Women Finance Leaders | Edition #45 - 21st Nov, 2021

This edition discusses the dichotomy of women in leadership positions in finance, RBI's report on digital lending, Indian fintech public markets performance and more.

Nov 21, 2021

Hi Insiders, Osborne here.

Welcome to the 45th edition of Fintech Inside. Fintech Inside is the front page of Fintech in emerging markets.

Today's edition is a guest post that discusses a dichotomy - that of women at leadership positions in finance. The post intends to spark a thought and encourage improving hiring practices.

I also cover details on RBI's digital lending report, performance of Indian fintech's on their public market debuts and SEA Fintech coverage.

Enjoy another week in Fintech...

If you’re an early-stage fintech startup founder raising equity, I may be able to help - reach out to connect@osborne.vc

🤔 One Big Thought

The Curious Case of Women as Financial Decision Makers

Cover image: Left - IFC, Right - Unsplash

Note: Today's edition is a guest post by Gayatri Suri who is an investment professional with a global philanthropic organisation. She's passionate about impact and gender lens initiatives. All views are personal.

One afternoon, while reading an article about women in leadership roles in the investment sector, I was struck by a peculiar thought – “Why is it that women are not trusted to make sound decisions at leadership positions (e.g., fund managers, founders) but considered well-equipped to make similar decisions at their household level?”. Through this post, I pen down some initial thoughts that came to my mind as I continue to unravel this space.

A majority of Non-Banking Financial Companies (NBFCs) in emerging markets target women from underserved communities – providing them with credit and even training, at times. Research strongly points to the fact that providing financial resources to women not only improves the household’s economic status but also improves other interlinked outcomes. Studies find that “women invest as much as 10 times more of their earnings than men do in their family’s well-being, in areas including child health, education and nutrition.”

Investors consider these data points when deciding to invest in high-potential NBFCs that place women at the heart of their models i.e. as a key client to achieve their mandated goal of improving financial inclusion. On the other hand, when it comes to hiring women at leadership positions in investment teams or investing in women founders, investors apply a different lens – more often than not, tending towards supporting male fund managers or founders. A 2021 U.S. SEC Diversity and Inclusion report found that “less than 1% of the $70 trillion of global financial assets is managed by minority-or women-owned firms.”

This dissonance confuses me. I struggle to understand the nuances at play here. How is it that underserved women, often with limited exposure or education (not by choice though), can be trusted to make sound financial decisions for their family but highly educated women at potential leadership positions cannot be trusted to make the right financial decisions. If we take a relative view of the issue at hand, the proportion of funds managed by women at a household level relative to their total financial resources is almost equivalent to the proportion of funds managed by women fund managers or founders as compared to their total financial resources.

Is it that women, regardless of their professional achievements, are perceived ill-equipped to make sound decisions? Recent research seems to suggest that this hesitation to support women in leadership roles, be it as fund managers or founders, is unsubstantiated by data. It has been demonstrated that supporting women leaders not only creates a strong social impact (which in itself should be enough!) but also makes sound financial and business sense for investors. A 2019 International Finance Corporation (IFC) study found “gender-diverse fund managers deliver an incremental 10% to 20% in returns compared to non-gender-diverse peers” and “only ~12% of decision makers at VC firms are women, and most firms still don’t have a single female partner.”

Could underlying cultural and intergenerational conditioning and patriarchal attitudes be at play here? As evidenced by a Harvard Business Review (HBR) report found that “women-led startups received just 2.3% of VC funding in 2020.”

Are women not trusted at leadership positions due to a limited number of women with adequate investment experience? The 2019 IFC report found that “a mere 11% of senior investment professionals in emerging markets’ private equity and venture capital are women.”

Is it possible that this could be attributed to, what I like to call, the “male bonding” effect i.e., having men in leadership positions typically creates a strong pull and preference towards male colleagues? The HBR report found that “The VC and PE industries are still largely homogenous. Men comprise 90% and 85% of investment committees in both, respectively.” This unconscious and inherent bias in hiring and promotions is a problem that runs deeper. Data from Kauffman Fellows shows that “women are much more likely to be hired when making use of blind applications.”

As we pick up the pieces and usher in a new era with renewed hope for a more equitable and inclusive future, now is the time for investors to elevate their thinking and open their eyes to the untapped potential of women leaders. As we have seen time and again, diversity of perspective and thought, can be a key differentiator between the losing and winning bet. IFC’s 2019 report serves as a strong proof point, it found that “when VC firms increased female-partner hires by 10%, they saw 1.5% increases in returns for the overall funds and 9.7% more profitable exits.”

There are proven economic benefits with women as financial decision makers. As I continue to research this space and find the answers I am looking for, I am optimistic that we will see more investors truly championing the cause for women in leadership roles. Early evidence from a Morgan Stanley 2021 study echoes this trend, finding that “67% of global asset owners identify gender diversity as an area of interest within their investment portfolios.”

Sheryl Sandberg probably said it best, “In the future, there will be no female leaders. There will just be leaders.”

What did you think of today's edition? Know a women who could benefit from reading this piece - share it with them.

If you'd like publish a guest post, write to me with your post and let's get your ideas to a thriving fintech community.

