Inclusive Economy | December 20, 2021

Impact in emerging markets in 2022: Riding the digital transformation to drive inclusive and sustainable growth

Jessica Pothering

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ImpactAlpha Editor

Jessica Pothering

‘Tis the season for our lookaheads to 2022 and, thanks to ImpactAlpha subscribers, we are able to make the roundups freely available. So give the gift of a link to ImpactAlpha’s industry-leading coverage of climate finance, impact in emerging markets, The Reconstruction and catalytic capital. You can find the whole set on our Looking Ahead to 2022 landing page

ImpactAlpha, December 20 – If the pandemic had a silver lining in emerging markets, it was as a super-spreader of small business digitization. 

The online trend, which extended to informal businesses and gig workers as well, is in turn expanding access to working capital, growth financing and other financial services.

The past year’s race among service providers and investors for a slice of the small business finance opportunity follows the 2020 boom of B-to-small-B tech startups filling in for government relief programs and helping micro, small and medium-sized businesses survive the pandemic’s economic disruptions.

In 2022, startups will use the troves of data they’re collecting to further build out and ramp up customized financial services for the small business segments they’re serving. 

About $5 trillion is needed annually for informal and small businesses in emerging markets. Traditional sources of capital like banks, development finance institutions and microfinance have largely failed to fill the gap. 

Stepping into the breach: tech ventures. 

What we’ll be watching for in 2022: With so many enterprise tech solutions coming into the micro and small business space, ImpactAlpha will be on the hunt for those that can prove they’re having a material positive impact on revenues, income and jobs. 

Enterprise tech

A new raft of startups are bringing small businesses online with services from inventory planning to digital payments. As they provide such services, the enterprise tech vendors are gathering data on small businesses’ sales, performance and growth, which they can use to underwrite lending for badly needed working capital, inventory financing and business growth. 

That ‘nonbank’ advantage over traditional sources for such financing is helping boost the value of enterprise tech startups. One of the largest rounds of the year was the $110 million raised by TradeDepot, a Nigerian enterprise tech venture focusing on informal shopkeepers. Brazil’s e-commerce platform Nuvemshop raised $500 million to set up webshops for tens of thousands of mom-and-pop businesses. India’s Khatabook raised $100 million to help millions of Indian merchants manage their business transactions online. Kenya’s Twiga Foods raised $50 million, Egypt’s MaxAB raised $40 million, and Pakistan’s Bazaar raised $30 million. 

Many others have raised smaller, earlier-stage rounds. Nigeria’s Alerzo raised $10.5 million to digitize informal businesses. Kenya’s MarketForce raised $2 million and Sky.Garden raised $4 million to help Kenya’s small businesses go digital. Pakistan’s Finja, which partners with banks to offer credit to small groceries and other micro-businesses, raised $9 million. Egypt’s Cassbana secured $1 million to help unbanked micro-businesses secure inventory financing. Nigeria’s Prospa, a neobank for micro-enterprises, secured $3.8 million to provide digital bank accounts to informal and small businesses, help informal businesses get registered, and provide invoice and inventory software. Indonesia’s Farmacare raised seed funding to digitize community pharmacies in Indonesia. Catalyst Fund backed four Ghanian digital commerce startups. 

Companies are using investor capital to accelerate their own evolution into financial services providers, embedding products like buy-now pay-later inventory financing alongside their core services. TradeDepot, for example, is extending to its merchants the ability to finance inventory purchases on a buy-now pay-later plan.

“The premise is that this is an on-ramp to financial inclusion,” said Maelis Carrarro of inclusive tech accelerator Catalyst Fund. 

Spurred by pandemic shutdowns, enterprise tech startups like Sokowatch and MarketForce in Kenya and Kirana247 in India have supported the digitization of small businesses worldwide, down to the kiosk owners and mom and pop shops that distribute the majority of consumer goods and food staples in emerging markets. 

“When companies that are not financial institutions offer embedded finance products, they give customers who aren’t able to access traditional financial services a way to grow their businesses, protect their livelihoods, and save for their futures,” Accion Venture Lab’s Amee Parbhoo told ImpactAlpha

Go deeper:

Catch up on all of ImpactAlpha’s coverage of frontier and growth markets in 2021.

Africa’s fintech transformation

The African fintech boom began before COVID-19. The economic shutdowns and financial dislocations of the pandemic supercharged the tech disruption.

Venture investors looking for deals in Africa are stocking their pipelines with fintech ventures delivering financial services to underbanked consumers and businesses. African startups are on pace in 2021 to more than double the capital raised in each of the last two years.

“We’re moving from digitally enabled fintech to a digitally native environment,” observed Lendable’s Daniel Goldfarb on ImpactAlpha’s Agents of Impact Call No. 34.  

Lendable provides debt capital to technology-enabled financial services providers that help mostly low-income and women borrowers increase their incomes or reduce their costs. The fintech investor has developed an innovative financial vehicle that mitigates risks for investors that want to avoid them, while compensating other investors that actively seek them. This year it raised $50 million of a $100 million fund.

The People’s Fund in South Africa is crowdfunding purchase order financing for small businesses. Kenyan alt-credit venture Pezesha is linking both traditional and non-traditional lenders to small businesses. ImaliPay, also in Kenya, aims to be a one-stop shop for savings, credit and insurance services for Africa’s gig workers. 

Go deeper: 

The rise of crypto

To say cryptocurrency and investment platforms go mainstream in 2022 “would be short-sighted, as we are already there,” Mercy Corp Ventures’ Dan Block told ImpactAlpha

In Africa, crypto investing caused assets to skyrocket 1,200% in the past year to $105.6 billion. Companies like Ejara in Cameroon and Kotani Pay in Kenya are making it easier, and cheaper, to build savings, make payments and send money across borders. Nigeria’s traditional remittance flows plummeted in 2021 because of the diaspora’s switch to cryptocurrencies. 


Financial technology firms have leveraged billions of data points across mobile phones and social media to transform loan underwriting for the emerging consumer class, as well as gig workers and small businesses.

Data from those users is providing fintech service providers real-time insight into something else: the accelerating climate impacts on farmers and rural communities and the urban poor. 

Pula in Kenya, for example, embeds crop insurance into the distribution of inputs, seeds and fertilizers for smallholder farmers. Ecobodaa, also in Kenya, manufactures e-motorcycles and offers financing to help motorcycle taxi drivers make the switch to electric. India’s recognition of its vulnerability to climate change has spurred a set of ambitious targets to curb carbon emissions.

“Startups are either seizing the opportunity to support societies towards climate resilience, or will rapidly fall irrelevant,” observed Block. “Next year will be the fulcrum point where climate-lens goes mainstream.”

The e-mobility shift in India, Southeast Asia and Africa is drawing lenders and impact investors to the manufacturing and financing of the two- and three-wheel vehicles that form the backbone of public transportation for billions of people worldwide. E-buses are accelerating e-mobility in Latin America.

Go deeper: 

Local capital providers

It’s been a difficult fundraising year for in-market and first-time fund managers whose mission is to invest in small and growing businesses. 

“Fundraising has largely been a bust for the whole sector,” said Drew von Glahn of the Collaborative for Frontier Finance. “We’re much more optimistic for 2022.” An exception: Alitheia IDF secured $100 million for its Africa-focused gender-lens fund.

For private investors concerned about the risk of investing directly in first-time fund managers or frontier markets, fund of funds may provide an ideal way to select and invest in them.