MIX News Brief: 19 October 2018
19 October 2018
Every other week we post recent articles curated by our team of data analysts and financial sector experts. The articles span sectors and topics including fintech, smallholder finance, mobile money and more. The MIX News Brief is intended to keep socially responsible investors and businesses updated on the latest thinking on financial services for the poor because, at MIX, our mission is to provide the data, analytics and insight that enable decision makers to build inclusive financial services ecosystems. Let us know what you think by tweeting at @mix_market!
Data is critical to decision making. Data is also critical to the proper functioning of markets and systems, not only in removing information asymmetries but also in identifying concentrations of risk. And that's how data was used by Juan Carlos Izaguirre, Michelle Kaffenberger, and Rafe Mazer in this article. The authors analyzed transactional and demographic data on more than 20 million digital loans in Tanzania, which revealed high rates of delinquency and defaults. But that's not to say it is all negative: the authors note that these trends could be turned around with a greater focus on consumer protection and increased investment in data for regulators to more closely monitor credit markets.
The deals are certainly growing as more fintechs emerge to fill gaps in emerging markets (like the USD 180 million raised by NuBank or the USD 47.5 million raised by Cellulant). The interest from investors is growing so quickly that, as Dennis Price of ImpactAlpha puts it, "the demand for later-stage investments is driving a new round of activity to stock the pipeline of earlier-stage companies as well." Interestingly, though, a new report from Accion Venture Lab cautions that some fintech startups are focused more on the technology than the customer, leading to less-than-ideal outcomes. But fear not, all is not lost with the right combination of "tech and touch".
The team at RAF Learning Lab takes a step back to assess how data analytics have contributed to innovation in smallholder finance (such as credit scoring, customer segmentation and product development) and where it still has work to do (mostly in strengthening the business case for financial service providers to invest in data analytics). What's more, the brief is full of useful examples from companies like Tulaa, Harvesting and SatSure. You might even stumble across the metaphor from Hillary Miller-Wise of Tulaa, which ties it all up nicely: "Data is the new raw crude oil and everyone is prospecting for reserves. But the real value is in the refined product."
This short article is a quick read, especially after finishing the "brief" report above. It also hits the perfect balance between charts and text, something close to our hearts here at MIX. But the most interesting tidbit about the growth of digital platforms in Africa is the diversity of payment options available to consumers, perhaps indicative of the financial services landscape across the continent. While cards are the most common payment option available, nearly 40 percent accept cash (about the same percent that accept mobile payments). And stay tuned - Cenfri will be rolling out more information on the intersection of digital platforms and financial services.