San Francisco, CA, December 16th 2020, ZEXPRWIRE, Fairbanc, the Silicon Valley-based FinTech that offers credit to the unbanked in Southeast Asia, just received backing from Columbia Business School’s student run impact fund Microlumbia. This new financial backing comes on the heels of recent investment from 500 Startups and Indonesian billionaire Michael Sampoerna. Earlier this year, Fairbanc also sealed deals with large multinational FMCGs like Unilever to offer data driven Terms Of Payment option to the unbanked micro-merchants who buy Unilever products.
“Fairbanc’s financial tools are at the cutting edge of innovative solutions aimed at delivering rudimentary financial services to the 1.7 billion people on the planet who lack even a bank account. Our team at Microlumbia is proud to back Fairbanc and its management team to help unlock credit to women and unbanked merchants using its proprietary technology and data science innovations,” says Ryan Fauber, the Chief Investment Officer of Microlumbia.
Microlumbia is a non-profit fund within the aegis of Columbia University that supports financial inclusion in underserved communities around the world, while educating and inspiring the next generation of impact investors. “We build and maintain strong relationships with our investees and believe in enabling them to develop and grow to scale,” says Wineeta Paul, Co-President of Microlumbia. Fairbanc is also working with Columbia University’s Data Institute to help analyze FMCG transaction data to unlock credit using advanced data science and machine learning.
According to a joint study published by IFC and McKinsey, the total unmet need for credit by all formal and informal micro, small, and midsize enterprises in emerging markets today is in the range of $2.1 trillion to $2.5 trillion. Providing them with the basics of credit is one of the great challenges and opportunities of the century.
Fairbanc founder Mir Haque / Photo credit: Fairbanc
Fairbanc, founded in 2018 by Mir Haque, a Wharton MBA and a second time founder who previously worked for many of the well-known global companies including Google, Adobe, McKinsey, and Deutsche Bank recently became winners in the Most Inclusive FinTech category by Inclusive Fintech 50, a Financial Inclusion platform backed by Visa and IFC.
Around 80% of the Fairbanc borrowers are unbanked and around 70% are women merchants.
Where banks saw risk, Fairbanc saw an opportunity.
“The speed and size of the micro-merchant transactions make it challenging for banks to service this segment because their transactions tend to be small and largely not traced,” Khailee Ng, the managing partner of 500 Startups, a US based venture fund that invested in Fairbanc, said.
By partnering up with large consumer brand companies and only offering terms of payment extension to purchase high margin products like Unilever, Fairbanc expects to reduce loan default risks significantly while scaling quickly by leveraging the consumer brand’s large merchant network.
Fairbanc relies on data science and machine learning to automate profile scoring and risk monitoring, allowing it to provide deposits instantly, according to a statement. The startup says the service doesn’t require collateral, credit history, smartphone ownership, or digital literacy. Instead, credit can be accessed through a one-time passcode sent to merchants via a text message.
After completing the initial test of its service in Bangladesh in 2019, the company rolled out the platform with Unilever Indonesia through startup program Unilever Foundry. It claims that participating outlets saw a 40% growth in sales through the program, and over 1100% year over year growth in merchant counts.
Fairbanc’s founding team includes many FinTech veterans like the former CTO of Kiva, a San Francisco based microcredit platform that operates in 77 countries and disbursed $1.4B in microloans, and Thomas Schumacher who co-founded California based emerging market microloan giant Tala that recently closed a funding round at $800M valuation.
Fairbanc Indonesia Team / Photo credit: Fairbanc
With its new capital, Fairbanc plans to make a bigger push into Indonesia, a country that hosts the fourth largest unbanked population globally, with 95 million adults still lacking a formal account at a financial institution. However, with a growing middle class, an increasingly tech-savvy youth population, and a regulatory environment encouraging innovation and entrepreneurship, Indonesia is now home to the most billion-dollar tech start-ups in Southeast Asia (including Bukalapak, Go-Jek, Tokopedia, and OVO), boasting a range of e-commerce, ride-sharing, media distribution, and financial services.
Mir is convinced that Indonesia offers Fairbanc the right backdrop to bring about a scalable solution that can be replicated in many other emerging countries to address one of the greatest challenges and opportunities of the century: providing the millions of merchants with the basics of credit to help fuel economic revitalizations in order to uplift millions of poor merchants out of dire poverty.