, FAMA has recovered nicely and is once again a healthy institution with three straight years of growth and a portfolio at risk just under 2 percent.

In contrast, Banex, which lacked a similar international anchor, succumbed with its investors in disarray (see the Harvard Business School case on Banex). Accion’s credibility stemmed directly from its model: when the investors opted in, they were counting on Accion to protect its own financial, reputational, and mission concerns.

And this, in brief, is the crux of Accion’s model. It puts Accion in a position in which it has financial and reputational resources at stake that can only be protected if Accion does its job well, subjects its decisions to scrutiny by others, and maintains cooperative partnerships. That, essentially, is its pitch to partners: if you invest beside us, you can count on Accion doing its utmost – with you – to help the organization succeed.

On paper, Accion’s model may sound easy. It isn’t. Being just an investor is easier. Providing technical services without ownership is easier. Being a majority owner may not be easier, but it does not draw in other players. Partnerships that nurture institutions to stand on their own require skill, finesse, wisdom, and plain hard work. It’s not just the money, though that provides “skin in the game”. It’s not just the board seat, though that is the key strategic leverage point. And it’s not just the management and technical services, though that adds development impact. It’s deploying all of these elements in a dynamic dance with other players that enables Accion to pursue its mission.

<em>Image credit: <a href="http://www.accion.org/">Accion</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/02/12/base-of-the-pyramid-savings-among-accion-partners-some-news-is-bad-and-some-is-good/">Base-of-the-Pyramid Savings Among Accion Partners - Some News Is Bad and Some Is Good</a>

<a href="http://cfi-blog.org/2015/01/05/five-lessons-for-building-savings-in-latin-american-microfinance/">Five Lessons for Building Savings in Latin American Microfinance</a>

<a href="http://cfi-blog.org/2014/12/03/strengthening-governance-in-africa-accions-africa-board-fellowship-paves-the-way/">Strengthening Governance in Africa: Accion's Africa Board Fellowship Paves the Way</a>

A Conversation on Accion’s Model

<em>&gt; Posted by Andrew Fixler, Associate, CFI</em>

[getty src="157518792?et=3ngTRP4YRw1ZszFQ-4ERIA&amp;sig=j_5SOUlncPnYjd_Dp3cj99MRZN00naKPQGW3eZTebEA=&amp;caption=true" width="594" height="396"]

Inclusive financial services in Africa are blooming. Between the turn of the millennium and 2011, the number of African MFIs reporting to the MIX increased from 58 to 397. From 2000 to 2014, the gross loan portfolio expanded over tenfold to $6 billion. Between 2003 and 2009, the number of borrowers served by MFIs in Africa increased from 1.6 million to 8.5 million. These numbers represent the development of an economic development tool for economies with very small financial sectors. It is impressive progress for an undeveloped industry beset by sparse human capital, problematic governance, and minimal external commercial interest.

AfriCap, which was the first private equity fund to invest exclusively in African microfinance institutions, and other microfinance investment vehicles (MIVs) funded by social investors have been a key growth factor through capitalizing MFIs and offering technical assistance and training. This interest is relatively new. The African MIV portfolio grew at an average annual rate of <a href="http://www.microrate.com/media/downloads/2013/11/MicroRate-The-State-of-Microfinance-Investment-2013.pdf">36 percent</a> between 2006 and 2013. This compares with an average growth of 38 percent for investments in the Latin America &amp; Caribbean region since 2006, and 8 percent in both the Middle East &amp; North Africa and South East Asia regions. The strong connection between MIV financing and microfinance sector growth was also noted in a World Bank paper, <a href="http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/09/15/000158349_20140915084416/Rendered/PDF/WPS7029.pdf"><em>Benchmarking the Financial Performance, Growth, and Outreach of Greenfield Microfinance Institutions in Sub-Saharan </em>Africa</a>. The paper, released in 2014, explains the relevance of greenfield MFIs to effecting financial inclusion in undeveloped financial markets. These institutions are financed in large part by equity and debt from development finance institutions, as well as a now-significant cohort of MIVs.

African MFIs are attracting palpable interest from investors with a double bottom line. At the most recent meeting of the Financial Inclusion Equity Council (<a href="http://fiecouncil.com/">FIEC</a>) in Zurich, social equity financers, many of whom represent the expanded cohort of Africa investors, noted that there is strong interest to invest in Africa, which is seen as ripe for social impact investment, with potentially “eye watering” multiples.

