Webinar | Investing with Insight: How Data Is Changing the Game for Inclusive Fintechs

Good morning, good afternoon, everyone. Thank you for joining this event and welcome to this conversation. My name is Javier Paz and I am the lead for finance for inclusive growth at CGAP. I'm very excited to kick off this conversation, this discussion, with a few introductory remarks. The smallest enterprises have a colossal impact in the economy. Microenterprises, as you know, provide more than 80% of employment in low and lower middle income countries. In Africa alone, micro, small, and medium enterprises represent over 44 million businesses. For these firms, finance is key to achieve resilience and growth. Finance helps businesses expand inventory, invest in productivity enhancing tools, seize growth opportunities, and build long-term stability. Yet, despite their economic importance, these firms remain consistently underserved by financial institutions due to little understanding of critical needs of MSC sub-segments, high customer acquisition cost, low ticket sizes, limited digital access, and other systemic barriers. The global MSME credit gap is estimated at 4.9 trillion US dollars. Fintechs are driving innovations that can help close this finance gap. Innovators are showing they can viably serve excluded segments of MSMEs with models that offer faster service, products that match cash flows more precisely, and a more user-friendly experience. However, these fintechs struggle to access the funding they need to scale their portfolios. Since they are small, not necessarily profitable, and without a track record of lending, they are deemed too risky by investors, even by venture or impact capital. This pushes fintechs to use equity to grow their loan book, which is inefficient and expensive. This is what brings us here today. In this session, we will explore how real-time data integration and innovative funding mechanisms can allow funders to assess risks with greater precision, enabling them to fund high-potential fintechs that they might otherwise overlook. This opens up a great opportunity to expand finance, promoting inclusive economic growth. I now turn to my colleague, David Cruyff. David is part of our core team on scaling finance for MSMEs at CGAP. I pass it on to him to introduce the panel and kick off the discussion. Thank you, Xavier. Thank you for providing this clear overview of why MSC finance is so incredibly important and how fintechs are well-positioned to push the boundaries of MSC credit. Over the past year, the CGAP MSC finance team, they have been researching the different technology-enabled business models that fintechs are using to reach the underserved and excluded MSCs. We've seen really a large variety of approaches. We've seen fintechs that work directly with MSCs in partnerships with bank or telcos or through embedding their MSC loan into existing non-financial products. We've seen technologies where the installments are linked to the daily sales of the merchants. We've seen buy now, pay later plays where micro-retailers receive their products on consignment so they can actually return them if they don't sell them. We've seen companies using AI and cluster analysis to determine the MSC loans. I mean, we've seen such a large variety of different models and ways being used. But one thing, as Javier already alluded to, one thing they all have in common is that the difficulty to find appropriate capital for growing the loan book. So CGAP then decided to do further research into this overarching problem, which we believe is an obstacle that can be solved. And we collaborated with Brighter Bridges and DFS Lab to find out the true extent of the problem and what can be done about it. So Brighter Bridges is a data-driven research and market intelligence firm specializing in innovation and technology ecosystems. And DFS Lab is a research-driven venture capital firm that invests in early-stage African fintech startups, providing funding, mentorship, and strategic support to digital commerce entrepreneurs. And these two companies, so Brighter and DFS, they really did a truly amazing job, which provided CGAP with all the data and insights for our latest publication on this topic, Innovative Financing for Inclusive Credit Fintechs in Africa. And some of the key takeaways there are really eye-opening, is that the landscape itself, there's growth, but with limited debt. 270 inclusive credit fintechs raised over $4 billion in the past decade, but most remain small and pre-profit. 90% of this funding went just to 16% of the fintechs. These are mainly larger-stage asset financing and unsecured lending fintechs. And the funding is concentrated in this series B to E rounds, which is most inclusive credit fintechs never even make it that far. The traditional capital fit is a rather poor fit. Equity, 65%, mainly venture equity, dominates the early-stage funding, useful for building tech and teams, but inefficient for scaling loan books. Grants is the second largest investment instrument, and this is good to help de-risk new ideas, but they're small, competitive, and very slow to obtain. And debt is on the rise, but proportionally still very small, and it's hard to access. The third most eye-opening takeaway is the high failure rate. 54% of all inclusive credit fintechs drop after the first funding round, and only 15% survive beyond three rounds. The fundraising is time-consuming and unpredictable. And this lack of debt forces fintechs to either delay growth or chase more lucrative, but less inclusive segments. Now, the research continues to describe how innovative asset managers establish data integrations to overcome the risks associated with early-stage debt investments. And I highly recommend you read the study for its truly refreshing and eye-opening review of the innovation in the fintech financing space. But I'm going to stop talking now, and I'm going to hand it over to a group of people who know so much more about the realities of fintech funding. Today, we are very fortunate to have with us representatives from some of the world's most innovative and impactful inclusive credit fintechs and innovative asset managers. We have Hilda Mora, founder and CEO of Pisacia, Wayne Hennessey Barrett, founder and chairperson of 4G Capital, Honey Ibrahim, chief investment officer of Lendable, and Jim Chu, founder and Before diving into the