Table of Contents

Letter from the FINCA Ventures Team | Impact Highlights | Investing in Fintech to Expand Financial Inclusion | Impact Framework | Customer Spotlights | Portfolio Overview: Financial Inclusion | Portfolio Overview: Health Care | Portfolio Overview: WASH | Portfolio Overview: Agriculture | Portfolio Overview: Energy/Education | Deep Dives

Letter from the FINCA Ventures Team

2020 was a year of unprecedented challenge and change. The COVID-19 pandemic swept across the globe, wreaking havoc on economies, markets and most tragically people. Many entrepreneurs struggled to stay afloat. The events of the last year required impact investors to step up to the plate—to take more risks and be bolder in their support of early stage, impact-driven companies. Without the partnership of risk-taking investors, many social enterprises—the engines of growth and positive change in low-and-middle income countries—would not have survived.

FINCA Ventures was able to rise to the challenge. Our small team and nimble investment approach allowed us to provide additional support to existing investees while simultaneously expanding our investment portfolio. As a result, all of our investees not only managed to stay afloat during COVID-19, but also increased their reach and impact.

In addition to expanding our portfolio and ensuring that our capital supports our investees to weather the storm in times of crisis, FINCA Ventures also pivoted in 2020. We revamped our strategy to focus on three core pillars—global health, agriculture and livelihoods, and financial inclusion—while also continuing our commitment to gender equality and gender-lens investing as a cross-cutting theme. This commitment is evident when looking at our investment portfolio, where 60 percent of investments are supporting women-owned businesses. Finally, we raised funding of $3.5 million from USAID that will increase our investments in health and agriculture and serve as a catalytic bridge as we look to scale those portfolios exponentially.

We are thrilled to share our second annual impact report which showcases how our commitment to creating sustainable social impact has allowed FINCA Ventures and our investees to face the challenges of 2020 undaunted. We hope that their progress inspires you as much as it does us.

The FINCA Ventures Team

Impact Highlights

Investing in Fintech to Expand Financial Inclusion

Since 1984, FINCA International has been delivering responsible financial services to underserved communities through its network of 20 financial institutions on five continents. Today, these financial institutions serve almost 2.8 million customers annually.

However, FINCA recognizes that financial institutions cannot on their own extend financial services to the 1.7 billion people who remain unbanked. This is even more apparent when a pandemic like COVID-19 strikes and dramatically disrupts business as usual. To reach financially excluded individuals, FINCA is pursuing investments in technology innovators who are building pioneering products that hold the potential to expand the frontiers of financial inclusion.

FINCA Ventures now also invests in products and services designed to enable underserved communities to access responsible and affordable financial services and lead financially healthy lives. FINCA evaluates each investment opportunity through the lens of how its financial institutions can support early-stage fintech to grow faster, reach underserved communities and address market challenges.

Impact Framework

Theory of Change

FINCA Impact Finance, a global network of community-based microfinance institutions and banks founded by FINCA International, works at the forefront of financial inclusion. Driven by a mission to alleviate poverty sustainably, FINCA International is now taking a more expansive view on how to help poor and low-income families build assets and resiliency through better access to essential goods and services. In light of COVID-19, which has disproportionately impacted low-income populations, such a new, more wholistic approach to fighting poverty is particularly relevant.

FINCA Ventures, an impact investing initiative by FINCA International, leverages the institutional knowledge gleaned from serving low-income customers for nearly 40 years to make equity investments in early-stage companies whose products and services unlock productivity and improve the quality of life for the world’s poor, with a focus on sub-Saharan Africa. Gains in productivity through adjacent channels (e.g., access to healthcare products and services) improve financial well-being and engender demand for financial services. Together, access to finance and access to basic services has the potential to dramatically improve the lives and livelihoods of low-income populations at scale.

With patient, strategic, impact-first capital, FINCA Ventures is positioned to:

• Play an active role in reducing the pioneer gap—the funding challenge social enterprises face in their early stages when they are not considered investable by many impact investors.
• Provide hands-on support to groundbreaking entrepreneurs that prepares their companies for the next phase of growth.
• Cultivate strategic partnerships between our investees and FINCA Impact Finance to improve resilience.

Combined, these efforts improve the long-term sustainability of early-stage social enterprises while deepening, broadening and hastening their impact.

