The Brief: Cutting in the middle men, and women, to reach customers and build trust

Greetings Agents of Impact!

📣 Agents of Impact Call No. 65: Preserving homeownership and affordability. Land trusts, long used for conservation, can be used to conserve accessible home ownership and affordable housing as well. Grounded Solutions Network recently launched the Homes for the Future Fund to acquire affordable homes in fast-developing cities and move those homes to affordable ownership over time. Community control helps such efforts “straddle affordability and wealth creation,” says Grounded Solutions Network’s Devin Culbertson. Culbertson will join Impact Community Capital’s Michael Lohmeier, ROC USA’s Paul Bradley, and other special guests to explore strategies to preserve housing affordability and ownership, Wednesday, Oct. 16, at 10am PT / 1pm ET / 6pm London. RSVP today. This Agents of Impact Call is supported by Robert Wood Johnson Foundation.

In today’s Brief:

• Enabling field agents to build trust in emerging markets 
• Tapping shipyards for more efficient nuclear power
• Citi’s social finance in Latin America

Featured: Financial Inclusion

To reach customers and build trust, inclusive fintech ventures cut in the middlemen and women. In emerging economies where market fragmentation and inadequate infrastructure create massive inefficiencies, you might think “cutting out the middle men” is the answer. Instead, many impact tech startups are cutting them in. That means reintermediation instead of disintermediation, enablement rather than disruption. Fintech ventures, in particular, are developing tools to make intermediaries more efficient and financially secure, while driving financial inclusion. “Digital financial services for underserved populations still oftentimes require a human in the process, whether that’s for onboarding or customer service or some other stage in the customer journey,” says Amee Parbhoo of Accion Venture Lab, an early stage investor in inclusive fintech companies. The distribution of financial services, along with food, medicines and other daily essentials, often depends on long chains of agents, brokers, informal businesses and workers. Parbhoo says there’s a need for a “tech-touch balance.”

• Business to business. Take Lami, an insurance tech startup in Kenya, where the takeup of insurance is extremely low. Initially, Lami sold vehicle insurance directly to consumers online, improving insurance access and affordability. But the direct-to-consumer approach couldn’t address other obstacles to adoption, like skepticism of insurance policies. “Insurance is sold, not bought,” says founder Jihan Abass. “Ninety percent of insurance products in Africa are sold through brokers, because agents and brokers can have those conversations.” The uptake of the company’s new tool to help brokers sell policies was so swift that Lami quickly pivoted its entire business to serve brokers.
  
• Feet on the street. Off-grid solar providers like Bboxx, M-Kopa, Zola have long depended on field agents to help customers understand the benefits of reliable energy access as well as payment terms. Tolbi in Senegal sells its mobile field and weather insights service to farmers via agribusinesses. Companies serving customers in rural and peri-urban areas often need more “feet on the street” than those in urban areas, says Amie Patel of Elevar Equity. Consumer lender Sarvagram has a mobile loan application but still relies on loan officers to connect directly to rural households. Bike Bazaar offers vehicle financing to motorbike buyers via India’s small bike repair and sales shops. “The end-customer in these geographies are savvy and have purchasing power, but trust and adoption doesn’t just happen because you bring them technology,” says Patel. “Instead of completely dismantling the middlemen, you’re bringing them in and giving them a slice of the economic pie.”
  
• Keep reading, “To reach customers and build trust, inclusive fintech ventures cut in the middlemen and women,” by Jessica Pothering on ImpactAlpha.

Dealflow: Energy Transition

Blue Energy raises $45 million for modular, underwater nuclear power plants. With data centers gobbling up energy, nuclear power is getting a fresh look as a clean, flexible and reliable source of energy. The latest twist: small modular reactors, or SMRs, that can be mass-produced at shipyards and operated underwater. Washington, DC-based Blue Energy says the permanent workforces and automated machinery at shipping yards slash construction times from 10 years to two. The company’s first modular plant cost $5,000 per kilowatt hour, compared to $13,000 per kilowatt hour for a traditional plant and Blue Energy expects costs to fall steeply. “The idea that nuclear is an essential part of our energy future,” said Gil Dibner of Angular Ventures, “is a great example of an idea that is transitioning from non-consensus to consensus.” Angular invested in Blue Energy’s Series A round with Engine Ventures (formerly The Engine), At One Ventures, Tamarack Global, Propeller Ventures, Starlight Ventures and Nucleation Capital.