discussion, I would like to ask the panelists to briefly tell the public how incredibly special the companies actually are. So, Hilda, if you would start and tell us about yourself and Pisacia. Thank you. Thank you for having me here. My name is Hilda Mora, CEO and founder of Pisacia. What we do at Pisacia is we unlock working capital for small and medium businesses. These are the underserved businesses that we support. We're a pan-Africa business. We're currently across East Africa. And the way we unlock this working capital for these businesses is using our AI-driven credit scoring platform that allows us to use alternative data to include them into the financial system. And we don't stop there. We actually add on to other additional value financial literacy and digital tools that allow them to grow up the financial ladder. So, the majority of these businesses are excluded. They don't have a formal credit history. So, we take it upon us as our responsibility to actually help them to be part of the system. In the end, you know, the ecosystem is inclusive, but also we work with partners to do that. So, majority of our working capital goes to merchant lending, partners like Safaricom and banks that we work with. But more importantly, our embedded approach allows us to make sure that the capital is productive. So, that's what we do. And glad to be here to share some of our learnings in that journey. Thank you. Thank you, Hilda. Thank you. Wayne, you're up. Thank you very much, David, and everybody. Great honor to be here. Wayne Hennessey Barrett, founder, chairman now of 4G Capital. We have been going for about 12 years now, and our mission is to grow small businesses with capital and knowledge. So, we provide working capital loans completely unsecured in under 24 hours to the 80% informal economy, the informal businesses that make up 80% of Africa's GDP. But we blend those loans with enterprise training so that those customers get the knowledge as well as the wherewithal to grow their business. We also provide retail finance, so last mile working capital with distribution partners in order to scale. We've been investing heavily in digital this year and looking forward to a big platform upgrade so that having successfully got the right product market fit, we can look to scale in the markets in East Africa where we currently operate. And yeah, extremely honored to be here, David. Thank you. Thank you, Wayne. Excellent. Hanni, you're up now. Thank you very much, David, and good to be on this webinar with everybody. So, I'm the chief investment officer at Lendable. Lendable is a debt financing provider to emerging and developing markets with a focus on and a mission of creating an equitable and sustainable world. So, we've been in sort of the debt analysis space for over a decade now, particularly in emerging markets, and we've applied that data-driven approach essentially to fund and asset management. So, we've been able to mobilize institutional capital through our funds and we've been able to lend upwards of $500 million over that time into emerging and developing market fintechs and essentially act as a bridge between a very early stage, seed stage fintechs who've been able to get capital to bring about and essentially create that product and get them to a stage where they are able to raise more traditional bank, traditional asset management funding. So, that middle gap is what we've been targeting, and it's the credit space that we've been targeting because we saw very much a gap there. So, very much in line, David, with the report and the analysis and the research that you guys have done at CGAP. So, we've seen that space flourish really well. This year, we're raising our fourth fund in this space, which is, again, mobilizing institutional capital to emerging and developing market. We're also launching a new initiative, which is on the sustainability and decarbonization side. So, that'll be our sixth fund, which is, again, looking at financial inclusion and the financially excluded segments of the population, but with a decarbonization element to that strategy. Okay. Excellent. Thank you, Honey. It's exciting to hear all that. And last but not least, the new kid on the block, Jim, with Untapped Global. Hi, Jim Chu with Untapped Global. So, our thesis is essentially that fintech and embedded finance lenders are really driving us impact, and it's great to see the CGAP study confirm that. So, really confirming what we believe as our core investment thesis. I think the second part of our thesis is that because of the data on the mobile payments that these innovative embedded finance and fintech lenders are using, there's actually an interesting opportunity to use that instead of your typical collateral and other tools of underwriting to create a real-time monitoring tool of these embedded finance and fintech lenders. And so, what we've done is we've built a digital underwriting platform, a collections platform, a real collections platform, to really facilitate more capital going into these fintech embedded finance lenders, but also to be able to service perhaps slightly earlier stage, even earlier than lendable companies, but also help them graduate through the process to become bankable by much larger investors. So, we're really an underwriting platform or underwriting data platform, if you will, but we also have a couple of funds through which we deploy capital to re-risk and see some of these engagements. Okay, excellent. Thank you, Jim. So, now that we all know who you are, and we also know now you like to talk a lot and everybody talks more than a minute, if we ask for under a minute, this is great. I'll be trying to hold the answers a bit shorter now. Let's start with the fintechs themselves. And I think what I'd like to ask either Wayne or Hilda, if you could tell us a little bit about a defining moment in your funding journey, like perhaps a rejection, a pivot, or an unexpected win, something that shaped your strategy or product, because funding is so important that it determines who you are in the end. Ladies first. Wow. Yeah. So, I mean, of course, it's tough times. We are all looking for the same investors. We are following and chasing the same. So, I think for us, our experience has been, given the current market situation, we've had to strategize and rethink how do we raise capital in ways or instruments that can basically be sustainable