Of course, the risks vary widely by country, warranting a cautious attitude and deep consideration before money can be smartly invested (a point well noted by the FIEC meeting attendees), as shown by the cautionary lessons of some of AfriCap’s more aggressive deals. AfriCap merits recognition as a pioneering microfinance investment vehicle that helped demonstrate the dynamism and investment-worthiness of the African microfinance sector. Although fund performance did not meet the hopes of its protagonists (investors who stayed with the fund from inception until 2014 realized an internal rate of return (IRR) of 1 percent), AfriCap’s legacy as part of the “cracking” of the capital markets for the African microfinance industry is significant. AfriCap formed with a challenging mission: “to support the commercialization of the microfinance industry by bridging the transition from a sector traditionally funded by donors to a scenario where the leading MFIs were raising most of their funds from commercial sources.”

AfriCap set out to fulfill its mission by building the capacity of self-sustaining microfinance institutions. In the face of a shortage of trained finance professionals, it consciously sought to bring on and develop local management, to infuse startups and established institutions with capital, and to add value to investees through technical assistance. From its founding in 2001 through its 2014 wind-down, AfriCap made equity and debt investments in 21 African MFIs. Among AfriCap’s investments were both incredible successes <em>and</em> complete write-offs. Over half of all investments failed to recover their direct costs, due in part to gaps in AfriCap’s own governance mechanisms to mitigate the risks inherent in the fund’s mission. Although the ultimate IRR was relatively modest, the fund demonstrated that among the range of institutions in Africa, good investments could be found and nurtured.

A soon-to-be-released study by <a href="http://www.grassrootscap.com/" target="_blank">Grassroots Capital Management</a> focuses on the role governance played in the AfriCap fund’s successes and failures, while recounting the fund’s many challenges and its ultimate accomplishment. The pivotal role of the board in governance, and the board’s lead responsibility for such critical matters as strategy, risk control, and management selection and succession, feature prominently in the study.

The successful investments among AfriCap’s portfolio provide a lasting testament to the potential of African MFIs, and contributed both directly and indirectly to the tenfold increase in the total African microfinance portfolio quoted above. The fund’s impact extended beyond direct effects of its investments to the signals it sent on the investment-worthiness of African microfinance markets. By investing in diverse countries, rather than only traditional targets such as Kenya, South Africa, and Nigeria, AfriCap reached beyond the “low-hanging fruit”, and demonstrated the investment-worthiness of MFIs across many countries.

Altogether, AfriCap’s results illustrate the opportunity for success in African microfinance investing. The story of AfriCap also illustrates the inherent risks of financing a diverse range of institutions, from startups to well-established companies that, when not contended with, can lead to portfolio losses.

<em>To learn more about AfriCap’s governance challenges, and current scholarship on governance best practices, stay tuned for the Grassroots AfriCap case study to be released later this month.</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/02/10/microfinance-equity-investing-different-context-similar-issues/" target="_blank">Microfinance Equity Investing: Different Context, Similar Issues</a>

<a href="http://cfi-blog.org/2014/08/08/growth-makes-governance-more-critical-in-sub-saharan-africa/" target="_blank">Growth Makes Governance More Critical in Sub-Saharan Africa</a>

<a href="http://cfi-blog.org/2014/12/09/rajans-revolution-and-modis-microfinance-mojo/" target="_blank">Rajan's Revolution and Modi's Microfinance Mojo</a>

African Microfinance’s Dynamic Growth and the Story of AfriCap

As the microfinance industry matures, a question that has come into sharper focus is how social investors committed to advancing responsible finance practices should “exit responsibly” from the microfinance institutions (MFIs) in which they have invested over the years. As they prepare to sell their stakes, what options do development-minded investors have to help ensure responsible behavior by their partner MFI into the future and healthy development of the broader market?

In this paper the Center for Financial Inclusion at Accion (CFI) and the Consultative Group to Assist the Poor (CGAP) seek to spark discussion among the stakeholders working to advance financial inclusion and in particular the investor community that will result in greater clarity around the goal of responsible exits and the policies and practices that would support it.

The Art of the Responsible Exit in Microfinance Equity Sales

<i>The </i><a href="http://www.centerforfinancialinclusion.org/programs-a-projects/investing-in-inclusive-finance" target="_blank" rel="noopener"><i>Investing in Inclusive Finance</i></a><i> program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.</i>

When you think about responsible investing, what comes to mind? Finding investment prospects that can deliver social returns? Perhaps diligent monitoring, with an eye to effective governance? How about when you sell an investment? How can investors remain committed to balanced social and financial goals when passing the baton to someone else?

This last question is the focus of a joint project by the Center for Financial Inclusion and CGAP. With several microfinance equity funds approaching maturity, the issue of equity sales is becoming more relevant, and as part of the project, the team has been interviewing many equity investors to understand how they perceive the question of what, exactly, is a responsible exit? A paper detailing the findings of these interviews, <i>The Art of the Responsible Exit in Microfinance Equity Sales</i>, will be released in the coming weeks.