• How it works. Blue Energy buys the modular reactors from commercial vendors. The company’s innovation is the cylindrical containers, pre-manufactured at shipyards, to house the reactors 12 feet underwater to provide a constant supply of cooling and protection from radiation. The reactor is isolated from the rest of the power plant, enabling it to shut down and cool itself without human intervention in case of an accident. Blue Energy co-founder Jake Jurewicz helped develop the idea as a nuclear science and engineering student at MIT.  Blue Energy said it had signed a letter of intent with a datacenter and cloud provider to take the energy from its first plant. It declined to disclose the location.
  
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Citi makes a $15 million social trade loan to boost small business lending in El Salvador. The social finance arm of the multinational investment bank is leaning into Latin America. Its latest deal is a social trade loan to Banco Cuscatlán in El Salvador to provide credit to small enterprises. Such facilities help local banks meet their short-term borrowing needs while expanding finance for hard-to-reach businesses. “Latin America is a really clear focus for us,” with lower risks than other regions, Citi’s Borja Garcia Fernandez told ImpactAlpha. “There are a lot of opportunities there in terms of diversification by sector, diversification by clients and perceived risk.” The region accounted for half of the Citi unit’s global transactions last year. In 2022 and 2023, Citi’s 50 transactions in Latin America mobilized $3 billion in co-investments from impact investors such as ResponsAbility and Symbiotics, as well as the US International Development Finance Corp. and the International Finance Corp.

• Open for business. Citi Social Finance is seeing growing demand from fixed-income impact investors. Last month, the unit closed a $50 million sustainability-linked trade loan with Banco do Brasil to grow the bank’s sustainable agribusiness portfolio and its leadership ranks of women and ethnic minorities. In July, Citi made a social commercial loan to Banco Industrial to support small businesses in Guatemala. Early this year, in the Dominican Republic, Citi structured two loans to support local trade and working capital activities at Banco Popular Dominicano and Banco Santa Cruz. Key to mobilizing more capital for the region, Fernandez says, is “explaining what is the opportunity, where is the risk and, more importantly, showing the impact.”

• Balance sheet. Citi’s social finance arm, run by a 10-person team in London, provides trade and working capital loans from the bank’s balance sheet to financial institutions and other borrowers in 45 countries in Asia, Africa and Latin America. The group’s social goals include expanded access to education, healthcare, water, sanitation and affordable housing for low-income households. In 2020, the bank issued a $1 billion social bond to expand its mandate with additional balance sheet capital.
  
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Dealflow overflow. Investment news crossing our desks:

• Form Energy, a maker of iron and air-based batteries for long-duration energy storage, raised $405 million, backed by Capricorn, Coatue, TPG Rise Climate, Breakthrough Energy Ventures, Energy Impact Partners and other big-name climate investors. (Form Energy)

• Amazonia Impact Ventures, a UK-based fund manager investing in nature conservation and biodiversity in the Amazon, secured $1 million from a Geneva-based family office (see, The Liist). (Amazonia Impact Ventures)

• Lafayette Square made its first loan as a specialized small business investment company to Capital City, a minority and family-owned business that sells mambo sauce, a specialty in Washington, DC. (Lafayette Square)
  
• Swedish EV battery maker Northvolt filed for bankruptcy protection for a business unit managing construction at its Skelleftea plant, amid a deepening cash crunch. (Bloomberg)

• Singapore-based Surfin scored $12.5 million from Insignia Venture Partners to provide financial services including payments, remittances and wealth management to underserved customers. (Surfin)

Agents of Impact: Follow the Talent

👋 Meet the ImpactAlpha editorial team. In dedicated breakout rooms, engage ImpactAlpha editors and journalists, share your stories, and help us help you to amplify your impact. Join the lively online session, Friday, Oct. 18, at 10am PT / 1pm ET / 6pm London. Register today.

The UK Climate Change Committee appoints Emma Pinchbeck, previously with Energy UK, as CEO… Conduit Connect taps Jo Pisani as investment advisory committee chair… 2811’s Waldo Soto Bruna joins Climate-KIC’s advisory board…  Common Trust has an opening for a transaction advisory associate… Jobs for the Future is hiring a growth initiatives director… SVX MX seeks an advisory services team lead in Mexico City.

Chan Zuckerberg Initiative is looking for a special projects senior program manager… Climate United is hosting, “Direct pay: Learnings and best practices,” with the US Treasury Department’s Ronald Newman, Re-Volv’s Andreas Karelas and Cami Thompson, and Self-Help’s Tracy Ward, today at 2pm ET / 11am PT… Accion’s Center for Financial Inclusion is hosting its virtual Financial Inclusion Week, Oct. 15-18. 

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Oct. 10, 2024