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Can fintech startups drive financial resilience for low-income populations?

Financial services are central to our everyday lives, enabling access to basic services like healthcare, housing, and education. They also facilitate social and economic progress, making it possible to manage expenses, endure setbacks, and seize opportunities. 

Yet according to data from the World Bank’s Global Findex, approximately 3 billion people remain financially underserved. This means that the financial sector either does not adequately meet the financial needs of, or excludes entirely, billions of people – especially low-income households and businesses.

The rise of fintech offers significant promise for financial inclusion – and resilience

Fintech can dramatically enhance the efficiency and affordability of expanding services that can help businesses grow, enable households to build savings, and create greater financial resilience for both. And because early-stage companies are seedbeds of innovation, connecting these fintechs with capital and knowledge resources can help them scale and spur further social and economic progress. 

However, it is unclear whether the significant investment capital flowing into fintech is reaching startups committed to delivering affordable, appropriate, and accessible solutions to low-income customers. Data collected through Inclusive Fintech 50 — an initiative that elevates promising early-stage inclusive fintechs through a competitive process — can help shed light on this challenge and point to possible solutions.

Access to capital for fintech startups is uneven

Startups that operate outside of global financial and innovation hubs often fly under the radar of traditional investor networks and, as a result, account for far less funding. Data from the 2019 Inclusive Fintech 50 applicant pool shows that early-stage fintechs headquartered in financial hubs including the United States, United Kingdom, and Singapore account for a disproportionate amount of total capital raised. In addition to the massive variation from region to region, there is a material penalty for being an Africa-headquartered fintech, even though these startups reach just as many customers as their counterparts in other regions. Imagine the potential impact for underserved populations if larger amounts of investment capital were directed to African fintechs.

Image Credits: Inclusive Fintech 50

Investment is not only concentrated across regions – it is concentrated within regions. For example, of the 110 applicants to Inclusive Fintech 50 that are headquartered in Sub-Saharan Africa, 7 fintechs captured 70 percent of the funding. This mirrors the findings of a report by Village Capital, which found that 72 percent of venture capital in East Africa went to only three startups over a two year period. 

Image Credits: Inclusive Fintech 50

Additionally, fintechs that were networked in some way — through an accelerator or incubator, for example — raised 1.5x the amount of their non-networked counterparts. These findings demonstrate the limited reach of investor networks. Because it is difficult to filter through the large number of investment opportunities, many investors rely on their networks to build their pipeline. In practice, this means that lesser-known startups tend to be overlooked, particularly in locales that need their services most. Providing greater visibility onto high-potential startups can help to address this problem of investment concentration, to the benefit of financially underserved populations.

Image Credits: Inclusive Fintech 50

The COVID-19 pandemic underscores the important role of fintech

Low-income households are particularly vulnerable to economic shocks because they often lack stable income, emergency savings, or access to health insurance. Similarly, micro, small, and medium enterprises (MSMEs) operate with thin capital bases and thus are made vulnerable by sudden shifts in supply and demand. The COVID-19 pandemic has underscored the important role financial services play as a stabilizing force for these populations. 

With the twin health and economic crises, early-stage inclusive fintechs themselves face unprecedented challenges in continuing to serve their customers, keep their employees safe, and access scarce resources to support ongoing operations. 

However, fintechs are stepping up to the challenge. As billions of people are unable to or discouraged from visiting brick-and-mortar branches, ATMs, and kiosks, the importance of transferring money, making bill payments, and accessing loans digitally has increased. Fintechs are extending grace periods, cancelling late fees, and communicating with customers regularly to provide reassurances. These startups are adapting quickly and demonstrating their commitment to mission.

Inclusive Fintech 50 builds serious visibility for fintech startups


Even in normal times, the limited reach of investor networks makes it difficult for many inclusive fintech startups to access capital and knowledge resources that can help position them for growth. These difficulties are magnified by the COVID-19 pandemic.

Inclusive Fintech 50 addresses these challenges by creating visibility for the most promising inclusive fintechs with a solution among credit, insurance, payments and remittances, savings and personal financial management, and infrastructure addressing challenges of underserved segments. Through a competitive process led by an independent panel of more than 35 judges from venture capital, technology, and financial services, the initiative brings selected fintechs together with leading investors, and develops industry insights from aggregated and anonymized applicant data.

In 2019, 400 fintechs based in 72 countries and with a combined customer base of nearly 70 million people submitted applications to Inclusive Fintech 50. This year, the judges will also select two of the final cohort of 50 to receive USD 25,000 based on an assessment of their contribution to the financial resilience of low-income households and businesses.

The application period runs from June 15 to July 20, 2020. Interested fintechs can learn more and apply at www.inclusivefintech50.com.