In the course of these interviews, many respondents used the analogy of children growing up. As early-stage or founding investors, they reach a certain point where they have fulfilled their "parental" mission and are no longer best-positioned to provide the MFI what it needs, be it capital, expertise, or market access. From the investor's perspective, the analogy works. But selling an MFI is less an act of entrusting your child's future to his or her own good sense, along with whatever wisdom you've been able to impart – you are handing the MFI over to somebody else.

Indeed, the better analogy might be that of an arranged marriage: you hire a matchmaker (M&amp;A specialist) to help find a suitor (buyer); you meet with the suitor to find out who he is and what he has done in the past (due diligence); maybe if you're a responsible parent (investor), you ask your daughter (MFI management) for her opinion. All along, you are nagged by one important question – is this a suitable match for my daughter?

Unsurprisingly, buyer selection is a major part of social investors' focus during the process and is seen as the most important way to assure continued attention to the double bottom line. However, investors have a few additional options at their disposal to insure that buyers will stick to their promises and will not lead the MFI away from its primary mission. The most common among these is simply selling a minority stake, relying on other like-minded investors to provide continuity of governance. In one case, a seller included one year employment contracts for key MFI management as part of the sale agreement, thus assuring at least temporary continuity in MFI operations. Several investors incorporated specific commitments to the MFI's social mission and to client protection principles in the shareholder agreement, thus binding the buyer to some degree. Yet another investor was seeking to structure a minority stake with veto power over key institutional decisions, as a means of retaining post-sale control.

Each of these is an interesting exercise in insuring at least some level of continuity or control, even if the suitor turns out to be a dud. However, one institution figured out a way to bypass the process altogether. From the start, it was built on an unusual evergreen governance structure that assured that this commercial enterprise would stick to its social mission. Its initial charter insured that no single investor would have a controlling stake, and gave its board – composed of majority independent directors – veto power over any acquisition that would give a single investor a controlling stake. In effect, the structure gives a purchasing investor a share of the company's assets and earnings, while leaving governance largely outside investor hands. And thus far, this MFI has been highly successful. In effect, the institution rendered the arranged marriage – or any marriage – unnecessary, by choosing to remain single and independent.

Which MFI is this, and how exactly does its governance structure function? And what are the other relevant lessons to investors seeking to sell their equity responsibly? Stay tuned for <i>The Art of the Responsible Exit in Microfinance Equity Sales.</i>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2013/09/23/a-204-million-leap-for-financial-inclusion/" target="_blank" rel="noopener">A $204 Million Leap for Financial Inclusion</a>

<a href="http://cfi-blog.org/2013/03/29/six-to-dos-now-for-responsible-investors/" target="_blank" rel="noopener">Six To-Dos Now for Responsible Investors</a>

<a href="http://cfi-blog.org/2013/07/23/a-journey-to-understanding-risk-as-a-new-board-director-in-governing-banks-mfi-edition/" target="_blank" rel="noopener">A Journey to Understanding Risk as a New Board Director in "Governing Banks: MFI Edition"</a>

&nbsp;

