Think of the number of apps on your phone where you manage your bank account, investments, and payments. This is FinTech, where the increasingly global digital setup has entirely changed how we manage, access, and grow our money.
In the traditional sense, we would perhaps hesitate to associate finance and social change or impact in the same sentence. Considering how banks and financial institutions are often money-making setups. Portrayed as non-emotional or non-sentimental. This narrative has undergone significant shifts over the past decade.
The rise of technology, growing global climate concerns, and shifting geopolitical landscape have all contributed to the growth of the social impact sector. This sector is experiencing a sprout like never before. A sector that thrives on social change is now also experiencing how profits and impact can possibly co-exist.
Now, think of how fast you were able to make the last payment from one of the UPI apps.
FinTech is directly associated with cashless transactions, fast payments, and digital wallets. However, in the social impact sector it has a deeper value system.
One where it helps to unlock social change. It brings on board the ability to include unbanked sectors and underserved regions. Supporting a vast majority of small and medium scale enterprise (SMEs). While also supporting local shops and business owners.
Fintech in the social impact sector branches out to offering short credit in these regions to build a financially inclusive support system for SMEs. Becoming a vital tool for growth in the social impact sector.
Why FinTech for Social Impact?
Let’s consider our national population, where still over a billion people remain unbanked. Signifying how they have limited access to financial and banking services. Think of savings accounts, current accounts, instant loans, insurance, credit lines, and others. This is where FinTech tools offered today act as a bridge to financial inclusion.
Financial Inclusion: Driving change
In social impact, an organization’s primary focus and mission is to solve a pressing social or environmental issue. A large part of this conversation is the concept of financial inclusion. FinTech executives are expanding financial inclusion to unbanked areas, strengthening financial health. While also promoting digital finance options and security.
Global brands like PayPal, Mastercard, Visa, etc, are embracing this by placing their products/services as tools for financial inclusion. In India, this growth has been largely led by both the public and private sectors. Including the Indian giant PayTM with its collaboration with the government enterprises.
Another key reason for the growth of FinTech in social impact is the rising awareness of social impact sectors potential with investors and organizations.
Fintech Role in Social Impact Sector
1. Driving financial inclusion
FinTech helps social impact to cast a wider net and reach the unbanked and underserved regions.
A significant example of this is the leading Indian organization PayNearby. They are B2B2C model operators, partnering with local neighbourhood stores (Kirana stores), enabling them with digital commerce services for their local communities.
Curating the Kirana shops into financial banking points. Assisting people to access money – via making deposits, withdrawals, paying bills, and accessing insurance services. Working on the last mile of financial access, driving financial inclusion.
2. Digital lending and microfinancing
Have you noticed how apps like CRED and GROWW also offer you services like your Credit score? Using financial data from your transaction and card additions. Today, many last-mile access FinTech’s are able to access credit worthiness without a traditional credit score. Offering microfinance loans to farmers collectives, women entrepreneurs, and many other informal workers.
Kinara Capital: This Indian organization in social FinTech is offering game-changing microloans formats. They are focused on women-owned MSMEs and small businesses. Offering them collateral-free MSME loans in 24 hours.
Their app – MyKinara – also offers 1- min eligibility checks in 7 different languages, with credit starting from INR 1 lakh and extending up to INR 30 lakhs. Offering opportunities to women entrepreneurs who may often be excluded by the traditional banking system for lack of collateral.
Working with smart analytics and other data points, replacing the age-old bureaucracy of banking systems.
3. Blockchain: Transparency, traceability, and trust
A game-changing concept that is revolutionizing Finance sector is Blockchain. It’s a simple, transparent, and decentralized ledger system. Which is used globally by a large number of organizations to track their financial aid distribution or global financial transactions. This ensures that funds are reaching the right people, offering traceable accountability.
4. Financial literacy via gamification
Notice how brands like Zerodha Varsity are utilizing game design to enhance investor learning? Supporting financial literacy via gamified engagement. Their app offers free learning resources in many Indian languages.
Aiming to educate the youth and first-time users. Keeping in mind how essential vernacular content is for financial inclusion. The brand is an ideal combination showcasing the power of play, finance and empowerment.
5. Impact financing or purpose-led financing
Let’s learn this from the example of an Indian organization – Rang De. A peer-to-peer lending platform where individual investors like you can also become social investors. You can directly empower low-income farmers, entrepreneurs, and women-business owners in remote locations.
It’s a crowd-funding platform changing the lives of borrowers with a lower rate of interest than other microfinance setups. They offer information on who the borrowers are, using storytelling and past impact reports as a strong base to attract individual investors.
We can learn from these examples that the impact of FinTech on social impact helps to bridge a necessary financial gap. While empowering the underserved with innovative tools. Creating new channels of empowerment.
These organizations are working with cultural, rural, and local aspects that make their services and solutions successful. Each of these organizations has a key concept and focus – to drive inclusive financial change. They are:
a. Empowering farming communities
b. Empowering women entrepreneurship
c. Empowering small kirana shops or SMEs and MSMEs
d. Enhancing financial literacy
e. Bridging the last-mile financial access
f. Driving financial inclusion
g. Improving access to microfinance and microcredit
Aligning with the UN Sustainable Development Goals, Fintech in social impact is not simply a disruptor but also a catalyst driving break-through change. Fostering accessibility of financial resources to the underserved.
Want to be part of this growing sector and drive meaningful change?
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