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💼 Work at a Fintech

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M2P Solutions, a fintech API startup, is hiring a Lead Software Engineer. Apply here. or read more about M2P Solutions here.
Winvesta, a global investment startup, is hiring a UI Designer and a Visual Designer. Apply here or read about Winvesta here.
Clinikk*, a health insurance and teleconsulting startup, is hiring sales managers and engineers. Apply here or read about Clinikk here.

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3️⃣ Fintech Top Three

1️⃣ India's Reserve Bank is taking steps to regulate digital lending

RBI released a report of its working group on digital lending. The report explains the research done, considerations of the report and 12 recommendations for digital lending in the country. This report comes in the same week the Indian income tax department conducted search and seizure operations at a digital lending company's offices for "allegedly charging very high processing fee at the time of disbursement of loans". RBI's invited comments to its recommendations by email before 31st Dec, 2021.

Takeaways: Instant, short term, small ticket, digital lending has become an albatross around RBI's neck over the years. Startups building legitimately have been impacted by the general mismanagement by some miscreants that launched these apps.

I've written about this situation in Jan, 2021, covering how Chinese apps have flooded app stores and disbursed money to borrowers at ridiculously high fees and interest rates. The income tax department search mentioned above, found that one such company made $1.35bn in revenue from fees in the first year of operations!

This working group report has been long time coming. The RBI notes "While the current share of digital lending in overall credit pie of the financial sector is not significant for it to affect financial stability, the growth momentum has compelling stability implications.". The report's recommendations had three guiding principles: technology neutrality, principle backed regulation and addressing regulatory arbitrage.

The 12 recommendations are a step in the right direction, IMO, but some are vague and some tricky to implement. The report recommends to set up a nodal authority to have a verification process for digital lending apps. This authority will also maintain a black list of lending service providers. It recommends that algorithmic features should be documented (how?!). It's left to be seen how many of these recommendations get adopted. If you're building in the digital lending sector, definitely send in your comments by email before 31st Dec, 2021.

2️⃣ Indian fintech performance at the exchanges

PB Fintech, the parent company of Policybazaar and Paisabazaar, gained ~23% over the IPO price, giving it a ~$7.26B valuation. Paytm made its stock market debut in India, raising $2.5bn in India's largest IPO, however, it's shares fell by more than 27% on opening day, ending the day at a valuation of $14bn.

Takeaways: Incredible milestone for Indian fintech (and the Indian startup ecosystem) that's been over ten years in the making. Institutional investor participation directly in startups is a big deal. These listings are an inflection point for a few reasons: 1. exposes Indian investor community to startup models, 2. makes IPO a serious potential exit opportunity, 3. forces regulators to rethink/improve listing and investor participation norms, 4. business model and valuation comparables and many more.

PB Fintech gaining 23% on debut is impressive - its offering was 16.6x oversubscribed. Where there's Paytm there's controversy, unfortunately. It's commendable what Paytm has achieved over the years leading to a $14bn listing and India's largest IPO ever. Without Paytm, QR and mobile payments wouldn't be as ubiquitous as it is today. Paytm has pivoted and pivoted to becoming a super app, as I covered in my Paytm IPO prospectus breakdown.

Macquarie released a report on the day of Paytm's listing implying a 40% downside to listing price. The report titled 'Too Many Fingers in Too Many Pies' cited "lack of focus and direction" in the payments platform's business model. This was bound to happen as people don't seem to fundamentally understand Paytm's business model. Nobody seems to ask Reliance, HDFC or Tata why they're in such disparate businesses and how it all ties together. The most important take away from this episode: don't rely on others research or borrow conviction from others. Do your own research and build your own conviction.

3️⃣ SEA Fintech round up

Arbo Works, a Singaporean fintech startup, raised an undisclosed amount.
BSP, the Philippine Central Bank, plans to build a regional instant bank transfer network. It's already integrated with Singapore.
CoinHako, a Singaporean crypto exchange, received digital asset token services license from Singapore's MAS.
Bitdeer, a Singaporean crypto mining company, announced a merger with a SPAC to list in the US at $4bn valuation.
OVO, an Indonesian payments startup, launched a fixed income product.
Pine Labs partnered with Standard Chartered to launch BNPL for customers in Malaysia.
KoinWorks, an SMB finance startup, plans to launch its neobanking feature for SMB's.

Takeaways: ex-Google executives, led by Caesar Sengupta, who founded what is now Google Pay, are building a fintech startup - Arbo Works. Arbo Works, based out of Singapore, raised a massive undisclosed round at a massive undisclosed valuation. The company was very vague about its product but said it "has identified an open space in the world of consumer finance".

Also, I promise I'm not cherry picking crypto news in SEA - there's just a lot of crypto activity there. Singaporean crypto startups are crushing it. KoinWorks is launching a new neo banking product to compete with Aspire's offerings - SMB finance is getting hot again. OVO, the Indonesian payments giant, going the Paytm and PhonePe route of launching full stack financial services with the launch of its fixed income product. The grand fintech rebundling is coming.

Looking for the news digest? Read all the week’s fintech news and updates in India and SEA over at This Week in Fintech - India and SEA Edition. You can also find our US, Global and European coverage.

🏷️ Notable Nuggets

👋🏾 That's all Folks

If you’ve made it this far - thanks! As always, you can always reach me at connect@osborne.vc. I’d genuinely appreciate any and all feedback. If you liked what you read, please consider sharing or subscribing.