Adelina Dasso

Senior Investment Officer, Accion Global Investments

Alex Qian

Senior Investment Officer, Accion Global Investments 

Amee Parbhoo

Managing Partner, Accion Venture Lab

Jasiel Martin-Odoom

Africa Investment Officer

Njord Andrewes

Managing Partner, Accion Digital Transformation Fund

Liza Curcio-Rudy

Vikas Raj

Brazil

India

Latin America and The Caribbean

Mexico

South Asia

Kenya

Nigeria

Sub-Saharan Africa

Europe and Central Asia

Luxembourg

North America

Switzerland

United Kingdom

United States

Access Usage Gap

Advisory Services

Enabling Environment

Equity Investing

Financial Inclusion Strategy

Financial Service Providers

Financial Technology

Fintechs

Impact Investing

Responsible Investing

Social Impact Metrics

Underserved Groups

Women

Challenges and Crises

Delivery Channels

Digital Financial Services

Entrepreneurs of MSMEs

Trends

Appropriate Product Design and Delivery

Consumer Protection

Customer Centricity

Financial Health

Microfinance Institutions

Resilience

Client Treatment

Consumer Credit

Credit

Credit Provision

Digital Credit

Housing Finance

Interest Rates

Microfinance

MSME/SME Finance

Over-indebtedness

Partnerships

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<a href="https://www.gendersmartinvesting.com/a-history-of-gender-lens-investing" target="_blank" rel="noopener noreferrer">More than a decade ago</a>, <a href="https://www.linkedin.com/in/jackie-vanderbrug-827b6b3/" target="_blank" rel="noopener noreferrer">Jackie VanderBrug</a> and <a href="https://www.linkedin.com/in/joy-anderson/" target="_blank" rel="noopener noreferrer">Joy Anderson</a> coined the term ‘gender lens investing’ to describe an emerging sector of finance designed to support the economic and social well-being of women. Since then, the field has evolved tremendously, with many venture funds, accelerators, and incubators forming to invest in and support women founders, funders, and customers. According to <a href="https://socialimpact.wharton.upenn.edu/research-reports/reports-2/project-sage-4/" target="_blank" rel="noopener noreferrer">Project Sage 4.0</a>, at least $6B in capital was raised across 206 gender lens investment funds as of June 2021. This is enormous growth (+361 percent since Project Sage’s <a href="https://socialimpact.wharton.upenn.edu/wp-content/uploads/2017/10/ProjectSageReport102317.pdf" target="_blank" rel="noopener noreferrer">first landscape analysis in 2017</a>) but is still microscopic compared to the <a href="https://www.bcg.com/publications/2021/global-asset-management-industry-report" target="_blank" rel="noopener noreferrer">$100T+</a> asset management industry at large. To close this gap and drive truly systemic change, asset managers of all kinds need to consider strategies for creating more equitable investment portfolios.

<span lang="EN-US" xml:lang="EN-US" data-contrast="none">The broader development industry has provided a helpful framework for where to begin. In</span><span lang="EN-US" xml:lang="EN-US" data-contrast="none"> the mid-1990s, the United Nations established </span><a href="https://www.unwomen.org/sites/default/files/Headquarters/Attachments/Sections/Library/Publications/2020/Gender-mainstreaming-Strategy-for-achieving-gender-equality-and-empowerment-of-women-girls-en.pdf" target="_blank" rel="noreferrer noopener"><span lang="EN-US" xml:lang="EN-US" data-contrast="none">Gender Mainstreaming</span></a><span lang="EN-US" xml:lang="EN-US" data-contrast="none"> as a global strategy to promote gender equality. These guidelines call on governments and other organizations to examine how all</span> <span lang="EN-US" xml:lang="EN-US" data-contrast="none">proposed programs, policies, and initiatives impact both women and men, even if they’re not specifically designed to address gender equality. For fund managers without an explicit gender mandate, this approach presents an opportunity to mitigate bias, fund more underrepresented founders, and </span><a href="https://hbr.org/2018/07/the-other-diversity-dividend" target="_blank" rel="noreferrer noopener"><span lang="EN-US" xml:lang="EN-US" data-contrast="none">increase returns by making every facet of the investment value chain more inclusive</span></a>.
<h3>Our approach</h3>
At Accion Venture Lab, gender impacts every aspect of our work. Women consumers and small business owners continue to be disproportionately underserved by banks and other financial service providers, and women startup founders raise a small sliver of global venture capital funding. These disparities hinder the outcomes that we strive for, both regarding the financial success of our portfolio companies and the impact of their products on the end customer. In response, our team has identified eight strategies to make the VC investment process more inclusive:
<h4>Sourcing</h4>
<strong><span lang="EN-US" xml:lang="EN-US" data-contrast="none">1. <span style="text-decoration: underline;">Make contact information more accessible</span></span></strong><span lang="EN-US" xml:lang="EN-US" data-contrast="none"><strong>:</strong> Venture capitalists often rely on warm introductions from industry contacts. This puts underrepresented founders, which often start with smaller investor networks, at a disadvantage when they go out to raise capital. By making contact information publicly available on your website or having a designated pitch submission form, investors can find differentiated deal flow and diversity their pipeline.</span>

<strong>2. <span style="text-decoration: underline;">Proactively explore new sourcing channels</span>:</strong> We’ve historically seen a dearth of resources for women founders in emerging markets, but that’s beginning to change. VCs can plug into networks like <a href="https://weraise.pk/" target="_blank" rel="noopener noreferrer">WeRaise</a> (Pakistan), <a href="https://restofworld.org/2022/why-we-set-up-a-tech-community-for-female-founders-in-latin-america/" target="_blank" rel="noopener noreferrer">Amela</a> (Latin America), and <a href="https://www.wetechng.com/about" target="_blank" rel="noopener noreferrer">WeTech</a> (Nigeria) by participating in office hours, judging pitch competitions, or hosting educational webinars.