in our model, because we're currently regulated by CBK. That's a central bank. So, a lot of things have changed. It's not the usual business that used to happen before the world of regulation. So, there's quite a lot of nuances in the business model and pricing. And so, the cost of capital and whether it's debt, whether it's equity, really matters now more than ever. And I think for us as a possessor, we've had to re-strategize because it's taking much more longer time to raise debt. It's taking much more longer time to raise equity. And so, one of the key things that we've done is to consider local banks. So, majority of our capital right now, almost 80% comes from local banks. That's how we've addressed the rejection, especially from global fundraising where, of course, the capital right now is very scarce. And the international capital is also looking for very high returns, as we've seen in the market from our experience. We might not be able to provide those returns right now. And so, we're looking for more patient capital. And so, we've to come back home and actually encourage or talk to local banks to see if they can be able to support us. And that's really been the way we've addressed that challenge. Okay, great. So, just confirming, capital is a major headache for possession and it influences actually how fast or how far you can grow. Wayne, would you like to expand on that or would you like to just complain a little bit about how much time you actually spend chasing funders rather than building the product? Enlighten us. Yeah, sure. It's not easy. And just feeling Hilda's pain, we've been there as well in the past. I have to say, the last 12 months have actually been very fortunate for us. We did have a couple of big milestones. I guess, because we've always prioritized customer success and therefore, a sustainable model, we've never been grant funded. We've had to be a commercial operation. We've had to be sustainable in that way. And capital is very expensive. So, we've packed as much value into the customer experience as possible. So, by aligning that customer success with our own, we've actually been able to kind of keep moving under our own steam, which makes the story easier to tell. So, the equity round that we closed in 2022, some time ago now, was transformative. We thought that would allow us to access the growth debt that we wanted. It wasn't as straightforward as that. And so, actually learning to use our data and find data-led investment partners was very transformative to us. And I have to give Jim and Untappd a big high five here, because we closed a debt round with Untappd in three months, because they were able to analyze the data from our loan book. That is the fastest deal we have ever done. And so, these guys are using the right approach to be able to measure and assess risk. And that was extremely catalytic. That, in turn, allowed us to increase the power and the fidelity of our story. And then, a really pivotal thing last year was a successful commercial paper. Because, as you know, we lend and sustain businesses in local currency, so hard currencies are fraught with risk. So, we really want to see Kenyan shillings and Ugandan shillings going from Kenyan investment pools into the local economy, and then back again with the alpha that we can offer. And so, that commercial paper was oversubscribed. It was over $5 million in the end, and we're continuing it on this year. So, I guess the milestones were, one, finding the right investment partners with a data-led approach, and two, being able to leverage that into a local currency-first conversation. Okay. So, we're talking here with two fintechs that have been around for a while, have proven the concept of things that work. But can you both confirm that up till today, it's difficult to work with traditional investment approaches? Or is there anything you want to highlight about where is the real mismatch? When a traditional investor comes to you, what questions do they ask that don't fit the way you operate? No, I apologize if I accidentally gave a positive story there. The fact is that we have had a breakthrough, but it has been incredibly difficult. We are an odd duck. We don't fit conventional investment theses for a number of reasons. First off, we're unsecured lenders. So, when asked about collateralization or securitization or the frameworks that traditional debt investors want, we don't have a fleet of vehicles or a ranch or a load of commodities that can be collateralized against the debt that we need to on-lend. So, that makes things very difficult. That makes for some quite strange structures. The second is that with short-term loans, our outstanding book size at any one time is really quite small for a traditional bank or a DFI to look at. They'll say, well, your loan book is only $15, $20 million, but we're going to lend $300 million over the course of the year. So, on an annualized basis, we're moving a lot of money. But they are looking at lifetime value, loan-to-value. They're looking at your outstanding book against your equity balance sheet, and they come up with strange conclusions compared to what we're actually able to achieve. So, that makes those conversations very difficult. And then, of course, there's the currency matches that I mentioned. Banks are not configured for risky venture debt. And in a way, they shouldn't be criticized too hard because they're meant to look after their depositors' money. But at the same time, it would be nice to see them moving some of that money to help grow small and medium businesses. Okay. Hilda, anything you want to add to that? Or do you recognize that? Yeah, no. I mean, it's been everything that Wayne has said, but also we've taken a different approach because, of course, we're lending in local currency. Capital is very expensive right now. Hard currency capital comes with other challenges like FX risk, hedging. So, basically, we've turned back and asked these same banks, we know you don't understand how we operate as fintechs, we don't have collateral, but can you use our receivables as collateral? And if we build our credit history with you, then over time, then you can come in and look at other ways that we can risk share. Yeah. So, we can risk share in whatever portion that makes sense, or we can actually look at other ways that are innovative. Because banks are not lending to SMEs, they are