Mark your calendars for Financial Inclusion Week 2022! 

Event

Financial Inclusion Week (FIW) is an annual gathering of the global community working to advance inclusive finance. The four-day virtual event is a forum for exchanging ideas, research, and perspectives from around the world. The Center for Financial Inclusion (CFI) convenes FIW each year and invites partner organizations to showcase work, share ideas on what’s ahead, network with others, and more. The community-driven agenda covers the most pressing topics in our space, helping to inform and advise global efforts to advance inclusive finance. FIW 2022 will be held October 17-20. Registration information will be made available at <a href="https://www.financialinclusionweek.org" target="_blank" rel="noopener noreferrer">financialinclusionweek.org</a> closer to the date.

The theme for 2022 is "Inclusive Growth in a Digital Era." Want to participate in 2022? The call for session proposals is now live! <a href="https://www.financialinclusionweek.org" target="_blank" rel="noopener noreferrer">Learn more about FIW</a> and <a href="https://app.smartsheet.com/b/form/c9a1ca94eb37456f8fae25515dbfe42b" target="_blank" rel="noopener noreferrer">submit your session proposal</a>.

CFI invites sponsors to support FIW. Sponsors help maintain FIW as a free event for our global community and benefit from visibility on their contributions to inclusive finance. If your organization is interested in sponsoring FIW 2022, please reach out to <a href="mailto:center@accion.org">center@accion.org</a>.

In the meantime, check out this <a href="https://financialinclusionweek.org/2021#page-section-61e9c01a780fa32ba37b6cba" target="_blank" rel="noopener noreferrer">playlist</a> of incredible content from Financial Inclusion Week 2021.

Financial Inclusion Week 2022

Upcoming Events

Research Topics

The application deadline has been extended to Aug. 1. 

Inclusive Fintech 50 Application Period is Now Open

Alexandra (Alex) Rizzi

Devina Srivastava

CFI explores how automated decision-making tools for digital credit are playing out for one demographic in India: interstate migrants.

Blog Post

“Essentially all models are wrong, but some are useful,” British statistician George E. P. Box declared. Despite progress made in machine learning and artificial intelligence, digital credit models risk being considered “wrong, but useful” – useful for certain groups such as urban salaried workers, but wrong as they leave behind large segments of the economy whose data trails are too faint or complex for a credit scoring algorithm.  

CFI recently explored how automated decision-making tools for digital credit are playing out for one demographic in India – <a href="https://www.habitat.org/sites/default/files/documents/Leaving-the-City-Behind_Rapid-assessment-with-migrant-workers-Maharashtra.pdf" target="_blank" rel="noopener noreferrer">the more than 54 million</a> interstate migrants – and what this might teach us about the ways data inputs and algorithms intersect with the digital lives of those at the margins.
<h1>Digital Credit in India is Booming, Yet Leaving Behind Large (and Possibly Viable) Segments of the Economy</h1>
The fintech ecosystem has ballooned in India in recent years, with an estimated 2,000 fintech startups and 300 digital lenders, including Buy-Now-Pay-Later (BNPL) players, operating by the end of 2020. Digital lending alone is expected to reach <a href="https://www.reuters.com/article/india-tech-financing-idUSL5N2NK4XL" target="_blank" rel="noopener noreferrer">$1 trillion by 2023</a>. While digital lenders existed prior to the pandemic, they have boomed over the last two years in the rush to conduct business and daily tasks remotely.

Earlier this year, CFI conducted desk research and interviews across the digital finance ecosystem in India and learned that most digital lenders are focused on serving urban, young, and employed consumers. With higher and more predictable income streams, this customer segment creates large volumes of digital data that can be mined to determine creditworthiness. And given the overall size of the Indian market, there is still room to grow before even this segment is saturated. But where does that leave the rest of consumers, including migrants?

