Regulating and Investing for Financial Inclusion

How should regulators and investors determine whether a lender is “inclusive” or “predatory”? Should regulators limit the interest rate lenders can charge? What should investors look for when making socially conscious decisions?

Digital credit options for the underbanked around the world are now more accessible than ever, but for a price. The rise of FinTechs delivering financial services to the masses has left regulators and investors scrambling to distinguish responsible lenders from predatory ones. Having built financial products and researched trends in many countries, I wanted to share a framework for how to invest in and regulate FinTech players in order to further financial inclusion around the world.

TL, DR:

1. Let market set the interest rate
2. Regulate what consumers can’t
3. Invest in financially inclusive players

1. Let the market set the interest rate

Consumers want credit, whatever the cost

Consumers with limited or damaged credit history typically don’t have access to loans from large financial institutions and resort to expensive alternatives. The inability and aversion of banks to lend to such risky borrowers paved the way…