currently only lending to government. So, their money is just sitting idle there. So, we're looking at other innovative ways. And for us, what we've done is we've strategically looked for banks that are innovating. Local banks that actually have a fintech arm, or they are fintech driven, and we've gone to them and said, look, here's an innovative way that we can work together without taking our cash as collateral, or our equity as collateral. And let's test it. Let's test and learn. Let's prove it. And let's make it work. And so, we've tried and tested with three banks, and now we are scaling with them. So, that for us has been a major success story, because then what we've done is, you know, we basically just said, you're going to continue to be a balance sheet lender. As we, you know, release our cash, let's continue to use it to make sure that the business is sustainable. So, what I'm saying in short is, I think there are still banks out there that are willing to understand that receivable is actually a collateral that can work. And we continue to grow with them. And we share in the risk, and we also share in the return. Okay, so there is hope. There's hope on the horizon after so many years of, you know, fighting for your cause, you're getting some breakthrough now. That's great. I'm going to quickly switch over to the innovative asset managers, if I can call you that way. And I just have this one question to start off with is, but I mean, like, please explain to everybody on this call why it is a good idea to provide debt to loss-making fintechs. I mean, what gives you the conviction to fund companies that haven't reached break-even? I mean, yeah, you have to have quite some guts for that, I think. So, please explain. Would you like to go first, Han? I'm happy to jump in. Yeah, look, I think if you use conventional underwriting tools, it's impossible. I would view that where it's impossible. Do you say, hey, what's your EBITDA? What's your collateral? How much cash do you have as collateral? How many tables and chairs can you collateralize? It just doesn't add up if you're looking at a embedded finance or a fintech lender. But if you actually value and look at their unit economics, and then also use things such as the fact that they're collecting with mobile payments and integrating with mobile payment systems, the picture changes. Because you're not relying necessarily on them making some money, managing their accounts, and then paying you after they've paid everybody else. But rather, you can be partners with them, almost joint venture partners with them, in deploying the capital. And so, you are taking, if you will, somewhere between equity risk and debt. If you look at debt, the two extremes are quite extreme. Debt, there's not that much upside. You're just protecting for your downsides. Equity, sure, you can take a lot more risk, but you need a big upside to make that work. But there are approaches where you can take more of a middle ground and say, yes, there's some risk here, but hey, look, the unit economics are great. We have real-time data integrations. We can monitor that as they grow. The returns are amazing because they're doing a great job. Wayne and Hilder are doing a great job in executing their businesses. So, there is an opportunity there to capture some short-term liquidity, short-term cash flows, high returns, but not take the debt risk or even the equity risk that may be challenging in this environment. But that sounds really nice. It almost sounds too easy. I mean, why is not everybody doing it? It's not easy. It's not easy because, I mean, I always joke, right, or I always say I shouldn't say it's a joke. There's a reason why more capital isn't flowing to fintech lenders and SMEs, because again, it's not as if big banks are just saying, no, I don't want to help you. I'm just a bad guy. They actually do want to, but there are very specific rules based on the underwriting process and requirements that are created for a very different world. It's created for corporate debts with big machines and factories. It's just very different. So, you actually have to do two things. One, change how you do the underwriting. So, if you use a very traditional underwriting process, you will go back to the same conclusions as everyone else does. And number two, you have to find some thing, and let's call it technology for now, some technology that allows you to do it differently. You can't just say, I'm going to do it differently. You have to actually innovate on how you do it differently. So, what we try to do, and I think, again, it's not easy. We really spent a lot of time and energy building something that can capture real-time data, but also with that real-time data, change how we disperse capital and how we do DD. If we actually use the same DD process, underwriting criteria and tools, then we'll just be like everybody else. And then the technology is what really brings it. So, managing all that data, managing data from Hilda and Wayne, and then six other... So, one comment I want to make about something you said, Wayne, we're an odd duck, I think. I mean, yes, it's true, but I think if you look globally, there are a lot of people coming up with very similar solutions. I mean, I think that's very validating for one, right? It's, in Indonesia, in Mexico, in Nigeria, I mean, so many different markets are coming up with similar embedded finance fintech solutions, but they all have different data systems. And so, I think one of the stats that you gave in the beginning, David, was only 16% of the 200 or some fintechs were getting the funding, right? It's because, well, gosh, if I want to actually start integrating with your data systems and analyzing your data, it takes a lot of time and energy. And it's not going to be worth it for a deal under $20 million. So, I'm just going to focus on the big deals. So, that's an old underwriting method. But if you can actually use technology to say, hey, let's integrate data faster, let's capture that data faster. So, now you can do smaller deals. Now you can do $5 million deals. Yeah, I remember that maybe it was you, Jim, or somebody else who told me, our due diligence starts when we make the data integration. That's when we get to know the company. That's when we start small, small tickets. And that's a very refreshing way to look at it. I just want to quickly ask Pani, is there anything