Aligning with Sustainable Development Goals and Other Industry Standards

FINCA Ventures invests in early-stage companies that offer affordable, high-quality and life-enhancing products and services. At present, FINCA Ventures has investments in health, fintech, agriculture, livelihoods, energy, education, water and sanitation. To assess outcomes across such diverse sectors, FINCA Ventures utilizes universal standards for measuring the impact of its investments. These include the United Nations Sustainable Development Goals (SDGs) and the Global Impact Investing Network (GIIN) IRIS+ metrics. Impact measurement, of course, comes in many forms. FINCA and its investees deploy custom survey instruments and develop custom metrics as needed for deeper or more specific evaluation and understanding.

The FINCA team reviews the targets underlying the 17 SDGs and compares them with the goals and activities undertaken by investees to identify direct and indirect impacts that each company has on relevant targets and goals. FINCA then maps the SDG targets to relevant IRIS+ metrics to obtain measurable indicators on social performance. Portfolio companies provide reporting biannually that we use to monitor performance against targets. The end result is that FINCA Ventures’ impact measurement system collects and analyzes social metrics that are core to the business and provide meaningful insights for all stakeholders of the company.

Based on our review, through its investees FINCA Ventures contributes to 14 of the 17 SDGs.

Assessing Portfolio Companies Across Three Dimensions of Impact

Complementing our effort to align impact goals to the SDGs, FINCA Ventures assesses portfolio companies across three dimensions of impact to develop a theory of change that articulates how the company is improving access to basic services and unlocking productivity for low-income populations. These three dimensions are scale, depth and the target poverty level of end-customers.

Scale and depth of impact often have inherent tradeoffs. High-touch models may result in significant depth of impact, but they can be difficult and expensive to scale. Technology-driven businesses may be rapidly scalable, but they can face limitations regarding depth of impact if a broader system of activities is not in place. In assessing the poverty level of end-customers, we consider that some models will naturally serve multiple income targets, with early adopters stemming from middle-income populations to make the business model feasible for lower-income segments. Keeping these tradeoffs in mind, FINCA Ventures supports portfolio companies across this spectrum and aims to provide post-investment assistance in areas most likely to enhance both commercial performance and social impact.

Capturing Higher Incomes Through Value-Add Processing

Sharifa started growing cashews in her village of Mambamba in 1974. She would sell the unprocessed nuts at a local market for a little income. In 2000, she started processing her own cashews after joining Tulinge Women’s Group. Tulinge in Swahili means “let’s get together.” The women get together to add value to their cashews through semi-manual processing. By selling to YYTZ, Sharifa and the women in Tulinge are able to secure 50 percent higher prices for their cashews. YYTZ plans to build a community center with automatic deshelling machines that these women can use to process their cashews at no charge.

With her higher earnings, Sharifa aspires to build a house for her family, raise cattle and buy a car. These assets would help her build wealth and move her family out of poverty.

Solving Liquidity for Banking Agents

With virtually all transactions in developing countries conducted using physical cash, customers need a cheap and convenient way to convert digital money to physical currency, and vice versa, to meaningfully engage with digital financial services. Agent networks have emerged to provide this critical service.

Financial service providers identify, recruit and train pre-existing businesses to perform financial transactions, including cash-in/cash-out, for customers on their behalf, making them agents of the provider. However, maintaining enough liquidity to provide cash-in/cash-out services to customers has proven to be a challenge for agent networks. In situations where an agent lacks enough liquidity, cash-in/cash-out transactions are denied, reducing commission revenue for agents and minimizing customers’ trust in agent networks and digital financial services more broadly.

The Hapa Cash product aims to address liquidity management challenges by providing agents access to a single day overdraft. The overdraft allows them to continue meeting cash-in transaction demand when they face a lack of liquidity, especially outside of normal business hours when banks are closed.

The platform primarily serves micro-merchants in the informal sector that provide mobile money and agency banking services to their customers. In Tanzania, FINCA Microfinance Bank and telecom provider Vodacom partnered to launch Hapa Cash, branded locally as Wakala Songesha.

Fidea is a 26-year-old mother of three who lives in Kisiwani. She signed up to be a mobile money agent a little over a year ago. It made sense to her because she runs a shop where she sells phones and phone accessories. She is subscribed to Wakala Songesha.

“I started with a limit of Tsh 50,000 (US $22) and now it is Tsh 85,000 (US $37). I like that I am rewarded for using it and paying it back. I hope that my limit will keep rising.”

During a typical workday, Fidea sends her assistant to the bank located an hour away to deposit cash in exchange for float and uses the overdraft only in emergencies. She plans on opening another shop next year closer to town where she will also have mobile money services.

“When I get a new till, I’ll put Wakala Songesha on that phone as well. It’s really very cheap and that really helps in this business.”

