Quona’s Investors Back Emerging Market Fintech For Impact

“If you’re smart, now is the time to double down on emerging markets,” says Monica Brand Engel, co-founder of Quona Capital, of increasing anxiety in an era of macro-economic uncertainty and market volatility. “These people and these markets are very important to us and that is not going to change.”

It’s a feeling that Quona’s investors appear to share. The emerging markets-focused venture capital firm is today announcing it has raised $332 million for its Fund III – well-ahead of its original $250 million target – and three-quarters of its original investors have participated in this latest round. The closure of Quona’s third fund means it has now raised more than $745 million to back its investment thesis.

This thesis is built around Quona’s focus on impact investment – the desire to deliver tangible social good as well as outsized financial returns through the businesses it backs. “We strongly believe that financial services is the lever through which you can drive dramatic change, both at the macro level and for individual households,” Brand Engel says.

To this end, Quona invests in fintech businesses whose products and services promote financial inclusion. Through technologies such as mobile connectivity and cloud computing, these businesses are giving consumers access to financial services that have previously been out of their reach – from banking facilities to savings, investments and insurance.

Quona certainly has the data to make a strong case that the 65 businesses in which it has invested so far are having an impact. Portfolio companies across a dozen or so emerging markets have employed 23,000 people, 35% of whom are women, served 30 million retail customers, 77% of whom were previously underserved, financed $2.4 billion of loans and enabled $12.3 billion of payments.

Commercially, these businesses have been successful too. Collectively, they have generated $836 million of revenues. Quona describes its first two funds’ performance as top quartile for comparable vehicles and Brand Engel cites loss ratios that are well below industry averages. Fintechs provide a natural path to exits for investors, she points out.


Quona is now looking for more of the same from Fund III, which will follow its predecessors in putting fintech for inclusion at the heart of its investment case as it deploys the new capital raised.

That is not to say the new fund is a carbon copy. One nuance is that it is likely to have a broader geographical spread than its predecessors, with many more markets now throwing up opportunities. India and Brazil, which have been mainstays of Quona’s portfolios to date, remain important says Brand Engel, but other countries look exciting too. She points to a growing number of opportunities in markets such as Mexico and Indonesia, as well as to an increased focus on Africa, and Egypt and Kenya in particular.

The universe of fintech businesses is broadening too, which will mean the new fund’s investment approach evolves. One good example is that Quona is now particularly interested in embedded finance– businesses that offer financial services to support a broader value proposition. Enabling retailers to offer credit at the point of sale is one such theme.

The other difference with this new fund, Brand Engel adds, is that it makes use of a broader range of Quona partners, with more locally-based experts feeding ideas into deal selection. “We’ve got people in multiple markets and not just the largest emerging markets,” Brand Engel adds. “They speak the local language and they’ve been there for years; in many cases, our partners were born in these markets.”

It’s a point of competitive advantage that Quona thinks is particularly crucial in the current market environment. While its appetite for emerging markets – and that of its investors – remains strong, there is no doubt that risk is rising. That requires greater on-the-ground experience and expertise to navigate the uncertainty.

Brand Engel does expect loss ratios to rise in the months and years ahead, though she argues that the scale of the returns delivered by the funds’ winners will more than compensate for this. But she also points out that the fund is managed with a degree of conservatism. “We’re typically investing in entrepreneurs with a proven track record, and often in business models that have worked well in one market but are now being tried elsewhere,” she says.

In that sense, the fund is effectively betting on a business’s ability to execute a particular strategy, concept or technology, rather than taking a punt on a completely new idea. And the flip side of increased market anxiety is that Quona may face less competition for the best potential additions to the portfolio.

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