Accion has invested $15 million investment in Colombian bank Banco Contactar via its $152.5 million Digital Transformation Fund that helps microfinance and other financial services firms digitize their products and services in order to serve more people.
Banco Contactar is part of a microfinance organization with a 32-year track record bringing microfinance products to Colombia’s rural communities via a network of 100 rural branches. It secured a banking license earlier this year to expand its range of products beyond credit, insurance and savings. The bank has originated $148 million in loans to 140,000 borrowers, 75% of whom work in agriculture and 50% of whom are women.
Accion has been engaged with the bank for several years prior to investing and has supported the development of its digital services strategy.
“Their client base is mostly rural and needs support in using digital tools. But we expect in the next few years, most transactions will go through new channels,” like digital savings accounts and e-wallets, Accion’s Adelina Dasso told ImpactAlpha. “We see the potential of generating more efficiencies for the company and for clients.”
Climate protection
Microfinance lenders have become frontline workers in the climate crisis. Their clients are often the most vulnerable to climate impacts and have the least access to affordable products and services to boost their resilience. Developing and driving access to financial products like insurance or equipment finance is a fast growing priority.
Banco Contactar sends climate-related alerts to its customers and training to help them prepare for climate impacts on their livelihoods and households. A key priority now is climate insurance.
“They already have a very high insurance penetration,” said Dasso.
About 90% of borrowers have some type of insurance protection, compared to 40% or 50% at most other rural microfinance organizations in Accion’s portfolio.
“They’re working with insurance companies to see what kind of insurance [customers] need to prepare for climate change,” Dasso added.
Peer learning
Banco Contactar is Accion’s sixth Digital Transformation investment. Dasso, who spoke to ImpactAlpha during a visit to Mumbai, noted that rural customers face many of the same issues, whether they’re in Colombia or India, Peru or Indonesia.
“Having a global fund is something we leverage to help with best practices,” she said.
Banco Contactar is an innovator in climate finance and leads on risk management. Los Andes in Peru and Annapurna Finance in India are more advanced on gender. Flexi Loans in India has been creative in building scale through partnerships.
“These companies are in different countries, so it would seem there is nothing they could easily share,” said Dasso. “But in fact, that is happening.”