While migrants have propelled the growth of vital industries such as <a href="https://cprindia.org/wp-content/uploads/2022/04/Push-the-policy-needle-forward-on-migrant-support.pdf" target="_blank" rel="noopener noreferrer">construction, hospitality, and commercial agriculture</a>, they historically have faced hurdles in accessing formal financial services and government benefits. And now with the increasing reliance on digital data to allocate benefits and make credit decisions, migrants potentially could be further marginalized.
<blockquote class="pullquote--right">A migrant's data trails do not fit the mold built for the urban, young, employed segment digital lenders were designed to serve.</blockquote>
Take the case of Mohan Kumar, an archetypal migrant whose data trails systematically exclude him from financial services. Mohan works in Surat, India in a garment factory, but is originally from a village near Ganjam, Odisha where his family still lives. Recently married, he visits his wife, who now lives with his parents back in Ganjam, for two weeks twice a year. On his last visit home, Mohan and his wife decided to open a stationary store. When seeking advice from friends, Mohan learned about digital loans available through the phone. Although small, these loans helped a few of his peers with fledgling, entrepreneurial ventures. Despite having a steady, full-time job in Surat for the last four years, Mohan is rejected again and again from numerous digital lenders. Simply put, his data trails do not fit the mold built for the urban, young, employed segment they were designed to serve.

Millions of migrants face similar challenges as Mohan. In general, migrants have fainter data trails due to lower levels of digital activity. Many low-income migrants have limited financial and digital capability and do not possess smartphones. And those who do have a smartphone typically only use mobile data when necessary due to the high cost. Additionally, migrants often rely on agents, such as kirana store owners, to assist them with digital transactions, and these transactions may not be directly associated with their identity.

Furthermore, digital lending algorithms do not understand the data trails of migrants very well. Migrants’ mobility causes multiple barriers. Some migrants change phones and phone numbers between their destination and home, which can impede the verification of transactions or authorizing identity via one-time-passwords (OTP), leading to KYC failures. Additionally, a mismatch between the location of the cell tower where a potential borrower applies for a loan and the location where the phone’s SIM is registered could cause the applicant to be rejected. While providers rationalize that the geographic mismatch might imply that a customer would be hard to reliably reach, unfortunately, this can unintentionally screen out viable borrowers who are inherently on the move, such as migrants.
<blockquote class="pullquote--left">Migrants' payment patterns are not well-understood or formalized, organized, or digitized.</blockquote>
When it comes to assessing cashflows to determine repayment capacity, migrants’ digital data trails make it difficult to see the full picture of their economic lives. For example, even if a migrant has established a stable income over multiple years, as is the case with Mohan, often their payment patterns are not well-understood or formalized, organized, or digitized. For example, some contractors provide an advance payment while others pay weekly or monthly, and some cover living expenses for migrants but deduct the costs from their salaries. In addition, migrants’ data trails might show varied consumption patterns in their two locations – for instance, in Surat, Mohan spends his money on accommodations and food, while back in Odisha he spends on household expenses and children’s education. Such variations in earning and spending tend not to fit within lending models’ range of what makes a viable borrower.

Finally, there is the issue of accessibility. Examining the top 30 downloaded digital credit apps in India (15 on the App Store and 15 on the Google Play Store), we found that 28 out of 30 worked only in English, with just 2 offering Hindi. Such limitations favor highly educated segments and inherently exclude vast numbers of potential clients.
<h1>More Effort is Needed to Ensure Digital Credit Does Not Further Exclude Marginalized Groups</h1>
The Reserve Bank of India (RBI) has taken an interest in digital lending and consumer protection issues over the last two years, asking Google to <a href="https://economictimes.indiatimes.com/tech/technology/google-removes-personal-loan-apps-violating-user-safety-policies-from-play-store/articleshow/80267043.cms?from=mdr" target="_blank" rel="noopener noreferrer">remove at least 30 lending apps from the Play store</a> that did not comply with local laws, <a href="https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52589" target="_blank" rel="noopener noreferrer">convening a working group</a> under the chairmanship of executive director Jayant Kumar Dash, and empowering <a href="https://faceofindia.org/index.html" target="_blank" rel="noopener noreferrer">FACE</a> to become a self-regulatory organization (SRO). The working group focused on a range of consumer protection issues including transparency and disclosure, aggressive sales, consent, and algorithmic design. For instance, one of the group’s recommendations suggests that providers have verifiable audit trails for their algorithms and models should be documented to ensure transparency. While a promising direction, little is understood about what this will look like in practice and how it will balance accountability with the proprietary nature of the models.

