FINCA Ventures is an impact investing platform that provides patient capital to early-stage social enterprises. But what makes the firm tick?
Disrupt Africa reported in August on the launch of FINCA Ventures, the impact investing initiative of financial services organisation FINCA International, which over the last 18 months has invested in a host of social enterprises serving emerging market customers, including Kenya’s Eneza Education and Sanivation.
FINCA International helped pioneer the microfinance movement. It is the founder and majority shareholder in FINCA Impact Finance, a global network of 20 community-based microfinance institutions (MFIs) and banks in Africa, Eurasia, Latin America, the Middle East and South Asia. Why is the company now moving into funding African tech startups?
“The experience of growing and scaling a microfinance network in some of the world’s most challenging markets afforded us a deep understanding of what it takes to grow a social enterprise and a keen appreciation of the needs of low-income customers,” FINCA Ventures managing director Ami Dalal told Disrupt Africa.
“Part of this understanding has led us to conclude that access to capital, while absolutely necessary, is not a silver bullet that can overcome poverty – many of the customers we care about still lack access to basic products and services, like energy, sanitation and healthcare, that could improve their standard of living.”
Dalal began her career making private equity investments in real assets and infrastructure, but always hoped to find ways to direct capital to emerging markets in a way that made a positive impact. She finally got the opportunity when she joined Acumen in 2010, and has now wound up running FINCA Ventures.
“We launched FINCA Ventures to better leverage the knowledge and trust networks of the global microfinance network we have built, and use it to get more life-enhancing products and services into the hands of the people who need them most,” she said.
The fund has got off to a quick start, with Dalal saying it plans to continue to invest in new companies as well as participate in follow-on investments in its current portfolio.
“We also expect to spend more of our time with our portfolio, actively working to support their management teams to help them however we can as they strive to grow in challenging markets, working on hard problems,” she said. “Hopefully, our strategic guidance – in combination with customer and market intelligence and relevant local and global business connections that FINCA has cultivated over the last 30 years – can help startup companies grow faster and smarter.”
There is such vitality in the tech space in Africa, she said.
“From a financial services perspective, we’re certainly seeing tremendous activity in fintech. In addition, we’re energised by the new thinking and bold solutions that leverage technology to create new product or delivery channels, to reduce cost, to improve accessibility or even to suggest entirely different business models in access to basic services,” said Dalal.
However, because the startup support ecosystem across the continent is still in the early phase, without sufficiently robust, relevant business networks, founders are sometimes hindered by structural market inefficiencies related to follow-on capital raise strategy, local market know-how, talent management and business management, among other things.
“We genuinely strive to bring FINCA’s experience, networks and operator mindset to help startups navigate these inefficiencies more effectively, in addition to providing capital for growth,” said Dalal.