As financial technology continues to disrupt traditional industries we are presented with opportunities to step into the changing finance landscape and support innovation that furthers inclusivity.  Countless people lack access to the financial system and are excluded from full participation in their local economy. Access Ventures believes that financial inclusion is a foundational element within a vibrant economy. Financial inclusion is a state in which all people who can use them have access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, and with dignity for the clients.

The key elements of financial inclusion:

  • Financial literacy
  • A wide range of product offerings
  • Quality financial products
  • Large reach/access
  • A competitive landscape

Access Ventures has a straightforward belief that more people with equitable access to capital and financial services would be a good thing for individual and community quality of life, as well as overall economic health.  A published by Thomson Reuters on financial inclusion provides support for this belief:

“But the absence of these services is an everyday reality for 38 percent of the world’s adults – more than 2 billion people. They do not have bank accounts and thus have no formal saving or borrowing capacity, even though, as the World Bank points out, they have a greater need for  financial services than people with more financial resources. Indeed, the lack of access to capital and savings all but ensures little upward mobility.”

Even in the United States, this number is staggeringly high. A recent article in Forbes puts the number of unbanked and underbanked US citizens at 28%. Traditional banking and financial services exclude millions of individuals and small businesses. Inclusion in these financial systems leads to greater individual, family, and community stability. Therefore, we invest in companies and programs that improve access to equitable capital, financial services, and the distribution of funds beyond traditional means.

The goal of the Innovative Finance area of focus is to improve access to capital and financial services for excluded populations. There is not just one solution to this problem. Just like every small business is unique, the financial tools also need to be diverse and creative. For some, it’s a new technology solution, but for others, it’s still someone willing to take a financial risk on a new and struggling business. Therefore, we work across the financial spectrum to create different solutions – from microfinance partnerships and programs to equity investments into promising new technologies.

The goal of the Innovative Finance area of focus is to improve access to capital and financial services for excluded populations.

On the program side, we are increasing access to capital for small businesses through microfinance. If you’re not familiar, microfinance is a type of banking for individuals who are excluded from bank financing due to a lack of resources, poor credit or abbreviated business history. It’s also a response to demand from small businesses in the U.S. for loan sizes which are typically uneconomical for traditional lenders to provide. The most recent statistics in the US put bank loan rejections at 80%, and loans of less than $50,000 offer significantly less return to bank shareholders

The first aspect of our microfinance effort is our partnership with Kiva, a pioneer in tech-enabled micro-lending. We have partnered with Kiva to increase exposure for their platform through the launch of Kiva Cities in Louisville, KY, and Columbus, OH. We have also sponsored and co-sponsored numerous local Kiva Leads to do the groundwork of helping potential borrowers access the platform and achieve their loan goals.

Despite Kiva’s success, it may not provide enough funding to close the gap for small businesses. Therefore we built our own Growth Loan product which provides up to $35,000 for such enterprises. Much like Kiva’s underwriting process, our loan product relies on social capital as support for the loan as opposed to taking a position on the loan recipient’s assets.

Chad Rosen of Victory Hemp, a Growth Loan recipient, pouring hemp hearts into sifting machinery.

On the investment side, we look for opportunities in which an underlying financial technology addresses financial inclusion. We have a strong partner in helping us identify promising opportunities in Village Capital, which runs an accelerator around financial inclusion that Access Ventures has provided equity capital for three years running. Through our partnership with Village Capital, we have made investments into companies focused on ending the debt trap, providing equitable warranty services, increasing access to education through the creation of student lending programs, and finally helping people relieve student debt through innovative human resource offerings

Every investment we make into a business or community must be something we are proud of, something we ourselves support, and something people will love. If you are involved with an organization, initiative, or idea that you believe is a technology that fits this goal, we’d love to meet you and learn more!

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TJ Abood

Partner, Investments