Moving forward, digital lenders should find ways to understand and assess the unique activities of groups like migrants through more nuanced models and data inputs that give a more complete picture of a migrant’s economic life. For example, do workers travel back to the same destination each working cycle? How many trips home do they make? How have income patterns shifted within their employment – is it consistent or is it varied?
<blockquote>Digital lenders should find ways to understand and assess the unique activities of groups like migrants through more nuanced models and data inputs that give a more complete picture of a migrant’s economic life.</blockquote>
Providers could draw inspiration from the work of <a href="https://indiamigrationnow.org/" target="_blank" rel="noopener noreferrer">India Migration Now</a> (IMN), which is working to understand the nuances of the data trails of migrants. They are preparing to launch a pilot for a customized, digital lending product for migrants that will leverage both traditional and non-traditional indicators to determine creditworthiness. IMN’s scoring model will leverage data inputs such as frequency of travel, place of origin, destination for migration, frequency of remittance transfer, length of stay at migration location, GPS, and mobile top-up amounts. IMN’s focus on migrants requires commitment, research, time, and resources, which may be less attractive to other digital lenders when there are still potential customers with more robust data trails who are easier to reach.
<h1>What Can Be Done to Maximize the Inclusivity of Algorithms?</h1>
Research: We must do more to understand <a href="https://escholarship.org/content/qt3gt9x28k/qt3gt9x28k.pdf?t=qx7nai" target="_blank" rel="noopener noreferrer">whether specific segments that are already at risk for exclusion</a> are further included or excluded by algorithmic decisions. Researchers could help by leveraging context-specific research about specific segments – for instance, migrants or <a href="https://ncst.nic.in/" target="_blank" rel="noopener noreferrer">scheduled tribes</a> in India – to help data scientists better understand the data trails of these groups and incorporate insights into models.

Guidance and Incentives for Providers: While advancements in auditing and disparate impact testing can measure models' results across a set of sensitive characteristics (e.g. gender, race, religion, ethnic group), providers may not prioritize the inclusivity of their algorithms. In markets like India, for instance, financial service providers continue to focus on growth among customer segments with more “intuitive” data trails and on keeping customer acquisition costs low. In our view, stakeholders such as impact investors and industry associations can engage with providers to provide guidance and/or incentives for inclusive algorithms. CFI <a href="https://dai-global-digital.com/how-four-awardees-are-paving-the-way-for-a-more-equitable-ai-powered-future.html" target="_blank" rel="noopener noreferrer">recently launched a project</a> to help impact investors engage with fintechs on their algorithms during their due diligence processes.

Government Engagement: Because this is a very nascent field, more work is needed to test regulatory approaches and efforts to build the public sector’s capacity for supervision. Government entities, such as the Reserve Bank of India, have begun to think <a href="https://www.centerforfinancialinclusion.org/accountability-for-algorithms-a-balancing-act-for-governments">more strategically about the supervision</a> of high-stakes algorithmic decisions. Ongoing work is needed to understand and advance data protection regulation, national AI strategies, and sector-specific initiatives, such as the RBI working group or Project Veritas in Singapore, to name a few.

Digital Credit Algorithms in India: Expanding Access or Cementing Exclusion?

Lucciana Alvarez Ruiz

Edoardo Totolo

Global Findex 2021: Growth, Stagnation, and (Relative) Decline in Global Financial Inclusion

Jayshree Venkatesan

RFF convenes this week for the first time since 2020, and the rapid pace of change in financial services, and the external world at large, supplies stakeholders with a plethora of issues to discuss regarding emerging risks to consumers.

We Are All in This Together

Ethan Loufield

Prior to the launch of the fourth annual Inclusive Fintech 50 (IF50) competition on June 27, we look at findings from last year’s competition and identify ways to help inclusive fintechs build commercially viable businesses.