you'd like to add on what Jim responded to? Yeah, sure. A lot of what Jim is saying absolutely chimes. So, I think the one point that Jim made was that there are a lot of other people in other markets doing it. And actually, if you look at Europe, US, there are a lot of people doing it at scale, at significantly more scale than Jim is doing it or we're doing it. So, the business model is there. It's validated. Going back, David, to your question of why give money to a loss-making business, Jim made the key point. It's unit economics. So, businesses that are starting off, they're in year two, year three, year four of life, are very different to what banks would see as factories that have been around for 10, 15, 20, 30, 50 years, for generations. Those businesses can turn around audited financials. And so, there is a process and a system. They can turn around financials that show a net profit. Is that really what we're relying on from a repayment perspective? It's important to be profitable. It's important to get there and be a sustainable business. And so, you can see through your first five, 10, and then go on to 15, 20 years. But it's a journey. It's stages of life for these businesses. And if they don't get, so if Hilda and Wayne don't get to capital in year three, year four, year five, they can't get to year 10 and year 15. And so, this is what we're doing. This is what Jim's doing. And we're looking at different timelines. So, instead of looking at annual financial statements, we look at shorter timelines. We look at cohort data. We look at performance data. So, if a loan product is a six-month loan product, we look at those cohorts. If the loan product is a six-day loan product, we look at those cohorts. And if that product is unit economic positive, once we've done all of our analysis, et cetera, then it makes sense for us to see how we can help scale that business and get it to a net profitable or net break-even position. So, ultimately, that's what we're trying to do. And yes, we're driving return off the back of that. We're doing it in a commercial way. And CONTACT is doing it in a commercial way to get capital mobilized, which gets a return. It's not necessarily an equity return, but it's also not a straightforward commercial paper bank debt type return. And we have the processes. We have the systems. We have spent the time, and it's not easy. It takes time, but we spend the time to put that in place. And that's also one of the reasons why not everyone's doing it, because you could do it the easy way. You could shortcut it. At some stage, you'll get found out. It might take a year. It might take 10 years, but you'll get found out. So, you've got to put in the hard work. Yeah. The hard work and building your own internal systems. I often refer to you guys as APEC fintechs. It's kind of like fintechs yourselves, just using the same technology as fintechs use for their own clients, only you lend to fintechs. And I'm really very pleasantly surprised to see all these developments. I'm going to take a quick break, because there's a lot of good questions coming in from the people listening to, watching the webinar. One is from Federico Suarez. And Federico asks, more often than not, the biggest challenge for scaling is capital ratios, loan book to capital. How is this challenge being tackled? This is the largest challenge I see in emerging markets, limiting growth and impact from alternative lenders to MSMEs. Would anybody like to respond to that? Yeah, I'm happy to respond. Yeah, I think there's a phrase that I like, that is often for companies, fintech lenders, any company, there's, especially in Africa, a feast or famine. You spend a year securing a loan from XYZ, and then you have way too much money than you need. And then you deploy it, and then you're scrambling for more. So you're always in this feast or famine cycle. And I think that's what, in certain parts of the cycle, that's where, for Rico, it was very intake. So I think it's, and the way we try to do this differently is we deploy the capital more incrementally, incrementally, in line with when the businesses need to deploy it. And so that we care about capital efficiency, how capital efficient are they? Are they just sticking it in a bank and putting it into Kenyan sovereign bonds? Or are they actually deploying the capital and seeing the high returns that you get from that? And so being able to monitor that is really important, to being able to disperse in that incremental way. But doing it that incremental way, resolves some of the issues that cause that capital ratio issue that Rico mentioned. Oh, thank you for that, Jim. That's very clear. Two more questions. I'll give these two in one go. They're for our fintech panelists. Judy from Renew Capital asks, for Wayne and Hilda, can you share thoughts on how venture debt providers can streamline the funding process? What are your recommendations regarding providing plugins for venture debt providers to access data, to access all-inclusive fintechs for fintechs? And the other question from Daniel Adiretti is for Wayne. Wayne points a great point, short-term lending versus traditional balance sheet receivable ratios. How can we further educate the market on this divergence? So would you like me to repeat any of those questions or are you guys good to go? Good to go. I'm happy to jump in first. How to streamline venture debt deals. I guess it would be nice if the industry could lean towards some kind of common, accepted, standardized measurement metrics. I'm thinking now really about impact. A lot of impact investors speak a very good game about what they want to see, but then when you explain that you're a B corporation, they've never heard of it before. B corporation is quite a big deal and it's not easy to get. It's a very, very rigorous and involved set of criteria that you have to be assessed hard against. We over-index massively because our customers are vulnerable and because if you are careless with provision of credit, you can get people into a great deal of trouble. So that's the commercial logic behind our social mission, which is equally valid and important. But I guess streamline the process by some kind of accepted standard level, whether it's social performance task force, SPTF, or something that CGAP espouses. That would be helpful. But ultimately, nobody's entitled to capital. No business is entitled to