PORTFOLIO OVERVIEW

Financial Inclusion

PORTFOLIO OVERVIEW

Health Care

PORTFOLIO OVERVIEW

WASH

PORTFOLIO OVERVIEW

Agriculture

PORTFOLIO OVERVIEW

Energy/Education

Deep Dive: Supporting Municipal Waste Management

More than 2 billion people globally lack access to basic sanitation, such as a flush toilet or a private pit latrine. In sub-Saharan Africa, less than 30 percent of the population has access to basic sanitation services. Around the world, over 800,000 deaths per year are caused by diarrheal disease due to inadequate sanitation. In fact, diarrheal disease is the second leading cause of death in children under the age of 5. Malnutrition resulting from diarrheal disease contributes to stunting or impaired growth and mental development in children. There is also an economic cost: the global economy loses hundreds of billions of dollars because of poor sanitation.

Starting in July 2019, Sanivation helped Malindi Water and Sewerage Company to produce a City-Wide Inclusive Sanitation Plan (CWISP). Thanks to Sanivation’s involvement, the 20-year, $120M plan will incorporate fecal sludge waste management into the county’s strategic mandate. In addition, Sanivation helped to build internal technical capacity to deliver on the sanitation benchmarks set out in the CWISP and support systems level change. This is the first of many engagements that Sanivation will undertake to support local governments in Kenya in planning for and implementing waste management activities.

Sanivation’s solution tackles many aspects of the sanitation service chain in Africa. From installing container-based toilets in refugee camps to collecting, transporting and treating waste, Sanivation addresses the sanitation pain points of developing country municipalities. Sanivation also is pioneering a low-tech approach to transforming waste into improved alternatives to firewood for cooking and heating, resulting in better environmental and health outcomes for communities and municipalities. Their waste-to-energy model produces briquettes that burn for one-and-a-half times longer than traditional charcoal, produce one-third of the smoke and are more affordable.

Sanivation’s first large-scale project was underwritten by the UN Refugee Agency (UNHCR) and the Gates Foundation and managed waste in one of the largest refugee camps in Africa—Kakuma in northwestern Kenya, with nearly 200,000 people. The success in Kakuma convinced Naivasha, a mid-sized town in western Kenya, to contract Sanivation for its own waste management. Sanivation built and operates a waste treatment plant for the municipality.

Now, Sanivation is working with other counties and municipalities in Kenya that are eager to deploy its approach to waste management. In addition to Malindi and Naivasha, Sanivation has signed a contract for waste collection services in Wajir in partnership with the local government and the World Bank.

Deep Dive: Bolstering Local Pandemic Response

The outbreak of COVID-19 and its unprecedented impact worldwide required countries and companies to pivot from business-as-usual. As a provider of affordable health care and services to low-income groups in Africa’s most populous country, Nigeria, MDaaS Global acted quickly to combat the spread of the virus.

After Nigeria’s regional lockdowns began, MDaaS Global remained open to continue providing health care to patients in need. They implemented strict safety measures—such as the use of personal protective equipment by all on-site staff, screening patients for symptoms upon entry, additional and more frequent sanitation, and more—to ensure the health and safety of all staff and patients.

In order to fully utilize its team’s unique strengths and seeing how important large-scale testing had been in other countries, MDaaS Global reached out to partner with other organizations to set up testing sites and expand the country’s testing capabilities. That collaboration led to the establishment of COVID-19 sample collection sites in Ogun and Kwara states. The collection sites, which allowed people to either walk-in or drive-through, demonstrated effective partnerships with state governments and other critical local actors.

To better support employers to safely return their workforces to the job, MDaaS Global launched an initiative that offers testing and monitoring services at the place of employment to mitigate outbreaks. It developed SentinelX, a digital health platform combining cutting-edge diagnostics, continuous disease monitoring and telemedicine to help protect teams and businesses from the threat of COVID-19.

MDaaS Global also produced a free, downloadable “playbook” with step-by-step instructions for health authorities and organizations on how to prepare, set up and operate a mass testing site. The playbook is also available for people in other developing countries to use.

To learn more about FINCA Ventures, ways to support or to seek investment, please contact us at www.FINCAVentures.com.

FINCA Ventures is an impact investing initiative of FINCA International. This publication has been prepared solely for informational purposes and has been prepared in good faith on the basis of information available at the date of publication without any independent verification. Charts and graphs provided herein are for illustrative purposes only. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. This publication should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell securities or to adopt any investment strategy.

FINCA International is a nonprofit, tax-exempt charitable organization under Section 501(c)(3) of the United States Internal Revenue Code. Donations are tax-deductible. Our tax ID number is 13-3240109.