Accion, a global nonprofit organization, announced on Tuesday that Accion is a $152.5 million fund targeting large financial institutions, including microfinance, serving small and medium-sized businesses currently excluded from the global financial system. Announced the launch of the Digital Transformation Fund.
The company said in a statement that it will provide these companies with growth capital and strategic support for their “digital transformation.”
For more than 60 years, this nonprofit organization has been active in the financial services field. First, by developing and scaling solutions tailored to small business orders, smallholder farmers, and women. Second, we provide investment and advisory services to traditional financial institutions and microfinance companies, creating products that are easy for them to use. Accion's years of work have helped build 230 financial services providers serving low-income consumers and businesses in 75 countries.
In 2019, Accion took a bold step into early-stage fintech investing by launching Accion Venture Lab, a $23 million fintech startup fund. This venture arm has supported over 65 of his seed and Series A companies operating in over 30 countries in Latin America, Southeast Asia and Africa. Notable investments include Konfio, Lulalend, Fairbanc, and Khazna.
While some of these startups have become large fintech companies in their respective markets, they are leveraging technology to expand the reach and affordability of their products to underserved populations. They are leveraging technology to not only extend affordable pricing but also drive customer engagement. Various institutions are trying to make a comeback.
“After years of working on financial inclusion, we have realized that the digital inclusion of the world's rural areas and those left behind by traditional financial institutions is lagging behind,” said Axion Digital Trans. said Abhishek Agrawal, Managing Partner, Formation Fund. , on the phone with TechCrunch.
“And the challenge was twofold: one, because rural customers and those who are digitally late don’t have enough trust in digital technology; and the second part of that is that institutions (Traditional banks and financial services institutions that lacked sufficient knowledge and internal support to invest in real digital customer engagement.)
Agrawal said the pandemic has highlighted the severity of the digital inclusion gap. Accion had been advising banks and microfinance institutions on how to engage with customers digitally, but the nonprofit recognized it needed to put its money where its mouth was, which is why this fund This was achieved by launching . Accion Digital Transformation Fund's investments will focus on companies serving micro, small and medium enterprises (MSMEs) in South Asia, Southeast Asia, Latin America and Africa.
Accion Impact Management manages the Accion Digital Transformation Fund and Accion Venture Lab.
While Venture Lab focuses on early-stage fintech companies and new models, Digital Transformation Fund focuses on large financial institutions that have not yet pivoted or invested significantly in digital customer engagement. Targeted at service companies.
Its approach includes deploying equity investments in the range of $12 million to $15 million, along with contributions from limited partners, to support these companies in their efforts toward digital transformation and enhanced customer engagement. It is. This will enable fintech and traditional financial services companies in the nonprofit's portfolio across both funds to digitally serve underserved customer segments.
“In this case, our priorities would be traditional microfinance, affordable housing companies, and microfinance institutions converting into banks. For us, it's about digitizing processes and core It's not about helping them implement a banking system. That's not our place,” Agrawal said.
“We want these banks and traditional financial services institutions to think about how to engage with their customers more digitally so that they have more choice in the future. , it will also help prepare for what the future holds, as traditional financial services companies have so far been left behind and taken a bold, collaborative and competitive stance in the fintech world.”
The Accion Digital Transformation Fund will not make any additional fintech investments from Venture Lab. Instead, the fund will focus solely on new investments in traditional financial companies. The company plans to make 10 to 12 investments, with flexible allocation of capital between regions of interest.
“There is no hard cap allocated to each region, as it depends on the specific needs and potential of each company in different regions,” Agrawal said. However, the managing partner added that the firm intends to build an overall balanced portfolio with three to four investments in Asia, two to three in Africa, and two to three in Latin America.
With this in mind, our fund will build a portfolio that takes into account differentiated models. For example, in India, Annapurna Finance, which has already made two investments, provides unsecured microloans of about $400 on average to underserved women. In addition, IKF Finance, which operates primarily as an asset finance company, provides secured financing. Further ticket sizes range from $3,000 to $5,000.
What will digital transformation and engagement look like in India for companies that offer insecure, very small-sized tickets versus those that offer secure, slightly larger-sized tickets? Agarwal said he hopes to answer questions and demonstrate examples of the commercial benefits of these models for the rest of the market to follow.
The fund's limited partners include British International Investment (BII), a UK development finance institution and impact investor. Dutch entrepreneurial development bank FMO. IDB Investment. International Finance Corporation (IFC); Mastercard; OeEB Austrian Development Bank. and Swedfund, the Swedish development finance institution.
In addition to the Digital Transformation Fund and Venture Lab, Accion's other investment strategies over the years include Accion Emerge, which supports growth-stage companies innovating in embedded finance, agritech and the future of work, and its relationship with spin-off Quona is included. Capital is a venture firm focused on financial inclusion in emerging markets.