There has been a lot of talk in recent years about the promise of fintech to help advance financial inclusion. This has been especially true during the pandemic: acceleration in digital adoption, spurring further growth in the inclusive fintech sector. Much of this growth has taken place in Africa, where fintechs raised <a class="Hyperlink SCXW16100441 BCX0" href="https://thebigdeal.substack.com/" target="_blank" rel="noreferrer noopener">$2.3 billion dollars in 2021, up from $830 million in 2020</a>, helping to catch up with funding levels in South Asia and Latin America.
<blockquote class="pullquote--right">While inclusive fintechs are developing innovative ways to reach new customers, meaningful customer segments remain underserved.</blockquote>
With this growth, there also is more data and insights about fintechs and their customers. Last year, two reports, CFI’s <a class="Hyperlink SCXW14958972 BCX0" href="https://www.centerforfinancialinclusion.org/insights-from-the-2021-if50-applicant-pool" rel="noreferrer noopener">Inclusive Fintech 50: Driving Innovation in an Era of Uncertainty</a> and Catalyst Fund’s <a class="Hyperlink SCXW14958972 BCX0" href="https://bfaglobal.com/catalyst-fund/briter-catalyst-fund-state-of-the-fintech-industry-report/" target="_blank" rel="noreferrer noopener">State of Fintech in Emerging Markets </a>(in collaboration with <a class="Hyperlink SCXW14958972 BCX0" href="https://briterbridges.com/" target="_blank" rel="noreferrer noopener">Briter Bridges</a>), leveraged such data to take stock of the industry’s progress. The reports arrived at similar conclusions: while inclusive fintechs are continuing to develop innovative ways to reach new customers, meaningful customer segments remain underserved and fintech funding remains concentrated.

The truth is that we are still in the early stages of bringing the power of fintech to bear on the challenges that low-income and vulnerable populations face. Advances have certainly been made, but the greatest gains only can be realized through intentional and collective efforts on the fintech frontier. This will help pave the way for strategies to turn these underserved markets into opportunities for growth.
<h1>Outreach to Underserved People</h1>
On the bright side, early-stage fintechs continue to proliferate. Last year, nearly 300 such fintechs applied to <a href="http://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50 (IF50)</a>, an annual competition to showcase early-stage fintechs driving financial inclusion around the world. Expert judges selected 50 winners from this applicant pool based on established criteria of inclusivity, innovation, scale potential, and traction. 

IF50 applicants have shown a continuous drive to innovate, demonstrated by their broad range of product areas, with varied models, partnerships, and customer acquisition strategies. The fintechs also are finding diverse ways to reach underserved people, such as through the provision of in-person digital skills training, use of agents, and product offerings that can be accessed without a smartphone.

Applicants are also designing solutions to address challenges in areas that are fundamental to people’s livelihoods – including climate resilience, health, and support for micro and small enterprises. For example, IF50 2021 winner <a href="https://gotugende.com/" target="_blank" rel="noopener noreferrer">Tugende</a> uses asset finance, technology, and a customer-centric model to help informal sector entrepreneurs in Africa grow their businesses and access value-added services such as medical insurance. Eighty percent of IF50 2021 applicants reported that their solutions helped customers access essential services during the pandemic, such as healthcare, government relief, and clean energy.

&nbsp;

<img class="size-full wp-image-44679 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/06/Tugende-Snapshot-03-e1655994301976.png" alt="" width="1000" height="599" />

&nbsp;
<h1>Gaps in Inclusivity</h1>
Despite this progress, significant gaps in customer outreach remain. For example, only 23 percent of fintechs in the Catalyst Fund sample reported that women constituted more than 50 percent of their customer base. Moreover, 38 percent of the IF50 2021 applicants do not disaggregate client data by gender.

Catalyst Fund and IF50 both also found that most inclusive fintechs do not focus mainly on low-income people. In the IF50 sample, 41 percent of applicants reported primarily targeting low-income customers. More than 70 percent of startups in the Catalyst Fund sample reported that fewer than 25 percent of their customers live under the poverty line, although poverty rates in the countries where these startups operate are closer to 35-45 percent.

The Catalyst Fund data also showed that as startups grow, they tend to move upmarket. Particularly for early-stage startups looking to raise capital, showing strong acquisition numbers is imperative, and middle- and higher-income customers tend to be <a href="https://medium.com/caribou-digital/what-are-the-limits-of-the-private-sector-in-serving-the-poor-3ee9a9a468fc" target="_blank" rel="noopener noreferrer">easier and cheaper</a> to acquire.
<h1>Concentration in Funding and Geographies</h1>
The pressure to acquire more customers may be driven by the underlying scarcity of funding for early-stage fintechs. Although investment flows have grown dramatically in recent years, funding in emerging markets is concentrated among very few startups. Out of 101 Sub-Saharan African startups in the IF50 2021 sample, five accounted for 65 percent of the funding. In Latin America, five of 36 applicants received 83 percent of funding.

