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Emerging Technologies Have a Place in the Market, But Financial Inclusion in Africa Should Continue to Be Explored

Conventional wisdom holds that one must learn to walk before running.

So, when more than half of your population (57%, according to data from U.K.-based The Fintech Times) does not have a traditional bank account, ensuring everyone is financially included would translate to learning how to walk. Only then can you start “running” by dabbling in technologies such as cryptocurrencies and exchanges.

For Accion Venture Lab’s (AVL) Ashley Lewis, as much as these emerging technologies are “incredibly exciting and have a place in the market,” financial inclusion should not be overlooked.

“I also think some of the foundational elements of inclusion, such as insurance, financial health, affordable lending and full-service platform offerings, should continue to be explored,” said Lewis, who is Africa director at AVL, a seed-stage impact investment initiative that is part of the U.S.-based global nonprofit, Accion.

In line with her organization’s mission of reducing financial inclusion worldwide, she added that making traditional products and services more available – consumers’ access to a bank account or small business credit access, for example – is key to ensuring that more people are not excluded from the financial fold.

The FinTech venture capital fund has been doing its part. When Lewis was brought on to lead its West Africa expansion in 2017, there were only a handful of portfolio companies. Today, AVL has invested in 11 companies across four different markets: Egypt, Nigeria, South Africa and Kenya, which together receive most of the capital flows coming into the region.

But the fund is not restricted to those countries, and has previously screened companies based in other countries like Ghana, Morocco and Tanzania. “We are definitely opportunistic and open to investing across the region,” remarked Lewis, adding that it’s important that ventures are reaching multiple African markets and making an impact beyond their borders.

She used one of AVL’s portfolio companies, agricultural insurance startup Pula, as an example of a company that is based in Kenya, but serves smallholder farms in 13 different countries across the continent.

“They’ve found a way to not only expand throughout Africa, but are also exploring international expansion in Latin America and Asia,” said Lewis, who leads her team’s deal activity and portfolio management from her base in Lagos, Nigeria.

One market she singled out is Egypt, which she said is “very primed for growth” given the significant amount of domestic and international investment opportunity and interest. The North African country has a deep bench of technology talent, as well as a progressive regulator – “the Central Bank of Egypt is one of the regulators that I speak to the most in the region,” Lewis explained.

Moreover, the country has a promising consumer base – 100 million people, many of whom are connected digitally and are excited about adopting digital innovation – not to mention the “tremendous amount of work” it has done to support innovators in growing their businesses.

The Due Diligence Process

Lewis said that because of the organization’s financial inclusion mandate, the first thing they’ll observe is impact, to determine whether the product is reaching underserved consumers or small businesses.

“We focus on how you [the business] are including more people into the financial services system, keeping customers more engaged and expanding the ‘wallet’ of services they can access,” she pointed out.

Lewis added that it’s not simply a question of the banked and unbanked: “It’s about affordability, it’s about stickiness of products, and it’s also about being able to ensconce them with a number of services that could actually create a more financially healthy life for a small business or an individual.”

Once the impact is guaranteed, what comes next is looking for the most innovative companies that don’t shy away from risks, are open to trying new things and are willing to invest in new innovations. “We’re interested in seeing how a business is addressing some of these inclusion challenges in a way that we haven’t seen done before in the past,” Lewis remarked.

Historically, the fund has invested up to $500,000 in the seed round, and then an additional $1 million in follow-on rounds, usually in the Series A. But as it moves into the next phase of growth, AVL will start investing up to $3 million in capital between those two rounds: $1 million in the seed round and up to an additional $2 million in follow-on capital into a Series A round.

Helping Startups Succeed

AVL’s financial commitment goes beyond just the money. As Lewis said, once you invest in a venture, “it’s all hands on deck to make sure that they succeed.” That involves empowering company leaders to find the right talent or using AVL’s networks to help companies to fill roles and build teams that work.

The fund also has a portfolio engagement team within the Venture Lab team, which is not only involved in the day-to-day investment decision-making, but also works directly with portfolio companies post-investment to address any challenges related to scaling.

“We typically help across a number of verticals, whether that’s product design, human resources or customer segmentation — a host of challenges that early ventures face,” she explained. “It’s almost like having access to a consulting group that focuses on financial inclusion, jumping in and supporting where needed.”

And having invested in and screened hundreds of deals, AVL has acquired key knowledge and insights into challenges hindering startup growth and development. One of those issues, Lewis said, is the talent bench — particularly how startups can continue to hire, promote and retain the best talent in order to grow and thrive.

Looking across her Africa portfolio, Lewis said it’s not surprising to find that several companies have their technology teams based outside the continent, which is a function of the limited talent available in the competitive regional market, reflecting the fact that a lot of that talent is being snatched up by international players.

On the non-tech talent side, the talent bench for roles such as heads of product, CFOs and sometimes the managerial staff is quite thin within certain markets — a need that holds promise for AVL and other leaders in the space.

“One of the opportunity areas for us as leaders in the sector is to continue to promote talent development, and also to promote technology and startups as a viable career path for the best and brightest talent in the market, so they can come into these organizations and make a difference,” Lewis said.

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