Why We Invested: Alliance for Financial Inclusion

The following post originally appeared on the Omidyar Network blog. It has been cross-posted here with permission. 

A big differentiator of Omidyar Network’s approach to investments is our hybrid model. We believe that big, systemic challenges can be solved by harnessing the power of markets and backing innovative entrepreneurs and their ideas with patient capital and the support they need to scale their businesses. However, we understand that the actors in the financial ecosystem are interdependent. The work of regulators can ease the path to market for new technologies, and new technologies can advance financial and economic goals of governments.

That is where our support to the Alliance for Financial Inclusion (AFI) comes in. Innovations that promise to dramatically decrease the cost of reaching the underbanked through digital channels, identifying, verifying, and scoring customers through alternative data, and reimagining customer product design through artificial intelligence (AI)-powered chatbots, embedded insurance, or “pay-as-you-go” loan financing built into solar products.

These new products, technologies, and channels provide new ways to include people, but also raise important new policy and regulatory challenges. For instance:

• For formal financial accounts targeting the very poor, what levels of “Know Your Customer” or Anti Money Laundering rules is required to manage risk appropriately?
• How should financial products embedded within other supply chains, such as mobile agent networks or energy companies, be regulated?
• Should regulators experiment with new innovations in sandboxes?
• What types of technologies can regulators use to understand and regulate the financial ecosystem in real time?

AFI helps tackle this challenge. Founded in 2008, AFI’s mandate is to provide financial regulators and policymakers from emerging market countries with the tools and resources to develop, share, and implement cutting edge financial inclusion policies. They do this in multiple ways:

• Peer learning, implementation support, and ecosystem engagement. This includes working groups on key challenges—such as transition to digital financial services and uses of data—peer review of policies, capacity building support, and public and private sector dialogues. This culminates in the annual Global Policy Forum, which brings together more than 500 top regulators from across the world.
• Platform to commit and track progress. AFI promotes and secures a wide-range of commitments from member-countries, providing the opportunity for regulators rally around common goals and to publicly share their financial inclusion agenda, targets, and progress to date.
• Based on their work, AFI engages in global policy advocacy, to a number of global organizations like the G20 and standard setting bodies.

Since its launch, AFI has already achieved a great deal. Today, they represent 115 member institutions from 94 countries, representing over 80 percent of the world’s unbanked population. Over 90 of its members are actively engaged in working groups, sharing lessons and best practices with the community. To date, they have contributed to over 200 policy changes and 63 countries have committed to the Maya Declaration—the first global and measurable set of commitments by policymakers from developing countries which aims to unlock the economic and social potential of 2 billion people through greater financial inclusion. Members are active, with over 80 percent using at least two services.

Omidyar Network first partnered with AFI in 2013. At the time, the organization was at an important time of transition into a full-fledged multilateral organization, moving to Kuala Lumpur to be hosted by the Malaysian Central Bank, and evolving their business model to move to financial sustainability through member commitments.

We are proud to renew our partnership with AFI and help them achieve financial independence. Our current grant will also help AFI continue to deepen their engagement with regulators, including their work in RegTech, the burgeoning public-private sector dialogue, and its growing engagement with the broader financial services innovation community.

Alexandre Lazarow invests across the Entrepreneurship and Financial Inclusion initiatives with a focus on Africa, Latin America, and Southeast Asia. He sources, executes, and manages for-profit investments and non-profit grants. Prior to joining Omidyar Network, Alexandre was a management consultant with McKinsey & Co.’s Brussels and Washington D.C. offices, focusing on the intersection of finance, economic development, and strategy. Connect with him on Twitter.