Fintech based inclusion before it was famous – interview with Accion CEO Michael Schlein

Fintech From A Peak Interview accion.001

This is one of our Fintech From A Peak Interviews, where we talk to people making a big difference in people’s lives with fintech services,

Accion, founded in 1961, is hardly an overnight sensation. This is a story of quietly doing the right thing for a long time and then suddenly the world catches up. Today Accion is still focused on the same mission from 1961, but it is using the latest financial technology. This is Fintech4us (the original name for Daily Fintech in 2014) ie fintech being used to change the lives of billions of people. 

Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO of Daily Fintech and author of The Blockchain Economy.

The pioneering work of Muhammad Yunus on Microfinance, with Grameen Bank in Bangladesh is well known. Less well known is that Accion was doing similar work in Latin America around the same time.  The organization began in Venezuela and began to lend in Brazil during the early 1970s.

So we were excited to talk to Accion’s CEO.Michael Schlein and to share that knowledge with the Daily Fintech community.

Here are the questions we asked Michael to address:

Q. how Accion combines for profit activities such as an early stage fund with an overall non-profit organization.

Why we asked the question. There are lots of non-profit philanthropic organisations. There are also lots of Venture Capital investors who have discovered how lucrative it can be to serve the billions who have not historically had access to financial services. What is less common is finding one entity that combines both.

A. Accion is a non-profit, founded in 1961, focussed on financial inclusion. in 1992 when Accion invested in Banco Sol, Accion started to engage the risk capital markets in the massive challenge – 3 billion people who are left out of the global financial system.  Following the success of BancoSol, the first bank created specifically for the poor, Accion went back to many of its early nonprofit projects and transformed them into for-profit organizations that could access the capital markets and offer lower-costs services for their customers. Fortunately financial inclusion can be a highly profitable activity. Michael shared some great data. As somebody who has worked in a lot of early stage ventures, I know the risks. The data point is that only 25% of seed stage investments go on to raise a Series A. That valley of death is well known. The data point which blew me away was that 80% of Accion Venture Lab’s portfolio companies have raised additional capital beyond the seed stage. (This excludes Accion’s most recent investments since those companies wouldn’t have had the time yet to raise additional capital.) For every dollar Accion Venture Lab has invested, its portfolio companies have raised an additional $13 in equity capital from later-stage investors.

Q. how Accion helps poor people in developed economies and how this has changed post globalization.

Why we asked the question. Globalization reduces inequality globally as millions in the developing world join a global middle class. However globalization has increased inequality in the developed economies (causing a rise in political populism of both right and left that is seen in all our headlines). In short, poverty in the West is a real problem.  

A. Although Accion primarily invests in emerging markets, Michael shared three ventures they invested in that are in America:

    • Joust – neobank for freelancers.
    • Self – enabling you to build credit by saving.

Q. Whether Accion sees much adoption of Bitcoin or  cryptocurrencies in countries with failing national currencies.

Why we asked the question. Many people in the West, blessed with strong currencies, good governance and an established financial system, struggle to understand the use case for Bitcoin beyond being an instrument for investing/trading/speculating. There is a theory that Bitcoin will first find adoption in countries with weak currencies and bad governance where most people are not well served by the established financial system

A.  Yes, with Accion’s early history in Venezuela, they are well placed to see this.

Q. how does empowering women in the family align to the mission of financial inclusion?

Why we asked the question. Women are often the Family CFO. Maybe they are better credit risks and more diligent early adopters of new approaches to finance.

A. Michael quoted from a book by Nikolas Kristof and Sheryl WuDunn called Half the Sky about how eliminating the money spent by men on alcohol and prostitution could end global poverty tomorrow. Michael also emphasised how doing the right thing is also the profitable thing to do, citing data about how women in developing economies are better credit risks. If the focus is on profitable lending, you will lend more to women.

Q. Is Accion doing work related to climate change?

Why we asked the question. Climate change is a huge problem.

A. Michael emphasised that Accion is focussed on Financial Inclusion not Cleantech, but the point of intersection is Insurtech ie micro insurance for poor people and Michael mentioned two ventures in this regard:


 

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