investment. So it's the entrepreneur's job and it's the business's job to be ready for the parade. You've got to have your books in order. You've got to be in good shape and have your numbers good to go and have your data rooms good to go and your information up to date and take it compliant seriously. There is no way to shortcut the process. You have to run a really, really tight ship. So I hope that's helpful from the enterprise side and a call to arms for the investors. How to educate people about various ratios for short-term lending against the balance sheet. I guess just keep having conversations like this and explain the quantums involved and describe how the compounding effect of 5% monthly annual growth, which is the kind of thing that we shoot for, it turns into some fairly significant volumes on an annualized basis. And providing you've got all the other important things kind of taped down, your cost income ratios are squared away, your customer churn is stable, your employee churn is stable, all the important things that are within your control. And then you can demonstrate your gross margin and a sustainable EBITDA and a sustainable profitability after tax picture. Then you can bring people along with the conversation. The only thing I have to counsel is just avoid frustration. Let me just jump in there, Wayne, because you're talking like, hey, it's our responsibility. We're not entitled to debt. We have to have our house in order, this and that. But okay, maybe Hilda, you want to chime in here. If you spend X percent of your time chasing funders and very little percent of your time building the product or caring for your company, I mean, how can you stay without frustrations? Hilda, how do you do it? Well, that's a norm currently, especially if you're growing your loan book to the tunes of what we are apparently doing in Possessia. Every day the loan book is growing because we are working with merchants who are in need of working capital. And I think in terms of just really making it easy, especially for venture debt providers, is how do you make sure that you can actually come in and support the initial loss to reduce or to de-risk the early stage of this portfolio's lending. So things like guarantees, fast loss structures. So we're not seeing more of that. We need to see more of that. If it means to partner with local lenders or DFIs, I think that would be something that is highly needed right now. So for us, for example, we've managed to work with some of our debt lenders to provide technical assistance to really just de-risk that early stage. So those are some of the ways that I think we've been able to see initiatives that are going to work. But in terms of the long term, I think we need to see more partnering with local debt providers, back-to-back facilities. So if it's a USD facility, how do you then ensure that the hedging costs make sense for companies like us? So partner with local banks and provide a solution to that problem, which is just a back-to-back facility. And I think lastly, just to answer the question of education, is also a playbook. I think we really need to think about what is that playbook for Africa? What is our playbook for Kenya startups? What is our playbook as we go from one market to another? There's a lot of nuances. And what I've seen from our venture debt providers is they want to generalize their returns. They want to generalize their margins and everything else. But I think we need to start going down to the context of how is our market operating? How do we support them to de-risk early on? How do we play together in the long term game? I think that is the questions that we should be asking ourselves. Of course, all that, if they are answered correctly with the right partners, it reduces all those frustrations. If, if, if. So, I mean, I just want to applaud both of you for being able to keep that patience. I definitely wouldn't be able to do that. I am going to continue with, actually, there are more questions coming in from the audience, which makes my job so easy. It's about securitization now. Can Wayne's suggestion around standardizing, can Wayne's suggestions around standardizing be used to pool loans into vehicles for multi-lender securitization products? And from Graham Wright, we have, have there been efforts made towards securitization of fintech loans in the African market? Any takers? I can, I can just speak from our own challenge that, you know, when you have a constellation of different debt providers, securitization can become complex. Everybody obviously wants the maximum level of assurance they can get. And so we've worked quite hard to get a universal securitization undertaking that everybody can sign up to, which is effectively pari passu for everyone. Of course, banks always insist on seniority and that's the way life goes. But ultimately, I think there's real space for innovative structures here, for SPVs, for things like that. But I do echo Hilda's call. It would be nice to see DFIs and institutional players come in with the credit guarantee solution that can help to spread that risk. And I do reinforce it needs to be data led. But ultimately, what are we trying to achieve? We're trying to make financial inclusion more accessible, more affordable, which means bringing prices down. All of our cost of capital is much higher than we'd like it to be. And that's based on risk and perception of risk. And I think that's the real delta. I think that the real risk is much, much less than the perception. And that's what we're trying to tell. Yeah. Do you think also that the risk is much less than the perception of your own clients, Wayne? Yeah. Very good. My clients are fantastic. My clients are the best business people in the world. We get 97% repayment on time. These are good people. So Jim, did you want to say anything in addition to that? I was just going to add that I think securitization is very difficult when you don't have the scale, don't yet have the scale slash standardization. I think there are some possibilities in that. But there are a handful. Oh, gosh. Sorry. I lost you guys. Okay. Sorry about that. But there's only a handful of ones that are large enough. So I think there needs to be, if we want to service a broader fintech vetted finance sector, there needs to be more standardization across those in terms of terms or in the data sources and aggregating those