<strong>3. <span style="text-decoration: underline;">Monitor progress</span>:</strong> Most VC firms use a customer relationship management (CRM) tool to track deal flow. By capturing the gender composition of founding teams, firms can determine if women founders are progressing through their pipeline at the same rate as male founders and identify any stages of the investment process where women are particularly likely to fall out.
<h4>Diligence</h4>
<strong>4. <span style="text-decoration: underline;">Reflect on your word choice</span>:</strong> Studies have shown that investors are <a href="https://hbr.org/2017/06/male-and-female-entrepreneurs-get-asked-different-questions-by-vcs-and-it-affects-how-much-funding-they-get" target="_blank" rel="noopener noreferrer">more likely to ask women founders about downside risk</a> and male founders about upside opportunity. Biased language can also pop up in job descriptions, blog posts, and website copy, which can inadvertently discourage women from engaging. Tools such as Kat Matfield’s <a href="https://gender-decoder.katmatfield.com/" target="_blank" rel="noopener noreferrer">Gender Decoder</a> can help you identify and remediate subtle bias.

<strong>5. <span style="text-decoration: underline;">Discuss diversity during diligence</span>:</strong> Investors can use the diligence process to discern how founders think about building diverse teams and establishing an inclusive culture. Ensuring alignment with founders during diligence can also make it easier to engage in these conversations later on as a board member.

<strong>6. <span style="text-decoration: underline;">Address team demographics in investment memoranda</span>:</strong> Including team demographic data in official investment memoranda can help firms hold themselves accountable to stated diversity goals. At Venture Lab, we also revisit and update this table when considering companies for follow-on investments.
<h4>Post-Investment Engagement</h4>
<strong>7. <span style="text-decoration: underline;">Request disaggregated data</span>:</strong> Portfolio companies report on a set of key performance indicators each month or quarter. By disaggregating the data (when possible), investors can pinpoint gender disparities and help founders identify opportunities to reach more women customers or better support existing customers.

<strong>8. <span style="text-decoration: underline;">Leverage your platform and relationships</span>:</strong> Representation matters. By continuing to bring more awareness to women and other underrepresented founders who are disrupting financial services, investors can help spur a more equitable, inclusive ecosystem.

Stay tuned for another article next month as we’ll dive deeper into how we’re integrating a gender lens into our publicly available resources for early-stage founders. To learn more about Accion Venture Lab, you can follow us on <a href="https://twitter.com/AccionVLab" target="_blank" rel="noopener noreferrer">Twitter</a> and <a href="https://www.linkedin.com/showcase/accion-venture-lab/" target="_blank" rel="noopener noreferrer">LinkedIn</a> or check out our podcast, <a href="https://www.accion.org/series/fintechforthepeople" target="_blank" rel="noopener noreferrer">Fintech for the People</a>.

How to build a more inclusive investment process

India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

Most of Mexico’s people lack access to a formal bank account. Accion has worked in Mexico for decades to create a thriving and competitive financial sector that embraces innovation and protects its clients.

[embed]https://vimeo.com/470629525[/embed]

In this webinar, experts from Accion Venture Lab discussed the merits of gender lens investing and how Accion Venture Lab has developed a gender lens approach when considering an investment in a fintech startup. We touched on the pandemic’s impact on this effort and report out on results from some exciting workshops that Venture Lab has organized and hosted for current and aspiring female entrepreneurs in Mexico, Brazil, and India.

This discussion focused on the issues and challenges female fintech founders face unique to their gender, particularly with accessing investor capital throughout the organizational lifecycle.

Investing in and supporting women entrepreneurs: Accion Venture Lab’s gender lens focus

[embed]https://vimeo.com/461400524/4024ba9784[/embed]

