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Big Checks for Fintechs: Increasing investment, impact, and inclusion through blended finance

Matt Schaar Accion Venture Lab

As frontier and emerging markets build out their digital infrastructure, it will enable new digital business models that will drive financial and digital inclusion for millions. At the vanguard of those efforts will be specialist impact investment funds that can provide both the necessary capital and the insights and expertise those digital businesses will need to scale and deliver transformational impacts in local communities. Today, impact investment funds have succeeded in capturing innovative and early adopter investors but as their portfolios continue to scale, the funds are turning increasingly to large institutional investors as capital providers. But large institutional investors don’t come easy and without their own demands. Often they are not set up to do small tickets and require larger scale. They demand capital protection and lower risk for debt investments or higher and/or more consistent returns for equity. As always, the priority given to impact varies from investor to investor, but with the general trend towards larger ticket sizes and larger funds, how can the fund managers continue to maintain the integrity of the impact their investments are having, even as their management fees come under scrutiny? What strategies are available to turn these institutional investors into stronger advocates of responsible financial inclusion in emerging markets versus an exclusive focus on returns and a growth-at-all costs approach? What role can blended finance play as a bridge to these investors in helping shape the right risk-return profile of the funds while continuing to maintain a focus on impact and inclusion?

Hear from two impact investment fund managers, one debt and one equity, and one catalytic capital provider on how they are addressing these issues. Lendable offers debt financing for financial technology companies (fintechs) operating in emerging and frontier markets, with a focus on increasing access to credit for small-and-medium-sized enterprises and supporting the digital business ecosystem. Accion Venture Lab provides early-stage capital and extensive support to innovative, scalable fintech startups that improve the reach, quality, and affordability of financial services for the underserved. The U.S. Agency for International Development (USAID), has partnered with both fund managers through its Digital Invest program. The program provides customized advisory support and targeted, risk-tolerant, catalytic capital to encourage outside investment into partner funds that support internet service providers (ISPs) and fintechs.

What has each partner learned from the experience? How do blended finance models look different for debt and equity? What are the implications for the ecosystem and is the market moving in the right direction? And how has the flexible funding allowed the two types of fund managers to de-risk additional investment and achieve greater digital and financial access?

Track

Capital Flows for Impact: Dialogues Around the State of Impact Investment

Format

Panel (3 speakers)

Speakers

  • NameMatt Schaar
  • TitleOperating Partner
  • OrganizationAccion Venture Lab
  • NameTaha Gaya
  • TitleDigital Finance Advisor
  • OrganizationUSAID
  • NameDaniel Goldfarb
  • TitleExecutive Chairman
  • OrganizationLendable

Description

As frontier and emerging markets build out their digital infrastructure, it will enable new digital business models that will drive financial and digital inclusion for millions. At the vanguard of those efforts will be specialist impact investment funds that can provide both the necessary capital and the insights and expertise those digital businesses will need to scale and deliver transformational impacts in local communities. Today, impact investment funds have succeeded in capturing innovative and early adopter investors but as their portfolios continue to scale, the funds are turning increasingly to large institutional investors as capital providers. But large institutional investors don’t come easy and without their own demands. Often they are not set up to do small tickets and require larger scale. They demand capital protection and lower risk for debt investments or higher and/or more consistent returns for equity. As always, the priority given to impact varies from investor to investor, but with the general trend towards larger ticket sizes and larger funds, how can the fund managers continue to maintain the integrity of the impact their investments are having, even as their management fees come under scrutiny? What strategies are available to turn these institutional investors into stronger advocates of responsible financial inclusion in emerging markets versus an exclusive focus on returns and a growth-at-all costs approach? What role can blended finance play as a bridge to these investors in helping shape the right risk-return profile of the funds while continuing to maintain a focus on impact and inclusion?

Hear from two impact investment fund managers, one debt and one equity, and one catalytic capital provider on how they are addressing these issues. Lendable offers debt financing for financial technology companies (fintechs) operating in emerging and frontier markets, with a focus on increasing access to credit for small-and-medium-sized enterprises and supporting the digital business ecosystem. Accion Venture Lab provides early-stage capital and extensive support to innovative, scalable fintech startups that improve the reach, quality, and affordability of financial services for the underserved. The U.S. Agency for International Development (USAID), has partnered with both fund managers through its Digital Invest program. The program provides customized advisory support and targeted, risk-tolerant, catalytic capital to encourage outside investment into partner funds that support internet service providers (ISPs) and fintechs.

What has each partner learned from the experience? How do blended finance models look different for debt and equity? What are the implications for the ecosystem and is the market moving in the right direction? And how has the flexible funding allowed the two types of fund managers to de-risk additional investment and achieve greater digital and financial access?

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