Safaricom’s M-Pesa has allowed 30 million people in East Africa to make digital payments; India’s fintech behemoth Paytm serves 177 million.
Both companies are exceptions, according to a new report from Village Capital, which runs accelerator programs in both regions. Most digital finance services companies in East Africa and India fail to raise funding and struggle to reach even 1,000 people.
That leaves 60 million potential customers in East Africa and more than 200 million in India without access to formal financial services. Why? Investors in these markets rely on networks to avoid high-cost due diligence, the report found. That means they fall back on a few familiar consumer technology companies.
That’s “bad for investors, who miss out on high-potential companies that need more time, cash, and support to grow,” says Village Capital’s Ross Baird.
To boost access to capital and mitigate risks, Village Capital says foundations, in particular, can back deal syndicates with first-loss guarantees, subsidize capital for strategic human capital hires, and develop a first-loss guarantee fund to catalyze local debt.