Can Fintech Bypass Traditional Gender Barriers to Financial Mobility? These Two Startups Say Yes!
In September 2021, TechCrunch profiled two fintech startups aimed at empowering women in emerging markets. Pakistan’s Oraan and Nigeria’s HerVest were both founded by women who know which pain points need to be addressed to appeal to their targeted users. These and other similar initiatives prove how financial technology can be a force for good, dissolving traditional barriers to entry for disenfranchised groups.
Oraan Formalizes a Socially Acceptable Alternative Vehicle
Investment banker Halima Iqbal and product designer Farwah Tapal are the first female fintech entrepreneurs in Pakistan to raise seed capital. They started Oraan in 2018, a year after Iqbal returned home from Canada. Despite having worked in finance overseas, it took three and a half months before Iqbal could open a bank account in her home country.
Just 7 percent of Pakistani women have banks account due to logistical and social barriers. Requirements such as needing male relatives to serve as guarantors mean women lack parity in financial mobility and can’t contribute meaningfully to the economy.
According to Iqbal, understanding Pakistan’s informal economy and how women save was the first step in deciding where to get involved to make the most significant impact. In the end, it made sense to go with ROSCAs (rotating credit and savings associations).
ROSCAs are groups of individuals who make regular, set contributions to a pool allocated to individual members in turn. They provide funding to financially excluded individuals who typically share familial, ethnic, or geographical aspects.
ROSCAs are a common alternative financial vehicle in developing economies like South America, Africa, Asia, and immigrant groups in developed countries. In Pakistan, $5 billion gets rotated through ROSCOs annually, and roughly 40 percent of the population has participated in them at one time or another.
The Oraan platform digitizes and formalizes this socially acceptable practice, and because it vets applicants and manages the collection and distribution of funds, participants can extend beyond their known networks. As there’s no formal credit scoring in Pakistan, Oraan works with other parties to assign creditworthiness scoring on factors such as residence, personal references, and verified identification. As participants build payment histories, they can use this data to access financial services otherwise unavailable to them.
Oraan wants to become a full-fledged neobank offering verticals like savings, credit, insurance, and investment products. A $3 million funding round co-led by Zayn Capital and Wavemaker Partners in September brings the startup’s total funding to $4 million. Other funders include Resolution Ventures, i2i Ventures, Hustle Fund, Haitou Global, Plug and Play, and several angels.
HerVest Helps Women to Help Other Women
CEO and founder of HerVest Solape Akinpelu is acutely aware of the $42 billion finance gender divide in her home country of Nigeria. Her background in financial services marketing exposed her to the low levels of financial literacy among the country’s almost 60 million working women. She says it’s evident at all levels but particularly prevalent in rural communities, where smallholder female farmers struggle to access the capital they need to grow their enterprises.
Women make up more than 50 percent of Nigeria’s smallholder farmers, but they generally underperform relative to their male counterparts because of their lower access to capital, education, and information about best farming practices. Studies indicate that were they to be given equal access, Nigeria’s women smallholder farmers could increase production up to 30 percent and make a significant dent in global hunger.
Akinpelu hopes to improve women’s lives through greater access to and use of financial services. Her initiative makes it possible for urban and peri-urban women with disposable income to save for their life goals. By pooling funds, they can earn as high as 25 percent annualized returns while helping female farmers access the capital, training, and opportunities they might not otherwise have access to. The funds are held in trust by a trustee firm, FBNQuest Trustees Limited.
HerVest’s app can be found on iOS and Android, and the company has recently launched a desktop application. Since its inauguration in August 2020, 4,000 women have registered as members of the HerVest cooperative. Earlier in 2021, a “friends and family” fundraise gave HerVest an injection of $100,000, which it intends to use to grow its team, strengthen its digital infrastructure, and ramp up marketing efforts. In addition, Akinpelu anticipates extending HerVest’s platform to other African countries next year.
Studies have shown the economic fallout from the COVID-19 pandemic has more adversely impacted women, particularly women of color. And when women’s financial mobility is impacted, it threatens their rights and security, as evidenced by the increase in gender-based violence during the pandemic. Perhaps technology can repair the damage.
Originally published at https://bill-malloy.com on November 11, 2021.