First Circle announced that it has raised an additional $1.3 million in venture funding. The Philippine-based fintech startup hopes to improve access to capital for SME’s in the country and in emerging markets in the Asian region.
Why It Matters – Financial Inclusion
In the Philippines, an ASEAN member country with a population of 100 million, SMEs represent 99 percent of all registered companies yet contribute to just 40 percent of economic output. Access to financing is a major hurdle for SME’s in the country, less than 20 percent have access to all bank loans.
The challenges are made more acute by lack of access to data on consumers and banks that tend to favor more established customers where risks are perceived to be lower.
However, startups like Lenddo, based also in the Asian region in Hongkong, are closing the gaps in consumer data, using alternative non-traditional data to provide better credit scoring and verification, compared to algorithms which can bias scoring against minorities. Lenddo, which announced a partnership with Experian in February, has raised $14 million from 11 investors.
And consider the opportunity – in the Philippines, SME’s represent 99 percent of all registered companies and contribute to 40 percent of the small country’s economic output.
Bottom Line
Risks to First Circle’s cash infusion are made lower by available technology and increasing growth opportunities in the ASEAN region. Alternative information can now come together to allow underwriting of loans with a degree of certainty without traditional metrics.
The capital was provided by Accion Venture Lab, part of Accion, the non-profit focused on financial inclusion, and Deep Blue Ventures. First Circle first raised $1.2 million last year, and it counts 500 Startups, IMJ, and Key Capital among its backers.
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“Lack of access to capital is a big problem that needs to be fixed,” said First Circle cofounder and CEO Patrick Lynch in a statement. “If it isn’t, millions of hardworking entrepreneurs and their businesses will not be given the chance to reach their potential.”
According to Lynch, First Circle will continue to focus on the Philippines market in the near future but may look into expanding into Indonesia, Thailand or other Southeast Asia markets. He added that the company will look to close a Series A round of funding before the end of the year.
Last month Accion International announced $141 million in funding raised alongside VC Quona Capital, which will be used to fuel FinTech startups across the globe that aim to disrupt the traditional banking market.”
Sources: TechCrunch, CrunchBase, PYMNTS