India’s inclusive fintech startups have a once-in-a-generation opportunity to use their unique advantages to grow and help underserved individuals and small businesses during COVID-19. I joined The Economic Times Digital Lending Summit to share my views and explain why Venture Lab is continuing to invest during the pandemic.  I discussed:
<ul>
 	<li><strong><em>A dramatic disruption:</em></strong> The COVID-19 pandemic is the most dramatic disruption to business that many fintech startups have ever experienced. Facing average revenue drops of more than 50 percent in the aftermath of initial lockdowns, founders quickly moved their teams to remote work and cut costs significantly. Many made major changes to their companies to ensure runway and leaned on their investors for support, which Accion Venture Lab has provided. Companies are proving their resilience and finding ways to cut down and refocus costs for the long haul.</li>
 	<li><strong><em>A time for innovation:</em></strong> Lenders are facing unique challenges as consumers and micro, small, and medium enterprise (MSME) borrowers continue to struggle and the effects of moratorium wear off. But some lenders also see an opportunity to truly innovate and even thrive. We have seen companies activate their digital capabilities to continue serving their customers. Some are onboarding customers and sourcing loans entirely by WhatsApp, and others have turned to digital marketing to reach customers. Many lenders have shifted from operating as a physical business with tech components to operating as tech businesses with minimal physical components.</li>
 	<li><strong><em>Emphasis on digital:</em></strong> This pandemic has been very difficult for nearly everyone but is particularly so for the financially vulnerable. Still, we believe there is still reason to be optimistic. While the crisis has led to the worst economic downturn of our lifetimes, it has also unveiled a new urgency to accelerate digital solutions, especially digital solutions that help MSMEs move their businesses online. Digital transformation is no longer something that is ‘nice to have.’ It is imperative, and that has massive implications for data and distribution for fintech solutions</li>
 	<li><strong><em>Alternative platforms:</em></strong> The increasing need for digital tools opens opportunities for digital lending startups to engage investors and grow their businesses. At Accion Venture Lab, we are excited about what we call <a href="https://www.forbes.com/sites/vikasraj/2019/11/20/platform-fintechs-are-cominghow-should-startups-respond/#4c768fed2b0f">“platfins”: platform fintechs</a> that solve difficult problems for MSMEs, like delivery and distribution, and add digital financial services to their offering over time. This is particularly true in sectors like agriculture and education. We are on the lookout for startups that can leverage this proprietary data and distribution to serve SMEs, or business that enable non-financial platforms to expand their offering to financial services.</li>
</ul>
As the inequalities in our systems are exposed, it has become abundantly clear that financial inclusion is more important than ever. The innovators in fintech and inclusion — who were already using new data, artificial intelligence, and innovative engagement strategies to reach customers — have quickly become more relevant and more needed than ever.

This is the moment for inclusive fintech startups to become the next leaders in financial inclusion.

Now is the time to invest in and build inclusive fintech in India

[embed]https://soundcloud.com/accioninternational/the-pandemic-is-a-moment-to-get-in-touch-creditas-ann-williams[/embed]

&nbsp;

"The pandemic has been a great learning experience for us and an opportunity to be even closer to our customers in a moment of crisis," says Ann Williams, COO of Creditas, a digital platform that offers financial products and consumer solutions in Brazil and Mexico. The company began by offering asset-backed loans to provide "lower interest rates, longer terms, and lower payments that can fit into the pocket of our customers". In the tenth and final episode of VentureKast: Rebuild, Ann explains how the fully digital company has reached out to their customers — especially small business owners who have been deeply affected by the COVID-19 crisis — to restructure loans and create new products that address their challenges.

"Brazil has one of the highest interest rates in the world for consumer loans and the banks are some of the most profitable in the world," says Ann, who elaborates that their high-cost structures and focus on shorter-term, "toxic" debt have created a need for better, cheaper loans. "There’s been a push among fintechs like Creditas, along with central bank and policymakers, looking to create opportunities for consumers to access more fair financial products," she says. By leveraging a digital platform, Creditas can give customers more information and more opportunities, even during this challenging time. Ann reminds us that "it’s always the moment to work to build something better for the underserved," and she asserts that Creditas’ resolve to enrich the relationships with their customers is as strong as ever.

For more conversations about how the pandemic is shaping our industry, listen to the rest of our <a href="https://www.accion.org/series/venturekast-rebuild"><strong>VentureKast: Rebuild season here</strong></a>. Host and co-managing director of  <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener noreferrer"><strong>Venture Lab</strong></a><strong>,</strong> <a href="https://www.accion.org/bio/vikas-raj" target="_blank" rel="noopener noreferrer"><strong>Vikas Raj</strong></a> interviewed industry leaders every Thursday for the last 10 weeks about how COVID-19 has impacted their work.

"The pandemic is a moment to get in touch" — Creditas’ Ann Williams

<img class="wp-image-22136 alignnone" src="https://content.accion.org/wp-content/uploads/2020/08/Digital-Lending-summit-logo-Final.png" alt="" width="215" height="130" />

The Economic Times Digital Lending Virtual Summit aims to deliver answers and solutions to the most common and unsolved challenges in the industry. This summit will help us understand the ways in which we can thrive in the fintech space during these challenging times, and discover the best models that allow us to better serve consumers. Explore the complexities of our rapidly changing world through insightful sessions focused on the most important trends in banking and lending. <a href="https://etunwired.et-edge.com/virtual/digitallending/" target="_blank" rel="noopener noreferrer">Learn more about the event and how to register here.</a>

Accion Venture Lab's <b data-stringify-type="bold"><a class="c-link" href="https://www.accion.org/bio/vikas-raj" target="_blank" rel="noopener noreferrer" data-stringify-link="https://www.accion.org/bio/vikas-raj" data-sk="tooltip_parent" aria-describedby="sk-tooltip-5396">Vikas Raj</a> </b>will join a session on the critical role that India’s inclusive fintech startups play in helping mitigate the economic impact of COVID-19 on underserved individuals and small businesses.