into a portfolio, into an SPV, for example, Wayne, that portfolio that actually has the sufficient diversification and the scale to make it workable. You can't securitize a $20 million textbook or even a $50 million one. It needs to be $100 million. So we don't know any complete example of this happening in the African context at the moment. Not that I know. But I think we're trying to get there. And that's our goal, right, to integrate with many great cylinders such as 4G and others, but then standardize the data coming from them and standardize the flow of capital coming, the cash coming from them and be able to create enough scale through aggregation to be able to securitize. That's actually interesting on this point, because it kind of brings us to the question for the asset managers. The way I sometimes see it, you fill in a missing link in the financing chain. You step early in with early stage fintechs and you mature them with your debt. You give them a debt track record, you reach them to profitability and beyond, and then get snapped up by traditional investors. How are you going to deal with that? Is it something you accept or do you keep these lines? Yeah, no, no. It's too simple to say it's not a concern. Look, the way that we see our role is not so much a capital provider, but rather a provider of underwriting intelligence. So we want to be the intelligence layer, the risky layer, if you will, and the aggregation layer that helps the folks like Connie and others be able to capture more of these deals. Now, it doesn't mean that we can't also be part of those deals, right? But I think it's important to separate out the two different parts. There's that data piece of it, or how do you use data piece of it and the aggregation of that data. And then there's the actual deployment of capital. I think getting that first piece right allowed you to do many of these things, but then you don't have to do the second piece exactly the same way. Once you have this great flow of data and intelligence about what's happening with Wayne, with Hilda, with six others that have similar businesses in other parts of the world, then you can do the kind of unsecured lending we're doing, or you could actually go and do or provide intelligence and data and information to those who want to do a very standard loss. That would help already. This is interesting because I have this discussion with fintechs themselves. A lot of fintechs tell me, actually, if it were up to me, I'd be a tech company, not a fintech company, because I don't really want to be bothered with the loan portfolio and putting loans out. And what I hear you saying is like, well, we have a capital provider, but actually, going forward, we want to be that layer that provides market intelligence, data as a service, and position yourself in that niche. Is that correct? Well, look, I think you need to do both, right? I think if you look at what's happened in the US market in particular, the companies that have really thrived are neither asset managers or pure tech companies. They're the ones who have combined the two into an interesting offering and provided basically the ability to open up new markets for much larger asset managers. I think maybe Hanning has different ambitions, or Lenovo has different ambitions, but we're never going to be able to compete against BlackRock or JPMorgan and these large, large compliant asset managers that have a very different job. Their job is to be compliant and raise money from large pension funds and institutions. But they can't access these deals. But what we see in the US market is that there's new players coming in who are actually providing that intelligence. And they're doing it with selling their own capital, by the way, to de-risk, but ultimately, they're paving the way for the JPMorgans, the Jeffries, and others in the world to come in. Okay, so there's a whole bigger vision here where you use your own capital also as leverage for outside capital. Yeah. I also think that it depends on the region and the market that you're looking at, right? So if you were a lendable in the US context or an untapped in the US context, you could actually choose one or the other because there is scale. So you could grow 10-fold, 100-fold, maybe 1,000-fold just doing the data piece or just doing the capital piece. I think you'll struggle if you're doing just the capital piece because you need the data to support the underwriting. But you could just do one or the other and really scale. I think that, as Jim was saying, you have to do both. I agree with that. And particularly in the developing market, the emerging market context where necessarily the scale isn't always there. So you've got to have a view to either or. And coming back, David, to your other point on fintechs taking capital from us and then graduating and untapped, maybe a lender, and then that fintech comes to us and we might provide them with additional capital, and then they may go to other credit providers and get other capital. That, from our perspective, is also fine. So if you look at mature businesses, particularly mature lending businesses, they will not have one debt provider. Even earlier-stage ones or relatively middle-stage ones will not have one debt provider. So if we see untapped as a debt provider, we see that as a positive and as a validation of that business. And we also don't see that as we should refinance out untapped or whoever else that debt provider is. We can be incremental for growth. Now, the obvious question there is that once we provide, let's say, $5 million, $10 million, $20 million, $40 million, and the fintech grows beyond that and they are accessing banks, that's also fine. And we've got examples in our portfolio where, in some cases, we've been refinanced by bank capital, we've helped them graduate, we've provided that sort of bridging phase, and I use bridge in the loosest sense of term loans, but we've served that fintech for that phase, and then they've moved on and chosen bank capital as their sole source of capital. In other cases, if we take Watu, for example, in East Africa, we've provided them capital in Kenya as the first lender there before it was profitable. We've then been the first lender in Uganda, the first lender in Tanzania, and we're still there, even though they are raising bank funding, asset management funding, listed paper in Kenya. My only question