Breaking the Pattern: Getting Digital Financial Services Entrepreneurs in India and East Africa to Scale

More than 233 million people in India and 60 million people in East Africa still do not have accounts at formal financial institutions, and around half of small businesses lack access to formal credit. We know the enormous potential of digital financial services [DFS] - Kenya’s mobile-money platform, M-Pesa, and India’s mobile-wallet giant, Paytm, have already begun to help millions connect with the formal economy. And payments are just the tip of the iceberg. Companies across India and East Africa are developing innovative solutions to meet the needs of the financially excluded. Yet despite the enormous market opportunity and the number of high-potential DFS companies in these markets, very few are scaling. Why?

The obvious answer most startups will give is capital. Companies aren’t raising the money they need to get to scale: 72% of startup funding in East Africa has gone to just three companies in the past two years, and the other companies have struggled to fulfill a full round. In India, despite a more active investment landscape, in the past two years, only five of the startups that have raised follow-on investment are focused on the underbanked. If there’s a huge market and many high-potential companies, why aren’t more companies attracting the capital they need to grow? What could unlock scale for a larger number of companies in these markets?

The report “Breaking the Pattern: Getting Digital Financial Services Entrepreneurs in India and East Africa to Scale” produced by VillageCapital and funded by Bill and Melinda Gates’ Foundation set out to answer these questions. Building on a strong body of existing research, this report focus on the entrepreneur perspective. They spoke directly with 55 DFS companies and 23 stakeholders operating in East Africa and India, two regions that have led the world in increasing financial inclusion through technology.

The complete report “Breaking the Pattern: Getting Digital Financial Services Entrepreneurs in India and East Africa to Scale”, provides a more in-depth analysis of these barriers and recommendations.

Access the digital story here or read the full report here.

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