For years, there has been some hope that inclusive credit fintechs—those targeting micro and small enterprises (MSEs) with responsible digital credit—would narrow the financial inclusion gap. The expectation was that they could outperform traditional microfinance institutions (MFIs) by being faster, cheaper, more scalable, and better equipped to serve hard-to-reach clients. While some success stories have emerged, the reality is far more complex.
Inclusive digital credit isn’t just about algorithms; it also relies on human interaction to bridge the gap.
Building a successful credit fintech is not an overnight achievement, and most successful fintechs experience a challenging route to success. Many started in modest settings—small apartments, student dorms, or co-working spaces—bootstrapping their way from concept to minimum viable product (MVP). This often happens with negligible budgets and funding scraped together from savings, family, and friends. Most fintech initiatives never even make it beyond this early stage. The reason is simple: developing a robust and responsible digital credit platform takes time and significant capital. It involves extensive development work, integration with existing digital infrastructure, rigorous data security and compliance measures, and the continuous refinement of risk assessment models.
The challenge intensifies when fintechs seek to serve excluded and vulnerable populations. Technology alone isn’t enough — trust must be built, often requiring field agents to onboard and support clients. Inclusive digital credit isn’t just about algorithms; it also relies on human interaction to bridge the gap.
Fintech is as much a long-term commitment as it is a disruptive force
Unlike traditional financial service providers (FSPs), which use standardized credit methodologies with clear benchmarks, fintech lending models are often untested and opaque, making it challenging for investors to conduct risk assessments since fintech approaches don’t align with conventional metrics. To evolve into viable, self-sustaining businesses, these credit-granting fintechs need to scale a robust portfolio, which requires financing. However, because their models are difficult to assess, securing funding from conventional investors is a challenge. They first need to establish a series of successful lending cycles to prove their viability and attract impact investors, but to do that, they need financing. It’s a catch-22.
Financing remains a major hurdle for inclusive fintechs, which, unlike MFIs, lack the equity base to leverage portfolio financing. Traditional debt is out of reach for young, unproven fintechs, leaving equity as the primary option. Early-stage fintechs with thin management teams dedicate most of their time to chasing and pitching to potential funders, rather than focusing on building the business and understanding market realities. The process is time-consuming and often does not yield the desired results. Fintech failures are not exceptions but an industry-wide reality, with most initiatives falling short. Not every idea deserves funding, as many fintechs struggle due to weak leadership, poor risk assessment, or an inability to find the right product-market fit. Given these challenges, it’s understandable that asset managers hesitate to back early-stage inclusive fintechs.
However, a handful of forward-thinking asset managers are rewriting the investment playbook
Through establishing data integrations with early-stage fintechs, these asset managers can adopt more sophisticated risk evaluation methods. Access to real-time portfolio data enables them to continuously assess performance and adjust their risk strategies. This approach allows them to enter with debt investments at an early and even pre-profit stage, measure performance over time, and release future installments based on the fintech’s evolving needs and risk profile.
A good example of the potential impact of data-driven asset managers can be seen in ALMA Sustainable Finance’s investment in Monedo, an Indian NFBC offering loans and other financial services to underserved MSMEs and consumers, using its digital platform. In 2022, ALMA issued a USD 4.5 million senior loan to Monedo, whilst the fintech was still loss-making. Although Monedo had received some small ticket loans (around USD 100 thousand) from three Indian investors, ALMA’s entry was their first significant institutional investment.
| MONEDO | @ initial ALMA investment 2021 | Monedo today 03/2025 |
| Loan portfolio | USD 600,000 | USD 23 million |
| FY P&L | – USD 750,000 | USD 1.9 million |
| # of loans issued | 14,000 | 52,000 |
| # of institutional debt investors | 3 | 5 |
ALMA’s investment was crucial in enabling Monedo to scale rapidly and achieve profitability ahead of schedule. Following ALMA’s senior debt, disbursements surged by 516% in just 12 months, allowing Monedo to break even within 24 months—12 months ahead of the initial forecast. Additionally, ALMA’s backing boosted Monedo’s market credibility, attracting larger institutional investors and securing a follow-on funding round, positioning Monedo for national expansion, cementing its role as a key player in financial inclusion.
Another strong example of the impact of innovative asset managers is the partnership between Watu, an African mobility financing company, and Lendable, a data-driven investor. As Watu’s first institutional debt investor, Lendable made a USD 350,000 debt investment in August 2017 and integrated with the company’s data systems to analyze the performance, cash flows, and margins of Watu’s moto taxi financing model. This data-driven approach provided valuable insight into Watu’s financial sustainability and growth potential, paving the way for larger commitments over time.
| Watu Kenya | Watu Kenya @ initial Lendable investment 08/2017 | Watu Kenya today 12/2024 |
| Loan portfolio | USD 1.6 million | USD 117.9 million |
| FY P&L | USD 190,000 | USD 2.6 million |
| # of loans issued | 1,400 (Bikes and 3-Wheelers) | 1.7 million (Bikes, 3-Wheelers and Smartphones) |
| # of institutional debt investors | 0 | 11 |
Lendable has been instrumental in Watu’s expansion into new markets. In 2020, it invested in Watu Uganda, which reached breakeven by 2021. With Lendable’s backing, Watu’s Ugandan loan book grew from USD 5 million in 2020 to USD 83 million by 2024. Lendable has since expanded its debt facilities to support Watu’s entry into Tanzania. Additionally, it has facilitated USD 18.6 million in syndications from co-investors, including leading development finance institutions (DFIs). Through its Maestro data platform, Lendable provides real-time, granular visibility into and verification of Watu’s transactions, enhancing transparency and trust in the collateral base.
For these innovative asset managers, these partnerships offer the opportunity to achieve healthy and even above-market returns by identifying and supporting high-potential fintechs that traditional investors will not yet serve, demonstrating both financial acumen and a commitment to inclusive finance. As such, data-driven asset managers are not competing with traditional investors; rather, they are building the pipeline for them. By scaling fintechs to a stage where conventional asset managers feel comfortable engaging, they add a unique and critical layer to the financial ecosystem. In doing so, they are not just funding innovation—they have the potential to reshape the trajectory of inclusive finance, accelerating the development of sustainable fintech models, and ultimately upgrading the entire investment landscape.
For a deeper dive into the inclusive credit fintech financing gap and the innovative ways data-driven asset managers are stepping in, check out CGAP’s recently published research: Innovative Financing for Inclusive Credit Fintechs in Africa.
