December 13, 2018

Impact Fintechs Need Private Debt, Not Just Private Equity, to Fuel Their Social Mission

By John Beckham, Chief Investment Officer, MicroVest | December 13, 2018 | Featured in ImpactAlpha

Impact investors are no stranger to private debt. But are they too shy about these instruments, right when impact-focused fintech companies need them the most?

It’s a reasonable question for any institution, family office or high net worth individual intrigued by financial technology companies serving underbanked populations in developing markets. Having gained traction over the last half-decade, these pioneers in responsible digital finance are ready to scale. Another equity-led capital raise isn’t the most efficient way to get them there. Private debt is.

Impact-focused fintech companies have played a pivotal role, alongside microfinance firms, development finance institutions and others, in promoting financial inclusion. These companies have devised innovative methods to connect debtors and creditors with traditional underwriting techniques. Some have transformed the rules of underwriting altogether. Their emphasis on technology has solved many of the inefficiencies that can prevent financial services from reaching worthy individuals and businesses.

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