Not only is funding concentrated among a few startups, but those startups are also based in a select few countries. Sixty-four percent of total funding reported by IF50 2021 applicants went to fintechs based in five countries: Colombia, India, Mexico, Singapore, and the United States. In Latin America, four countries (Brazil, Mexico, Uruguay, and Colombia) accounted for over 99 percent of funding in the Catalyst Fund sample. Such geographic concentration particularly excludes countries with lower levels of financial inclusion. Of the 16 countries in the IF50 sample that received over $10 million, only three have financial inclusion levels below 40 percent. Similarly, <a href="https://qz.com/africa/2029505/everything-you-need-to-know-about-fintech-financing-in-africa/?utm_source=email&amp;utm_medium=africa-launch-list&amp;utm_content=017e81c9-90b4-11ec-8d42-724a485ab421" target="_blank" rel="noopener noreferrer">fintech funding in Africa is concentrated in Kenya, Nigeria, and South Africa</a> (87.9 percent), all countries with higher levels of financial inclusion and/or more developed fintech ecosystems.
<blockquote>Not only is funding concentrated among a few startups, but those startups are also based in a select few countries.</blockquote>
Deals are also concentrated in certain types of products: those in payments, digital credit, and neo banks, and those that require a smartphone. In contrast, savings and insurance fintechs receive less funding, as do models that leverage USSD or lower-tech accessibility. IF50 data found that funding to fintechs offering services that require smartphones was about 3.5 times greater than those needing only a basic or feature phone. This may be because lower-tech models cost more to operate and users cannot bear higher-margin pricing.

Investment flows continue to favor men, and along all stages of growth, men founders raise more than women founders. According to 2021 IF50 data, women founders, on average, raised one-third the amount raised by men founders.

&nbsp;

<img class="wp-image-44683 size-full aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/06/IF50-blog-post-stacked-graph-1-e1656002022248.png" alt="" width="1000" height="652" />

&nbsp;

Overall, the data demonstrates that the majority of inclusive fintech startups, particularly those servicing more excluded segments, continue to find it difficult to access investment capital.  Being able to prove the business case of untapped markets is difficult, but Okapi Finance, an IF50 2021 winner, aims to demonstrate the potential by focusing on women merchants in Africa’s informal sector.

&nbsp;

<img class="aligncenter wp-image-44681" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/06/Okapi-snapshot-01.png" alt="" width="1000" height="599" />

&nbsp;
<h1>Looking Ahead</h1>
While there are opportunities for early-stage fintechs to build commercially viable businesses that are truly inclusive, more effort is needed from the broader ecosystem to ensure that innovative solutions can take hold. Startups are continuing to emerge on the frontier, but they need access to the visibility, resources, expertise, and networks that support their growth into sustainable and impactful companies.

Supporters of digital financial inclusion can help by directing greater attention to innovative startups in overlooked markets. Competitions like IF50 and those organized by <a href="https://www.womensworldbanking.org/fintech-innovation-challenge-2021/" target="_blank" rel="noopener noreferrer">Women’s World Banking</a> and the <a href="https://www.afi-global.org/newsroom/news/applications-open-for-the-2022-afi-inclusive-fintech-showcase/" target="_blank" rel="noopener noreferrer">Alliance for Financial Inclusion</a>, and market insights provided by research organizations like Briter Bridges, also help to raise awareness. Incubators and accelerators, such as <a href="https://bfaglobal.com/catalyst-fund/" target="_blank" rel="noopener noreferrer">Catalyst Fund</a>, can assist in de-risking less proven models and making them more market-ready via grant funding, mentorship, and other venture-building services. And finally, greater investment, particularly in the $250K to $1M range, can help to fuel early-stage ventures pioneering innovative solutions.

The application period for the 2022 <a class="Hyperlink SCXW136892565 BCX0" href="https://www.inclusivefintech50.com/" target="_blank" rel="noreferrer noopener">Inclusive Fintech 50</a> competition will open Monday, June 27, and inclusive fintech startups – especially those at the frontier – are strongly encouraged to apply. The 2022 theme is “Making Digitalization Count.” IF50 is sponsored by Visa, MetLife Foundation, and Jersey Overseas Aid &amp; Comic Relief.

