FINCA Helps Launch Global Guidelines for Responsible Digital Finance

June 20, 2018, Amsterdam – FINCA Impact Finance joined an alliance of over 50 fintech investors and digital finance innovators in launching the Guidelines for Investing in Responsible Digital Financial Services, a new set of global guidelines for socially-responsible investment. Attending the launch ceremony was Florin Lila, FINCA Impact Finance’s regional director for Eurasia.

Innovations in digital financial technology have created new opportunities to reach low-income people in emerging markets. Traditionally, low-income people have often been considered too risky and too poor to be of interest to banks and insurance companies, leading to major gaps in financial inclusion.

Due to the efforts of FINCA Impact Finance and other like-minded organizations, however, that is changing. Recent innovations such as mobile e-wallets, money transfers and digital savings products have reached hundreds of millions of consumers and small businesses, radically changing the financial services landscape around the globe. According to the World Bank’s Findex 2017, 515 million people have gained access to financial services since 2014, largely due to mobile banking and other digital innovations.

Opportunities to expand financial inclusion have increased. So have risks. For example, digital lending products can provide the capital necessary to start a business, or to grow a micro-business into a larger, more efficient operation. However, when these products aren’t provided in a responsible, targeted manner, they can result in over-indebtedness. Improved risk management, both for investors and for borrowers, is necessary to achieve responsible financial inclusion.

The Need for Socially-Responsible Investment Guidelines

One factor that continues to hold back responsible digital financial services is the lack of an appropriate investment framework. Many fintech companies and investors have, thus far, lacked the tools to effectively evaluate risks. In a world where the old rules are being rewritten daily, it can be hard to know where best to invest one’s time, energy and money.

Recognizing that problem, FINCA Impact Finance and more than 50 other major financial institutions have developed a set of guidelines for investors seeking to fund inclusive digital financial services—and who want to ensure their investments are made in a responsible way. How these organizations define and handle the issues facing the Fintech industry will enable the investor community to better identify new opportunities and manage investment risks, leading to better economic outcomes overall.

The new responsible finance guidelines are published by the Responsible Finance Forum and include 10 touchpoints that financial investors and Fintech companies can use to evaluate opportunities, mitigate risks and help create a more responsible and inclusive digital finance ecosystem. These include promoting fair and transparent pricing and better disclosure of terms and conditions for customers, preventing over-indebtedness, increasing financial literacy, establishing customer identity, data privacy and security standards, fostering a proportionate legal and regulatory framework and enabling the interoperability of digital financial services.

FINCA’s Commitment to Responsible Digital Financial Services

FINCA Impact Finance’s contribution to developing the guidelines is part of the company’s broader efforts to ensure that fintech innovation is properly targeted toward sustainable, responsible financial inclusion.

As digital financial services have proliferated, FINCA has strengthened its commitment to protecting its clients, investors and partners. The company’s 20 subsidiaries around the world uphold some of the most robust client protection standards in the industry. FINCA Impact Finance is also using digital credit scoring to more accurately assess risk.

Fintech innovation holds tremendous power to advance financial inclusion, but it must be coupled with appropriate safeguards. The Guidelines for Investing in Responsible Digital Financial Services are a major step forward in that regard, providing investors with a simple set of tools for mitigating risk when providing digital financial services.