Bancore participated in the well-organised Financial Inclusion Summit in Oslo on 28th March 2019, and we were not only happy having been invited to a summit primarily sponsored by Mastercard, we were impressed by the high standard of the speakers – not least His Royal Highness Prince Haakon.
The theme was Financial Inclusion and how to reach the United Nations´ Sustainable Development Goals by 2030.
Our take-aways after listening to representatives from the World Bank, Mastercard, the Norwegian government, investors, and hands-on presenters of a range of projects launched in emerging markets? Here is a summary:
- Fintech is on track towards reaching the UN goals, but there is still a long way to go.
- While the number of financially included people is growing, and inequality is thereby gradually disappearing around the world, with more and more people leading a sustainable everyday life, at least 30% of the world’s population are still at a significant disadvantage.
- The success of financial inclusion projects so far (especially mPesa) is mainly in financial non-regulated environments.
- While the success of mPesa has been significant, the early foundation of the success took place in a non-regulated financial environment, which allowed tests of various new and disruptive go-to-market strategies.
- This obviously raises the question whether something similar can happen again in the present highly regulated financial environment, and how we can create space for creative financial inclusion strategies while respecting global financial infrastructure and legal limitations.
- A mismatch between the typical ROI horizon for investors and the average time it takes before new initiatives become successful. The presentations typically stated that a new Fintech solution in an emerging market may take 8-10 years before having a real impact.
- On the other hand, investors are typically working with a 3-5 years’ horizon for their investments, and as one impact investor clearly stated, “we are looking for ROI before we look for impact”.
- Is PPP (public private partnerships) a solution?
- Many mentioned that PPP could theoretically be the solution, but the reaction of investment funds who had been involved in PPPs was typically that that their way of measuring success, and stringent demands on business focus and governance were so different that no private investor would normally want to get involved with PPPs.
All this results in a major challenge to achieve the UN Sustainable goals, since the conflict is that the Fintech industry may have great ideas for making this happen, but a combination of politically challenging markets, lack of consumer trust in banking, and the fact that we are working on “consumer behavioural change”, create very long implementation cycles, with the unfortunate outcome that many projects are closed and the accumulated know-how lost due to insufficient funds and inborn investor patience.