Driving Inclusivity on the Fintech Frontier: Let’s Make It Count

David Porteous

Sam Parker

Marc Herson

Is there value in good governance at the early-stage of a company’s life? It turns out that the answer depends on with whom you speak and on what you mean by “good governance.” We spent two months speaking widely to investors, accelerators, and founders in the startup investment ecosystem in different parts of the world. This was part of an exercise commissioned by the Center for Financial Inclusion to wrap up its multi-year <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/board-leadership-for-impact-program">Board Leadership for Impact program</a> by considering governance needs of early-stage companies – ranging from startup to a Series B funding round or equivalent.

Our interviews showed a disconnect in understanding between funders and founders, caused in part because the word “governance” is vague with different connotations. Funders differed in their degree of activism on the issue of governance, but tended to agree on the value of good governance and had a general desire to see certain practices in place over time. This was true whether or not the funder’s strategy or available resources allowed them to be actively involved in investee governance.

However, founders tended to have less positive views of the value of governance at the early-stage. Some founders experienced a low return on their investment of scarce time and money in formalizing their board. The co-founder of African fintech Zoona, Mike Quinn, writes in his recent autobiographical reflection, <a href="https://www.amazon.com/Failing-Win-Hard-earned-lessons-purpose-driven-ebook/dp/B09BDL1HQ8" target="_blank" rel="noopener noreferrer">Failing to Win</a>, that while he spent a lot of time preparing for board meetings, the outcomes of meetings were not focused on the pressing issues he faced as an early-stage CEO. For other founders, governance connoted adding formality and bureaucracy in ways that fettered their discretion and ability to move fast at a stage when there was little time to waste.

This is one of the reasons why the accelerators with which we spoke tend to avoid putting structured emphasis on the issue of governance, and instead, focus on product-market fit and go-to-market strategies. This Silicon Valley “proverb” expresses the prevailing view of many founders that boards bring more risk than they bring value: “Good boards don’t create good companies, but a bad board will kill a company every time.”
<blockquote class="pullquote--right">Founders who are working on their second or later startup are much more likely to recognize the value of paying attention to governance early on.</blockquote>
While we heard evidence of this disconnect between funders and founders in our interviews, we don’t want to exaggerate its extent: it turns out that founders who are working on their second or later startup are much more likely to recognize the value of paying attention to governance early on, in part because of ‘scars’ from difficulties they experienced in earlier ventures. And there is value in good governance: funders generally supported the view that investors are willing to pay a premium for good governance – certainly by the time of a Series B round. Even at the time of a seed or Series A round, the lack of governance processes is a negative screen for many investors. Founders can capture more investment value by building a governance roadmap that anticipates how their governance structures and practices will evolve as they mature.

Part of the disconnect is generated by different understandings of the term governance. Some definitions emphasize the structure and practices, usually focused on the role played by the board of directors. This tends to be the emphasis of <a href="https://www.cfainstitute.org/en/ethics-standards/codes/esg-standards" target="_blank" rel="noopener noreferrer">ESG standards </a>designed for and applied primarily to large public companies where the board plays a central role. For startup companies, the board typically becomes the main governing body after an inflection point, usually a seed or Series A funding round in which external investors have at least one board seat. But prior to that point, the locus of governance may well sit outside a formal board and be vested rather in less formal decision-making structures among founders, perhaps assisted by mentors or an advisory board.

It is important to note that an overemphasis on governance structures misses a key point of what happens to a company during a startup journey: not only is a company emerging out of an idea, but it is also accumulating stakeholders other than the founders – including investors, employees, suppliers, government officials, and the society in which it operates – who have legitimate but often competing expectations that their needs and claims on the company will be considered and met.

Good early-stage governance amounts to effective and ethical decision-making processes in the transition from founder-centric to a multi-stakeholder environment. Governance is a progressive process along the startup journey: governance practices evolve as the startup evolves. Smart, agile governance recognizes not only that an evolution towards multi-party decision-making is inevitable but also that it can and should be value adding. The interviews shed light on the importance of reframing early-stage governance more along these lines. And the rationale for doing so is clear: for founders, good governance pays off through better access to capital on better terms; for funders, good governance helps to de-risk a fundamentally risky early-stage investment proposition. This forms the basis of reconnecting the interests of founders and funders.
<blockquote>For founders, good governance pays off through better access to capital on better terms; for funders, good governance helps to de-risk a fundamentally risky early-stage investment proposition.</blockquote>
Reframing early-stage governance is important. Without it, the disconnect between founders and funders may widen. ESG pressures are rising for fund managers, even in alternative asset classes like venture. Without a clear reframing, this pressure may have the unintended consequence of rigidifying early-stage governance so that it is less, not more, effective. That deadweight loss is something society can ill afford at a time when risk capital may become scarcer and when innovation is required as never before to reach the <a href="https://sdgs.un.org/goals" target="_blank" rel="noopener noreferrer">Sustainable Development Goals</a>.

