Fintech, financial inclusion, and investor opportunity


Fintech startups might be concentrated in London, Switzerland, and other big developed markets, but their impact might be most felt in much of the emerging world. That is particularly the case when it comes to financial inclusion, a big issue in much of the emerging world. These developments could provide a great thing for investors.

Emerging out of the financial crisis of 2008, as consumers and businesses wanted new and better ways to handle their finances, fintech has grown rapidly ever since. Arguably, London is the centre of much of the activity in the sector, with Switzerland also another thriving hub.  

Firms like Revolut, Monzo and Transferwise have shown that the UK can create success stories in fintech which rival the startup world of Silicon Valley. But what really is getting the fintech community excited is opportunities in many emerging markets, particularly when those opportunities are linked to financial inclusion.

Things like the United Nations’ Sustainable Development Goals highlight the importance of financial inclusion. Access to new banking systems could transform the lives of many people and businesses in emerging economies. And this is perhaps where the big opportunity lies for fintech.

Just look at some of the numbers, which are so appealing to the world of fintech when it comes to financial inclusion.

  • There are 2.7 billion unbanked people globally
  • There are 2.5 billion smallholder farmers in the world. 95% of them are paid in cash.
  • In India, banks in rural areas have reduced poverty by 17%.
  • Farmers in Malawi with bank accounts spent 13% more on equipment & increased crop output by 21%
  • In Kenya, 55% adults do mobile payments

Despite obvious success stories, most farmers in Asia and Africa still lack adequate financial infrastructure for their businesses to thrive. And this leads to problems like cash-based agriculture sectors suffering from inefficient value chains resulting in huge wastage of food. Also, cash-based systems often lead to opaque pricing which increases costs for farmers.

The so-called Velocity 12 nations are poised for a boom in middle-class consumers in the next 20 years. Centred principally in South Asia, the Velocity 12 nations include Myanmar, Indonesia, the Philippines – extending to China, and in Africa: Egypt, Nigeria in Africa, and in Latin America: Mexico and Brazil.

When innovation in developed markets is leveraged to address financial inclusion in the emerging world, it invariably becomes a success story. However, spotting these opportunities is no mean feat. Most fintech firms in the UK look to Europe and the US to expand into, not necessarily Asia and Africa. These firms not only need a visionary management team to lead them to solve emerging markets issues, but also require suitable investors who can bring market access.

Many fintech firms build their products and services in developed markets, with a view to addressing specific emerging markets problems. For example, US-based Banqu is focused on improving financial Inclusion through social and economic identity. It is using blockchain technology and their primary geographical focus is in Africa and Latin America. This is made possible by the local knowledge of the founders Hamse Warfa (an ex-refugee from Kenya) and Ashish Ghadnis.

Yielders, an equity crowdfunding platform based out of the UK, is the first to bring Western banking regulatory frameworks together with Shariah banking principles. Founded by second-generation Muslims in the UK, Yielders has spent three years to get the platform approved by the local regulator and by Shariah laws. They have built their financial products ground-up with a view to providing market competing yields through unleveraged and sustainable financial modelling.

These are examples of innovative business models that are relevant to the emerging market consumer. However, financial inclusion doesn’t have to be just an emerging market opportunity.

When it comes to sustainable fintech investments, there is no lack of innovation happening in the UK and other developed markets. But the markets for these products and services are largely in the emerging world. Patient capital takes time to create impact, but the outcome lasts generations, and they are hugely rewarding.

That said, it does take an expert eye to spot such opportunities and execute them.



Arun Krishnakumar is a partner at Green Shores Capital. Green Shores is an Inclusion fund focused on healthcare and fintech. Arun has made several sustainable investments in fintech. He writes on and runs a podcast focused on Financial Inclusion called Rhetoriq. He has post-graduate degrees from London School of Economics and the University of Oxford.

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