<img class="alignnone wp-image-22124" src="https://content.accion.org/wp-content/uploads/2020/08/Digital-Lending-Combined-Speakers-Creative.jpg" alt="" width="750" height="393" />

The Economic Times Digital Lending Virtual Summit

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

[embed]https://soundcloud.com/accioninternational/the-pandemic-provides-lots-of-new-problems-for-entrepreneurs-to-solve-fields-michael-moreland[/embed]

“<strong>T</strong><strong>he COVID pandemic has exposed risks embedded throughout the health system</strong>,” reflects Michael Moreland, co-founder and CEO of Field Intelligence, a tech-focused pharmaceutical supply chain company operating in Nigeria and Kenya. As the COVID-19 pandemic caused an increase in essential drug prices across Africa, Michael and his team took fast action, doing “everything [he] could to help [customers] keep [their] business open and working safely.” In an uplifting seventh episode of <a href="https://www.accion.org/series/venturekast-rebuild" target="_blank" rel="noopener noreferrer">VentureKast: Rebuild</a>, Michael explains how critically important Field Intelligence’s data-driven Shelf Life product has been to mitigate volatility in the price and supply of essential drugs, and how the COVID-19 pandemic poses a massive opportunity for entrepreneurs to solve challenges within public health systems. In the wake of the pandemic, “health-seeking behavior [has changed] broadly as more and more patients avoid the clinical setting… and instead go to that pharmacy on the corner.” As people turn to community-based health care solutions for their basic care, Field has leveraged their reach with local pharmacies and distributed hundreds of hand washing stations and educational posters to protect against the spread of the virus at a local level.

“The urgency of [improving the lives of vulnerable populations] has never been more clear” as drug price volatility, coupled with lockdown measures and a collapse of household income, leaves many in a desperate situation. Michael reckons that investors and entrepreneurs alike will respond with solutions to problems that have become apparent. While “[Investors] will naturally turn to those essential critical services like community-based health care as the kinds of place where there is a tremendous opportunity to improve, create value, [and] participate in that value chain,” the pandemic “provides new problems for entrepreneurs to think about solving” — an opportunity which Michael believes will change the future of the health care supply industry.

Please join our host and co-managing director of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener noreferrer"><strong>Venture Lab</strong></a> <a href="https://www.accion.org/bio/vikas-raj" target="_blank" rel="noopener noreferrer"><strong>Vikas Raj</strong></a> as he interviews industry leaders every Thursday about how COVID-19 is impacting their work.

“The pandemic provides lots of new problems for entrepreneurs to solve” – Field Intelligence’s Michael Moreland

[embed]https://vimeo.com/438255046[/embed]

“I think impact investing can take a chance and invest in technologies that can transform the way we deliver important, basic tools to people all around the world — that can really help them weather pandemics and tremendous storms, as well as seize opportunities when the day allows that.” Our CEO Michael Schlein joined the 2020 Collision from Home conference to share how impact investing can build resilient communities.

Pioneering startups are finding new ways to help fight poverty, empower women and girls, and provide access to a good education. By investing in these startups and their innovations, we can build and scale powerful new tools that create a safer, more equitable world.

Impact investing for resilient communities: Michael Schlein at Collision

[embed]https://soundcloud.com/accioninternational/there-is-much-more-empathy-across-the-globeanthemiss-vica-manos-1[/embed]

In episode five of <a href="https://www.accion.org/series/venturekast-rebuild" target="_blank" rel="noopener noreferrer">VentureKast: Rebuild</a>, Vica Manos, Partner at <a href="https://www.anthemis.com/" target="_blank" rel="noopener noreferrer">Anthemis</a>, explains that the collaboration of traditional banks and fintech startups during and after COVID-19 will foster “an equilibrium that really works for consumers.” Vica shares a holistic understanding of financial wellbeing focused on resilience and explains that we must back companies that promote positive customer behavior. Although a few aspects of how Vica and Anthemis operate have changed, their ability to support entrepreneurs and their theses around digital services have only been reinforced through the pandemic. The advantages of Anthemis' portfolio companies — like <a href="https://www.altbank.co/" target="_blank" rel="noopener noreferrer">Altbank</a>, which leverages a digital, distributed model, and <a href="https://abaka.me/" target="_blank" rel="noopener noreferrer">Abaka</a>, which enables digital infrastructure for financial institutions — are shining through now more than ever.