Reframing is also timely because of recent events in the emerging world, which has experienced a flood of VC investments in the past few years. In April 2022, former employees and an investigative journalist surfaced <a href="https://restofworld.org/2022/inside-the-scandal-at-flutterwave-nigerias-fintech-champion/#:~:text=The%20police%20said%20at%20the,ultimately%20released%20without%20being%20charged." target="_blank" rel="noopener noreferrer">allegations of abuse and misconduct </a>at one of Africa’s fintech unicorns, Flutterwave. If found to be true, these may be attributed in large part to lack of good governance. This one case may be the tip of an iceberg: also in April 2022, Sequoia India published a <a href="https://www-india.sequoiacap.com/corporate-governance-the-cornerstone-of-an-enduring-company/" target="_blank" rel="noopener noreferrer">blog post </a>reporting that some founders in their portfolio were under investigation for potential fraudulent practices or governance lapses. Their lament expresses the reality that some VCs, in their chase to win deals and be “founder-friendly,” have neglected, or at least underemphasized, their governance responsibilities. Sequoia India has committed to double down on improving governance at its early-stage portfolio companies.

We hope that other VCs and impact investors will follow suit. We also hope that the outcome will not just be more procedures or controls, though some of that may well be needed, but rather a smart, agile approach to good governance at the early stage.

Is There Value in Good Governance at the Early-Stage?

Latest Blog Posts

Learn about FIW, watch last year's content, fill in the submission form, and more.

Now Accepting Proposals for Financial Inclusion Week 2022

#strategyvideo

Moving Beyond Access Toward Improving Outcomes

A longitudinal research program in four emerging markets 

COVID-19 & MSMEs: Data and Analysis to Understand Impact

How Financial Services Can Mitigate Climate Risks

Julia Arnold

Evelyn Stark

Report

Investing in digital financial capability is essential to support women navigating increasingly digitalized financial systems. A woman who is digitally and financially capable can evaluate, choose, and use financial services that enhance her life. Investing in her digital financial capability can contribute to meaningful access to and usage of financial services. This can be a positive step in improving economic opportunities for women and their families.

Approaches that work for women require going beyond traditional financial education to approaches that may require more time, support, and a deeper understanding of the social and <a href="https://www.centerforfinancialinclusion.org/normative-constraints-to-womens-financial-inclusion-what-we-know-and-what-we-need-to-know">gender normative constraints</a> that prevent women from realizing their economic potential.

This publication shares how we can improve the design and delivery of digital cash transfers for low-income women using a four-phased approach: diagnose, design, deliver, and document. It presents examples of promising interventions tailored to women’s needs and realities and offers practical suggestions and tools for market and ecosystem actors to support women’s digital financial capability.

This resource was developed in partnership with the World Food Programme (WFP) and the Bill &amp; Melinda Gates Foundation.

Making Digital Financial Capability Programs Work for Women

to advance inclusive financial systems for low-income people around the world. 

Indonesia

Consumer Protection

Delivery Channels

Financial Health

This is an example page. It&#8217;s different from a blog post because it will stay in one place and will show up in your site navigation (in most themes). Most people start with an About page that introduces them to potential site visitors. It might say something like this:
<blockquote>Hi there! I&#8217;m a bike messenger by day, aspiring actor by night, and this is my website. I live in Los Angeles, have a great dog named Jack, and I like piña coladas. (And gettin&#8217; caught in the rain.)</blockquote>
&#8230;or something like this:
<blockquote>The XYZ Doohickey Company was founded in 1971, and has been providing quality doohickeys to the public ever since. Located in Gotham City, XYZ employs over 2,000 people and does all kinds of awesome things for the Gotham community.</blockquote>
As a new WordPress user, you should go to <a href="https://content.centerforfinancialinclusion.org/wp-admin/">your dashboard</a> to delete this page and create new pages for your content. Have fun!

We use rigorous research and advocacy to advance inclusive financial systems for low-income people around the world.