Investing in fintech startups to empower youth

Published November 1, 2020, 6:30 AM

by Lee C. Chipongian

The COVID-19 health crisis have shut down workplaces and schools at all levels, banned public gatherings, and for all intents and purposes interrupted normal life as we know it pre-pandemic, especially for adolescents who were not even allowed to leave the house. 

 It was challenging but a global initiative that began in December last year — just as the coronavirus outbreak was about to happen — for the support of startups developing digital solutions to empower young people, children and families, doggedly went on despite the lockdown.

 A youth-centered program for financial technology (fintech) start-ups by ING Philippines and the UN Children’s Fund (UNICEF) pursued this project amid the pandemic because, as ING country manager Hans B. Sicat said, they provided an equity-free investment and mentoring program for open source start-ups to develop fintech solutions that will help a post-COVID-19 world.  

 “We believe there is potential for fintechs to find new ways and tools to reach people excluded from traditional banking. By extending financial services into new areas and helping more youth and families gain financial competencies, we hope to help all families secure financial stability for themselves and their children, and all youth to access opportunities to improve their futures,” according to Dutch bank, ING. “We also believe supporting the growth of these competencies will increase the capacity for cash transfer and social protection programs.”

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Chances are, the ING-UNICEF’s “Fintech for Impact” pilot program in the Philippines could be restarted as soon as 2021 going by the number of interests they received. 

ING said they have yet to see if the program will have a repeat. “That has not yet been determined,” the bank said. 

In a joint statement, they announced that they will invest as much as P24 million in five local fintech start-ups or up to P4.8 millon ($100,000) each. All of these money will fund the development of open source technology and content to “allow the tools to be adapted and re-used in other contexts.”

No small amount for these lucky start-ups: Agrabah, which will use the investment to build a digital platform to link farmers and fisherfolk directly to buyers and loans; and BeamAndGo, which will enhance its remittance-based platform to “help migrant workers and their families better manage their finances and make responsible spending decisions for the household”.

Educ4All: InvestEd is also included and it was selected because of its project to help students get access to educational loans and to come up with a “financial education and transition-to-adulthood courses (that) is expected to guide graduates into meaningful employment and financial stability”.

The last two chosen start-ups are Reach52, which is expanding their set of apps that provide affordable microinsurance, healthcare and health products to rural communities, as well as livelihood opportunities, to local women; and Saphron, which seeks to empower grassroots microinsurance agents to collect accurate, efficient data with a powerful new AI-enabled platform, according to ING.

The five local startups will not only benefit from equity-free seed funding but also a lot of hand-holding for the “testing, validation (proof that the solution works), and deployment (and the) start-ups will also receive invaluable technical and business mentorship from the partners and other experts over an incubation period of 12 months,” said ING.

Back in October, when the start-ups were first announced, UNICEF Philippines Representative Oyunsaikhan Dendevnorov said that the pandemic was especially difficult for the more than nine million Filipino children belonging to households that live below the poverty line. It’s not just about poor health and nutrition, but also about lack of education, training, work, and entrepreneurial opportunities, said Dendevnorov.

This is where the start-ups will come in to develop new digital financial tools for the specific needs of young people and children to help them “build economic security, encourage more equitable access to services and lift the financial barriers to opportunities for improving their lives.”

“Digital financial platforms allow for wider financial services, while providing social protection,” said Sicat.

The program, although new in the Philippines, is part of ING and UNICEF’s 15-year partnership that focuses on growing youth opportunity and empowerment, it said. “We want to look into the challenges of inequitable access to services and opportunities, and financial exclusion faced by many youth and families, even in rapidly developing economies such as the Philippines.”

The selection process was tedious but worth it. There were 49 start-ups that applied. The plan was to choose six early-stage fintechs but only five were selected which opens up the possibility of a second phase.

In the Philippines, with the rapid and intensified digitalization of financial services especially payment transactions, technology and banks’ use of it as fintech will only grow and develop over time. 

The Bangko Sentral ng Pilipinas (BSP) is a proactive regulator when it comes to fintech, particularly on how it can promote and expand financial inclusion in the country, and based on studies and surveys, the banking sector supports technology-enabled solutions and “exhibits strong interest in participating in the digital finance ecosystem”.

Most banks tap fintech companies for strategic efficiencies. But for the fintech sector to grow and progress, challenges have to be overcome such as how the country is set up with over 7,000 islands that make access to affordable, reliable and fast internet and mobile data connection difficult and formidable. Data collection, surveillance and analytics are also challenges in the use of fintechs.