Over 2 billion people from developing countries such as India, Uganda, Pakistan and Nigeria do not have a current account, access to credit or receive financial services, but they all own a smartphone. We all know that without credit there is no development, but what if it came from digital solutions? A few startups have been working on it, challenging a difficult context. Generally speaking, developing countries are not the obvious choice as they usually come with a baggage that would instinctively scare off any smart initiative. Lack of cloud infrastructures, inadequate digital competences of the average user compared to those of more mature economies, chaotic work life based on cash-in-hand piece-rates.
Nevertheless, while reading the prestigious Harvard Business Review, I’ve discovered how some fintech entrepreneurial undertakings have managed to turn these limits into opportunities. Digital startups have in fact stepped in with the objective of rectifying these inefficiencies and providing these economies with the tools they need to speed up their development. The Flutterwave startup in Nigeria, for instance, is creating a shared infrastructure for payments and financial services in Africa that will enable both operators and entrepreneurs to safely send and receive money, even through the web. In India, SERV’D is developing an app that will help people employing domestic workers manage payments online and create simple work contracts. This app will boost the confidence of people with limited digital skills and will create a 400m-strong pool of people who, by using it, will be able to demonstrate they have an income and therefore apply for loans and mortgages.
In Pakistan a startup called Cowlar has pledged to make cows be part of this digital revolution too by developing a collar that, once worn, will enable the real-time collection of a wide range of data (temperature, activity, position) that will greatly help farmers in the management of their daily workload. The information gathered could also have financial repercussions and result in a reduction of insurance costs for those who can provide a track record with a detailed health history for each animal. In Uganda, the Malako startup focuses instead on providing microcredit through smartphones.
Flexible loans, even very small ones, within a context where the job market is not only chaotic, but also based on casual work and uncertain remuneration, in the long run could represent a driving force in the economy of developing countries. It shouldn’t come as a surprise than that funding for fintech startups has increased tenfold since 2011.