there is, I mean, I do think that early stage debt providers are more expensive than the traditional debt providers that come later. So do you go down with your pricing eventually to stay with the partners? Because there is a price differential, there is, or there can be a price differential, but it's not as straightforward as I think the way you were thinking about it, David, because the bank capital, the local capital is local currency, which absolutely helps from a currency exposure perspective. I mean, that obviously is a risk mitigant, but local liquidity is not in the same cycle as dollar liquidity. So there are reasons why local liquidity is there and dollar liquidity is there. There's reasons why one is present and one isn't. So there's also a diversification benefit. If you put all your eggs in the local bank basket and the central bank turns around and changes loan to deposit ratios or capital adequacy ratios or something else, then those 12-month rolling funding lines just go away. And usually local liquidity tends to be shorter tenor than the dollar liquidity. So you are taking tenor risk and you're then taking concentration risk on a type of capital. So diversified funding is always... Absolutely. And we recommend our borrowers to do that. In fact, we start off as the first debt provider in some cases and stop at a level and say to them, hey, I think you should look at getting a second debt provider, not because we don't want to increase with you guys, but you should just have a sensible diversified debt structure. I just want to jump in there really quickly and just reinforce that point because I think it's not only sensible, it's a must-do for companies to have a capital stack strategy. And that includes everything. That includes equity, of course, use of equity. That includes secured loans, but it also includes other forms of non-dilutable financing. So unsecured loans. So I don't think it's correct to compare the pricing of a secure, collateralized, prosperous, consistent loan versus a revenue-based finance or even a subordinated loan. Thank you, Jim and Hani, for educating me on that. I needed that. So that's great. Hilda, do you agree? I mean, you're looking at funding a lot. No, absolutely. I think it's always going to be a balancing act. And that is the game. It's going to be a constant balancing every time you're looking at unit of economics, you're looking at cost of capital, you're looking at all the assumptions on the table and asking what is the right capital intentionally to fit in in each of these portfolios. And even when, of course, there's a lot of other nuances because we're talking about FX risk, we're talking about regulation and many other things. I think a mix of everything, blended finance has always seemed to be very complex. But I think if we can plug in some of these early stage instruments, as I mentioned, to come in and de-risk, I think the story will change and be different as we go along. So you feel comfortable with the current pricing structures? We can do better. I think if we can always get those pricing go down, as I said, it's a tough, tough time. There's a lot of capping, there's a lot of regulation risks and other things. Everyone is looking out for themselves. But I think getting to a situation where everyone is having a win-win, and we have more pushing capital, I think we can always take the pricing to go down as companies can scale and survive and sustain. Because if they are high and all these other things come in, highly likely, we know what's going to happen at the end, as we've seen in the current market. A lot of companies are actually dying because of expensive debt, and not so much because of the lack of equity. Thank you, Hilda. I just want to stick to you. I have two more questions from the audience, so I need to be short, Hilda. Pratik wants to know how you and the team are using AI to become more lendable. Well, not the lendable in this call, for sure. But I guess, you know, basically for us, this is the biggest investment we've done in Possessia. For the last eight years, we've been building this engine to allow SMEs to be worthy. And we've seen 40% of our SMEs being worthy for the first time ever. And the way we do it, as I said, it's taken us eight years. So we build a lot of alternative data. Because we work with embedded partners, we have transactional data that is very rich and complete. We work with MNOs, we have a lot of mobile money data. We have a lot of bank data and any other data sets that make sense, we collect it in completeness. And what we've done now is we've brought in Gen AI and other tools that we've built internally. This is purely our internal data science team, building these products and looking at data. And now behavioral data is what we are now able to predict a customer's ability to repay, but also willingness to repay. So that's how we are using AI. But in addition to that, we've embedded it in our fraud models. So we have 0% fraud in Possessia. And the reason for that is we're able to almost predict the pattern even before it happens. And also customer's behavior, when they're just about to turn around and change their behavior, we're able to see that using AI. So and there's many, many other use cases. But the exciting part is, we continue to build, we continue to innovate. And I definitely believe this is also going to be part of building a portfolio quality in the end. You know what, Hilda, I think by just listening to you, we need to have a webinar just on this whole topic itself, because it is very interesting. And it is the future and the future is around the corner. Last question, very short, but it comes from Jake Kendall from DFS Lab. And Jake wants to know for the APEC fintechs, do you find equity investors potential blockers for your debt contracts via their shareholders agreement clauses and board positions? Yes or no? No. No? No, not at all. We wouldn't be able to do what we do without them. Yeah, they're actually very collaborative partners on the whole, in most cases. Okay, that's good to know. You know, we've on the top of the hour. I think this is it. This went so fast. It was so interesting. You guys make a really a great set of panelists. Thank you so much for your time. And for your insights. We should do this again, you know? Stay in touch. Pleasure. Thank you, David. Thank you. Thanks, David. Great topic. Great study.