How social tech is revolutionising financial inclusion
James Simpson Investment Associate, Collington Capital
Financial inclusion is a cornerstone of sustainable economic development, offering opportunities for underserved populations to access essential financial services. Yet, globally, 1.7 billion people remain unbanked with 350 million adults in Sub-Saharan Africa excluded from the formal financial system. Social technologies and fintech are transforming access to finance, addressing barriers faced by individuals, small businesses, and marginalized communities.
This research note explores the innovative efforts of Aceli Africa, Kuunda, Jackfruit Finance, and Global South Holdings GMBH in advancing financial inclusion. It also incorporates insights from AVPA and Deloitte’s South Africa-specific research, highlighting how innovative finance instruments are reshaping economic ecosystems.
Reinventing Microfinance through Fintech: Kuunda
Traditional microfinance institutions (MFIs) have long supported underserved populations, but their processes are often slow, rigid, and costly. Fintech disruptors like Kuunda are reimagining this model by integrating digital financial services directly into platforms such as M-Pesa. By embedding their white-labelled lending profiles, Kuunda enables instant credit access while removing the bottlenecks of traditional banking processes.
Greatest Challenge: “Differentiating ourselves in a saturated mobile lending market has required us to continuously innovate while educating customers about responsible borrowing.”
Most Valuable Lesson Learned: “Financial literacy is as important as access. Without it, credit solutions can lead to over-indebtedness, undermining the very inclusion we strive for.”
Success Story: In Tanzania, Kuunda partnered with Vodacom to provide merchant cash advances for informal retailers. By integrating transaction histories into their platform, they, in turn enable merchants to expand their businesses and hire additional staff.
“When schools are empowered to grow, the ripple effects are felt across entire communities.”
Robert Alhadeff, CEO and Co-Founder of Jackfruit Finance
Financing education is complex, particularly for low-fee private schools that struggle to access capital. Jackfruit Finance has transformed this space by offering quick, data-driven loans tailored to the unique needs of schools. This has empowered schools to upgrade their infrastructure and improve student outcomes.
Greatest Challenge: “Managing cultural expectations around borrowing and repayment while maintaining transparent relationships with our clients has required a delicate balance.”
Most Valuable Lesson Learned: “Focusing on infrastructure financing—like classrooms and buses—provides immediate, measurable impact, building trust and demand for our services.”
Success Story: A rural Kenyan school took out a loan to purchase a bus, increasing enrolment by 40% as students from distant communities could now attend. The school subsequently secured additional funding for classroom expansion, cementing its reputation as a regional education leader.
Strengthening Supply Chains: Global South Holdings
Post-harvest losses and low productivity undermine food security and farmer income, a challenge Global South Holdings is addressing through solar-powered cold storage and regenerative farming practices. By providing high quality inputs and guaranteeing offtake, they ensure farmers can focus on production rather than market risks.
Greatest Challenge: “Securing financing for cold storage facilities has been difficult, as investors often view agriculture as a high-risk, low-return sector.”
Most Valuable Lesson Learned: “Building proof of concept locally before scaling has been critical to gaining investor confidence.”
Success Story: In Kenya’s Nakuru region, Global South Holdings worked with a cooperative of potato farmers to implement their cooperation program and cold storage. Within a year, spoilage rates dropped from 40% to 5% and productivity increased from 8 T per hectare to 20 T helping the farmers of the cooperative to increase their incomes by a factor of 4.
“There is almost unlimited potential in the millions of smallholder farmers across East Africa and beyond, but they need companies that support them where their needs are unmet.”
Andrew Massaro, CEO and Co-Founder of Stable Foods
Empowering Agriculture with Irrigation-as-a-Service: Stable Foods
Stable Foods addresses the critical challenge of water access for smallholder farmers through its Irrigation-as-a-Service (IaaS) model. By combining drip irrigation, embedded financing, and data-driven insights, the company empowers farmers to enhance productivity and resilience.
Greatest Challenge: “Encouraging adoption of the IaaS model requires overcoming upfront cost barriers and securing capital to meet demand.”
Most Valuable Lesson Learned: “Providing embedded financing and making irrigation affordable are key to breaking entry barriers for smallholder farmers.”
Success Story: In Kenya, a first-time commercial farmer used Stable Foods’ irrigation system to generate $1,000 per acre in profit. This success enabled him to reinvest in diversified ventures like poultry farming, securing a stable income.
Innovative Finance in South Africa
South Africa has pioneered innovative finance instruments, including blended finance, impact bonds, and catalytic pooled funds. The AVPA and Deloitte report, “The State of Innovative Finance in South Africa,” categorises these tools by maturity levels, highlighting their growing adoption to address critical socio-economic challenges.
These tools have bolstered financial inclusion, particularly in underserved rural regions, where traditional finance systems have failed to reach vulnerable populations.
Personal Reflections: Internship Insights
During my time as an Investment Associate at Collington Capital, I witnessed the transformative impact of these initiatives. Interviews with leaders from Aceli, Kuunda, and Jackfruit underscored the importance of collaboration between social tech innovators and investors. At the Africa Investment Summit (July 2024), I observed the intersection of impact investment and technology as key drivers of change.
To advance financial inclusion, further research is needed in the following areas:
Artificial Intelligence (AI): Exploring how AI-driven credit assessments can enhance financial access.
Blockchain Solutions: Potential for blockchain to facilitate transparent, cost-effective financial services.
Climate Finance: Investigating the nexus of financial inclusion and climate resilience in vulnerable regions.
Collington Capital is well-positioned to lead these efforts, leveraging its expertise to drive impactful investment strategies across Africa’s fintech ecosystem.
