“Frontier Investments focused on Mobile Banking, Microinsurance & Housing”-Monica Brand

Microfinance Focus, July 19, 2010: ACCION International is a private, non-profit organization and currently partners with 32 microfinance institutions (MFIs), NGOs and commercial banks across Latin America, the Caribbean, Africa and Asia, reaching out to a total of 3.3 million poor people with microfinance.

Monica Brand, MD, Frontier Investments, ACCION

ACCION International’s Frontier Investments Group is a double bottom line, venture equity fund focused on catalyzing a new approach to microfinance. It invests in new technologies and disruptive business models that can powerfully enhance the way financial services are delivered to the poor. Building upon microfinance’s success in “banking the unbanked”, Frontier Investments looks for breakthrough innovations that will radically enhance the efficiency, reach and scope of financial services at the base of the economic pyramid.  

Frontier Investments’ vision is to bridge the gap between purely philanthropic and for-profit investing.  In an exclusive interview with Microfinance Focus, the Managing Director, Frontier Investments, Monica Brand discussed some of the emerging sectors that have the potential of bringing breakthrough innovations in financial inclusion and are drawing interests from investors. 

Microfinance Focus: Can you tell us about some of the investments you are doing?

Monica Brand: Frontier Investment was created by ACCION because we realized that there were certain limits of the current microfinance business models. Actually the very things that make microfinance successful are also the things that constrain it as well. For example being very high touch models or being very locally focussed. These are the parts of the success as well as the limitations. So Frontier was created to invest in the sectors what we call the adjacencies  around microfinance which we think can unleash new business models and can help radically reduce cost and can expand the quality of financial inclusion.

These three sectors mean technology like the back office shared platforms that move microfinance away from home grown custom built systems to more off-the-shelf standard industry platforms. The second sector is what we call the distribution or popularly referred to as branchless banking that will include mobile banking, biometric ATMs etc. and it really helps to improve cost delivery.  The last sector we call New Financial Products, like Microinsurance and Housing with the idea of moving beyond microcredit. These are three new sectors that we want to promote in the microfinance business models.

Microfinance Focus: So what kind of strategy you have adopted globally and what is the road map for India market for frontier investment?

Monica Brand: We are an early stage equity investors so like early stage equity investors we look first if they have a compelling business model in these sectors and have some breakthrough innovations like some new payment technology that would allow the MFI to move beyond the branch and gives a new way of serving like mobile banking. Once we look at the nature of the business model we look at the management team and do they have the competency and the skills as well as a commitment to the business. Their revenue model, how does the business earn money and how defensible is their revenue model. Is the market size in which they are working big enough to grow and has a realistic exit? We obviously look at the market segment they are catering, whether they are serving the poor or not. If they have an interesting technology but they are serving the wealthier then it is not very interesting to us unless they want to bring that technology to the base of the pyramid so those are the things we look at.

Microfinance Focus:  What are some of the new deals that you are looking for in sectors like Microinsurance, affordable housing and others?

Monica Brand: Over all the emerging sectors we found interesting deals in India. Definitely by far the most deal flow we see is in the payment system sector so we are looking at one company which has a mobile technology that is very interesting. It serves the base of the pyramid using agent business correspondents as their delivery mechanisms and has a very simple technology that can be brought to even low cost handsets. Another example is that we have Business Process Outsourcer that actually targets microfinance sectors among other international clients but has specific focus on the microfinance sector. Few months ago we looked at the sector of housing. They have a model to do home improvement as well as mortgage the base of the pyramid so offering a new kind of financial product beyond just working capital. So these are the things that company is currently looking into and all these are based in India.

© 2010, Microfinance News. All rights reserved. 2008-09