Global impact investor Accion has reported the completion of its second early-stage fund with a total of $61.6 million to support financial inclusion with the use of fintech innovation. Accion is doubling its investments in one of the fastest-expanding fintech ecosystems in the world with a strategic pledge to invest 30% of this capital in Indian startups.

Mission and focus in India by Accion Venture Lab

The fund was initiated in partnership with the Accion Venture Lab but is currently renamed Accion Ventures and aims at early-stage fintech startups that target underserved people. Accion’s investment arm has invested more than $59 million in 76 companies in over 30 countries since its establishment in 2012. The second fund enlarges on this heritage but has a more refined focus on embedded finance, alternative data, and digital solutions, encouraging inclusive growth.

Accion’s investment thesis is to support the companies that deliver high returns on investments and quantifiable social impact. With this dual mandate, this firm has been able to determine the ventures that are not only able to scale on a commercial basis but also transform lives by increasing access to credit, savings, insurance, and other financial literacy.

It is not surprising that India is included in the second fund of Accion. The country has a rich fintech opportunity because of its vibrant startup ecosystem, a fast-digitizing economy, and a high number of unbanked people. Accion is expressing great confidence in the potential of the region to spearhead the next generation of inclusive finance by pledging almost half of the fund of around 30% to Indian startups, amounting to nearly $18.5 million.

Past investments in India are Aye Finance, which is the biggest MSME lending company; Olyv (previously SmartCoin), which is consumer lending; and TransBnk, which is an infrastructure provider in fintech. These ventures are typical of the Accion: supporting businesses that have an application of technology to tackle the actual problems of financial access.

Embedded finance and emerging markets across the globe

Although India is one of the primary targets, Accion Ventures will invest capital in other emerging markets, such as Africa, Southeast Asia, Latin America, and the United States. The fund will assist as many as 30 new fintech startups around the world, where each investment will be chosen based on its ability to scale and provide a sustainable payoff.

The presence of Accion in the world enables it to cross-pollinate ideologies, exchange best practices, and assist startups in dealing with regulatory and operational challenges. This network effect is particularly good in the fintech sector, where local nuances are usually the key to success.

Among the themes of the fund is embedded finance, which is the introduction of financial services to non-financial platforms. The method enables firms to provide credit, payments, or insurance as part of their own products, which makes financial access smooth and contextual.

The other focus is on alternative data. Fintechs in markets where conventional credit scores cannot be accessed, or are unreliable, are accessing the mobile usage, transaction history, and behavioral data to determine creditworthiness. Accion considers this a potent means of opening the door to lending to millions of people who are not part of mainstream financial institutions. Accion is supporting startups to re-imagine the most effective ways of delivering and consuming financial services by supporting them through these innovations.

Shaping the future of inclusive fintech

The original fund of Accion performed well, and various full or partial exits were well represented in its portfolio. This track record has seen institutional investors being attracted to the second fund, which is anticipated to take the same route of initial support and later strategic scaling and exit opportunities.

Its rigorous due diligence, on-the-job support, and impact measurement methods have led the firm to become a reliable investment partner to both founders and co-investors. Accion Ventures has a great opportunity to influence the future of inclusive fintech with the second fund already closed. 

Its investment in India is amidst a spurt in digital financial services in the country, owing to the growth of UPI adoption, regulatory changes, and the increased smartphone penetration. Accion provides not just funding but strategic advice, a worldwide network, and purpose to change the world in a meaningful manner to Indian founders to develop solutions serving underserved communities.

Conclusion

The second fund of $61.6 million raised by Accion is not just a financial vehicle; it is a driver of inclusive innovation. The firm is investing almost a third of its capital in Indian startups, which is an act that bets on Indian capabilities to spearhead the fintech revolution in the world. Accion Ventures is on a bold path to the future of financial inclusion with an emphasis on embedded finance, alternative data, and scalable impact. Since the fund starts to activate the capital, its investments will probably not only influence the market but also the lives of millions of people in India and other places.