The COVID-19 era has been an interesting one for emerging markets. On the one hand, there is a growing consensus among investors and financial professionals alike that, in the long run, emerging markets have greater potential for growth than markets in developed countries. But, on the other hand, the pandemic seems to have made these already volatile investments even more unpredictable in the short run.
The $95 billion investment management firm Tiger Global has decided it is worth the risk, helping lead an $11 million investment campaign for a Pakistani start up called CreditBook. The fintech startup offers digital bookkeeping for small businesses in Pakistan. Traditionally, most small businesses in Pakistan still rely on cash and manual registers. CreditBook is hoping to digitize the process and make the system more efficient.
Tiger Global’s investment is part of a larger trend of financial technology investments in emerging markets. In Pakistan alone, investments in fintech exploded in 2021, raising a total of $310 million in startup capital. In contrast, over the past five years, the average amount of capital raised was just $41.24 million per year.
Fintech is particularly promising for emerging markets because it serves to correct a common market inefficiency. In many of these countries, the general population has limited access to traditional banking services, leading many entrepreneurs to turn to digital banking as a way to solve the problem.
Multiple successful fintech startups have been launched in emerging and frontier markets around the world. Last week, a Kenyan fintech startup called Kwara landed $4 million to invest in a digital banking platform for credit unions. And last month, a Nigerian fintech company called OnePipe raised $3.5 million to invest in embedded finance.