Introduction:
Accion, a global nonprofit, has launched the Accion Digital Transformation Fund, a $152.5 million fund aimed at supporting large financial institutions, including microfinance providers. The fund will provide growth capital and strategic support for these companies to undergo digital transformation.
Decades of Experience in Financial Services:
For over sixty years, Accion has been actively involved in the financial services sector. The nonprofit has developed and scaled solutions tailored to small businesses, smallholder farmers, and women. It has also provided investments and advisory services to traditional financial institutions and microfinance companies, resulting in the creation of accessible products. Accion’s efforts have led to the establishment of 230 financial service providers across 75 countries, serving low-income consumers and businesses.
Venturing into Fintech Investments:
In 2019, Accion took a bold step into early-stage fintech investments by launching the Accion Venture Lab, a $23 million inclusive fintech startup fund. Through this venture arm, Accion has invested in over 65 seed and Series A companies operating in more than 30 countries. These startups leverage technology to increase the reach and affordability of their products for underserved populations. They also focus on using technology to enhance customer engagement, an area where traditional financial institutions are lagging behind.
Addressing Digital Inclusion Gap:
The COVID-19 pandemic highlighted the severity of the digital inclusion gap. While Accion was advising banks and microfinance institutions on digital customer engagement, it recognized the need to take further action. Thus, the nonprofit launched the Accion Digital Transformation Fund to bridge this gap. The fund will invest in companies serving micro, small, and medium enterprises (MSMEs) across South and Southeast Asia, Latin America, and Africa.
Supporting Traditional Financial Services Companies:
The Digital Transformation Fund differs from Accion’s Venture Lab as it focuses on larger financial services companies that have yet to pivot or significantly invest in digital customer engagement. Accion will provide equity investments ranging from $12 million to $15 million, along with contributions from limited partners. The goal is to support these companies in their journey towards digital transformation and improved customer engagement.
Creating a Balanced Portfolio:
The Digital Transformation Fund aims to make between 10 and 12 investments, with a flexible allocation of capital between regions. While there’s no specific cap for each region, Accion plans to make three to four investments in Asia, two to three in Africa, and two to three in Latin America. The fund will also consider differentiated models within its portfolio, showcasing examples of successful digital transformation and engagement strategies for various markets to follow.
Limited Partners and Global Support:
The fund has garnered support from various organizations, including British International Investment, FMO, IDB Invest, IFC, Mastercard, OeEB, and Swedfund. These partnerships highlight the global recognition of the importance of digital transformation in financial services and the need to support underserved populations.
Conclusion:
Accion’s launch of the Accion Digital Transformation Fund showcases its commitment to fostering digital inclusion in the financial services sector. By providing growth capital and strategic support to large financial institutions, Accion aims to drive digital transformation and enhanced customer engagement. Through its extensive experience and partnerships, Accion is well-positioned to make a significant impact on financial inclusion worldwide.