Unlike past recessions, Vica sees that the landscape for early-stage investing is burgeoning. The “data speaks for itself,” says Vica, who is proud to share that Anthemis has added eight new companies to their portfolio in the second quarter of 2020 alone. The long-term increase in demand for digital services, catalyzed by the COVID-19 crisis, has encouraged founders “to take the plunge and take the risk” to build scalable solutions to address customer challenges. In other words, says Vica, “the opportunity cost of not innovating, not inventing … has become way bigger.” Entrepreneurs are responding to this call to innovation. There will be “more opportunities that happen way faster," says Vica, adding that, "there is much more empathy across the globe and across industries because we are all in this together this time.”

Please join our host and co-Managing Director of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener noreferrer">Venture Lab</a> <a href="https://www.accion.org/bio/vikas-raj" target="_blank" rel="noopener noreferrer">Vikas Raj</a> as he interviews industry leaders every Thursday about how COVID-19 is impacting their work.

"There is much more empathy across the globe" - Anthemis's Vica Manos

[embed]https://soundcloud.com/accioninternational/return-to-a-better-tomorrow-flourish-ventures-tilman-ehrbeck/s-2hMaMmRbpfF[/embed]

In uncertain times, investors and entrepreneurs should "return to first principles," says Tilman Ehrbeck, Managing Partner at <a href="https://flourishventures.com/" target="_blank" rel="noopener noreferrer">Flourish Ventures</a>. "Start with your customers, what do they need, what are true pain points, and what can you do to help them to improve their lives.” On episode two of <a href="https://www.accion.org/series/venturekast-rebuild" target="_blank" rel="noopener noreferrer">VentureKast: Rebuild</a>, Tilman shares his customer-centric philosophy and explains how the acceleration of digital engagement has dramatic potential implications for financial inclusion – “both the need and the opportunity to get there.”

Impact investing "is more relevant than before,” says Tilman, who reminds us that even “in the best of times, it's hard to be a startup entrepreneur. And if you have a crisis like this on top, it’s really, really taxing.” Tilman shares insights about supporting portfolio companies, and he remains cautiously optimistic about the future of investing during the pandemic. The pre-COVID-19 normal had its shortcomings, explains Tilman, and there now exists an opportunity to “embrace the notion of ‘let's return to a better tomorrow” by optimizing technology and financial systems.

Please join our host and co-Managing Director of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener noreferrer">Venture Lab</a> <a href="https://www.accion.org/bio/vikas-raj" target="_blank" rel="noopener noreferrer">Vikas Raj</a> as he interviews industry leaders every Thursday on how COVID-19 is impacting their work.

"Return to a better tomorrow" - Flourish Ventures’ Tilman Ehrbeck

This template is meant to guide businesses through creating effective board decks.

Board deck template for startups

Early-stage, impact-focused startups often seek out traditional funding­­—equity or debt—to fuel their expansion and growth goals. But for a variety of reasons, these options aren’t always available: it’s too early to raise equity rounds, and debt financing requires certain qualifications.

Foundation-led grants have emerged recently as a great option for startups with a social mission, including those building fintech for inclusion solutions. In this guide, we’ll help you:
<ul>
 	<li>Understand the critical differences in securing grant funding versus equity or debt funding</li>
 	<li>Identify the type of grant funding that best fits your company’s needs</li>
 	<li>Develop a successful grant proposal</li>
</ul>

Equity Investing

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How to build a more inclusive investment process

Investing in and supporting women entrepreneurs: Accion Venture Lab’s gender lens focus

Now is the time to invest in and build inclusive fintech in India

"The pandemic is a moment to get in touch" — Creditas’ Ann Williams

The Economic Times Digital Lending Virtual Summit

“The pandemic provides lots of new problems for entrepreneurs to solve” – Field Intelligence’s Michael Moreland

Impact investing for resilient communities: Michael Schlein at Collision

"There is much more empathy across the globe" - Anthemis's Vica Manos

"Return to a better tomorrow" - Flourish Ventures’ Tilman Ehrbeck

Board deck template for startups

Grant fundraise guide

From the Center for Financial Inclusion

Including Women in “Inclusive Fintech”

The Future of Impact Investing: CFI’s Take on Dueling Views

Webinar: Disruptive Technologies Advancing Financial Inclusion

Impact Where? Socially Responsible Investing (SRI) in the U.S.

Offshore Financial Centers for Financial Inclusion: An Aligned Industry or Oceans Apart?

Offshore Financial Centers for Financial Inclusion

A Conversation on Accion’s Model

African Microfinance’s Dynamic Growth and the Story of AfriCap

The Art of the Responsible Exit in Microfinance Equity Sales

The Art of the Responsible Exit in Microfinance Equity Sales

Impact investing for resilient communities: Michael Schlein at Collision

"There is much more empathy across the globe" - Anthemis's Vica Manos

"Return to a better tomorrow" - Flourish Ventures’ Tilman Ehrbeck

Board deck template for startups

Grant fundraise guide