Inclusive fintech: Guidelines for Investing in Responsible Digital Financial Inclusion

responsAbility Investments, the Microfinance Centre Member, is an Inaugural Signatory to the newly defined, globally applicable Guidelines for Investing in Responsible Digital Financial Inclusion. These Guidelines, an initiative co-led by the IFC and developed in collaboration with a group of over 50 fintech investors and digital financial innovators, aim to spread the benefits of the fintech revolution more widely.

The Guidelines were launched on 20 June, 2018, at the Connecting the Dots conference held in Amsterdam. Michael Fiebig, Head of Financial Institutions Equity Investments, who signed the Guidelines on behalf of responsAbility Investments, explained:

“Technology is a key enabler for financial inclusion. Companies focusing on inclusive fintech have long been part of our portfolio and will present exciting investment opportunities also in future. As with microfinance, we have been an active promoter of responsible finance practices from the very beginning. This is why we are proud to be part of this global initiative that will definitely contribute to further progress in the field.”

Innovations in digital technology have created new and exciting opportunities to reach unbanked and underbanked low-income customers in emerging markets as well as developed countries. Traditionally, these customer segments have been considered too risky and too poor to be of interest to banks and insurance companies. Mobile wallets and mobile money transfers, peer-to-peer and other alternative lending platforms, pay-as-you-go asset finance and digital micro-credit are examples of recent innovations that are reaching hundreds of millions of consumers and small businesses. These innovations are radically changing the financial services landscape around the globe.

While the opportunities have increased, so too have the risks surrounding digital financial services for investors, investees, customers and wider digital ecosystems across markets and regions. An example is the rapid growth of digital lending products, some of which carry risks of overpricing and over-lending to customers. One factor that is holding back investors in inclusive digital financial services is the lack of a framework to help them evaluate these risks. In a world where the old rules are being rewritten daily, it can be hard to know where best to invest your time, energy and money.

Recognizing this, over 50 leading organizations have joined up to develop a set of guidelines for investors who are interested in funding inclusive digital financial services in a responsible way. How these organizations define and handle the issues facing the fintech industry will enable the investor community to better identify new opportunities and manage investment risks.

The resulting Guidelines on Responsible Digital Financial Services comprise 10 touchpoints that financial investors and their fintech investees can use to evaluate opportunities, mitigate risks and contribute to a more responsible and inclusive digital finance ecosystem. These include promoting fair and transparent pricing and better disclosure of terms and conditions for customers, preventing people taking on more debt than they can comfortably manage, increasing their financial literacy, establishing customer identity, data privacy and security standards, fostering a proportionate legal and regulatory framework, and enabling the interoperability of digital financial services.

More about the Guidelines

About responsAbility Investments AG 
responsAbility Investments AG is a leading asset manager in the field of development investments and manages a range of investment vehicles that supply private debt and private equity to high-impact portfolio companies in the agriculture, energy and finance sector of emerging economies.