Fund Seeks to Build Underbanked Credit Providers

The Center for Financial Services Innovation announced yesterday the launch of $1 million fund to invest in new financial service companies and products geared to underbanked consumers.

The CFSI Catalyst Fund will look for early growth stage companies “with the potential for broad scale, near term profitability” that can impact the underbanked market, CFSI announced in a statement.

The firms will be technology-oriented and could offer products or services in fields such prepaid cards, remittance, credit underwriting, mobile payments and possibly collections, Arjan Schutte, CFSI associate director that oversees investment programs, tells insideARM.com.

The Ford Foundation and Key Bank each invested $500,000 to begin the Catalyst Fund, Schutte said. The center is seeking other investors much as it did for its first investment vehicle, the Innovation Fund. “For each $1 we invested [in Innovation], we pulled from $5 to $10 from other venture funds,” said Schutte.

The Innovation fund began in late 2004 with about $1.5 million, says Schutte. It invested in CircleLending, a loan administration firm with products that manage interpersonal loans. Virgin USA bought a majority stake in CircleLending this spring.

The center has also invested in TIO Networks, a distributor and operator of kiosks providing bill payment, prepaid cards, and card reloading.

The CFSI is a not-for-profit that works with organizations seeking to provide services to underbanked consumers. It is a division of Chicago-based ShoreBank Corp.