January 29

Kyle Poplin / Scott Anderson / James Militzer

Weekly Roundup: Zika’s Super Challenge, LeapFrog’s Play, American Express’ Retreat

Editor’s note: This post has been updated with a clarification regarding LeapFrog’s second fund, which made the investment in UT Life Insurance Company Ltd. 


Another incurable disease of poverty awaits a hero

As the world comes to grips with another incurable disease of poverty – it’s Zika, this time – a lot of people are wondering if the lessons of Ebola have been learned.

The Zika outbreak began, predictably, with a panic phase. El Salvador won that round, when officials told women not to get pregnant until 2018, even though abortion is illegal there and birth control hard to find.

More reasonable voices are currently holding forth, urging calm and reminding everyone that while Zika is spreading rapidly and poses a significant threat to unborn children, it has a “negligible mortality rate” compared to Ebola.

Just around the corner, we’re predicting, is the blame phase of the illness, in which politicians, bureaucrats and media pundits will wonder, indignantly, how this mosquito-born virus made it through the world’s lines of defense and caused such problems in the first place.

That will leave those involved in global health quietly wondering: “What lines of defense?” The World Health Organization has, since 1948, been in charge of “directing and coordinating” international health policy. But it has little authority and 80 percent of its funding comes from voluntary contributions – and that’s not working so well. WHO has long been limited in its ability to predict and respond to health crises.

That leaves President Obama calling for someone, anyone, to step up and develop tests, vaccines and/or treatments. In other words, the world awaits a hero.

And that’s an incredibly inefficient way to address public health – as exemplified by that fact that mosquitoes, which have plagued poor populations forever, continue to wreak preventable chaos including not just Zika but malaria, dengue, West Nile virus, etc.

So, no, “the lessons of Ebola” haven’t been learned. Health care in developing countries remains reactive, and that won’t change until markets and sustainable health care enterprises are established where they’re most needed, so they can react when they’re most needed.

– Kyle Poplin


LeapFrog’s momentum

It was yet another big week at LeapFrog Investments. “Yet another” because it seems like just about every week since early December, the microinsurance-focused private equity firm has put out a new, seemingly disruptive, announcement.

This week Prudential Financial and LeapFrog said the insurance giant would put $350 million into a new LeapFrog-managed investment vehicle. For the next three to five years, LeapFrog will look to take positions in life insurance companies based and serving customers in Ghana, Kenya and Nigeria.

“We will target large, well-established life insurers,” LeapFrog partner Stephen Bowey told the publication Insurance Asset Risk. “All three markets are expected to see significant growth in life premiums over the next 10 years.”

Prudential is an investor in LeapFrog’s most recent private equity fund, and also a member of the LeapFrog Insurance Innovation Circle, a knowledge-sharing and innovation initiative. But this new Prudential-backed investment vehicle is not in the private equity mode that has been LeapFrog’s bread and butter since it was created in 2008, and under which it has raised $1 billion from investors.

“By enabling LeapFrog to pursue larger and more established assets than via our private equity funds, this partnership also diversifies our capability as an alternative investment group,” said Andrew Kuper, founder and CEO of LeapFrog Investments, in an announcement.

Less than a week after the Prudential announcement, the Accra-based UT Life Insurance Company Ltd. announced LeapFrog had taken a majority stake in the company. UT Life has a goal of reaching over 1 million people by 2020 with various insurance products. (Clarification: LeapFrog’s second fund, rather than the Prudential Financial managed account, made the investment in UT. LeapFrog’s second fund, Financial Inclusion Fund II, is a $400 million, 10-year fund focused on investing in financial services firms in Africa and Asia.)

A 2014 PriceWaterHouse survey assessing the insurance market in Africa found Nigeria, Ghana and Kenya the fastest growing insurance markets outside of South Africa. Rising GDP, an expanding middle class and political stability were among the reasons cited.

We’re looking forward to bringing you more specifics about LeapFrog’s direction in an upcoming Q&A interview with Kuper here on NextBillion.

– Scott Anderson


Good Intentions Meet Market Realities

Remember when American Express made its splashy entrance into the low-income market a few years back? They partnered with Walmart in 2012 to offer an all-mobile banking service called Bluebird, and in 2014 they rolled out Serve, a prepaid debit card targeted at underserved customers. They even commissioned Academy Award-winning filmmaker Davis Guggenheim to produce a documentary, Spent: Looking for Change, aimed at sparking a national dialogue about how the financial services industry could better serve low-income people. The film premiered at the Center for Financial Services Innovation’s 2014 EMERGE conference, where Dan Schulman, American Express’ then-president of enterprise growth, spoke passionately about the need to re-imagine finance – with his company helping to lead the charge.

“Change is possible and we believe financial exclusion is a solvable problem,” Schulman said in a press release at the time. “But it’s going to take lots of people working together, raising awareness, and investing in initiatives that help to create better, more affordable financial solutions for everyone.”

As of last week, American Express will apparently no longer be a major part of this effort. Following an exodus of top executives in recent months, the company announced that it is dismantling its inclusion-friendly enterprise growth division (Schulman himself had jumped ship back in September 2014 to helm PayPal). Amex says it will continue to offer its prepaid and alternative payments products targeted toward the unbanked, but customer reports suggest it’s already scaling them back.

What happened – and how poorly does it bode for the prospect of more major financial players focusing on the underserved? Not surprisingly, it seems that American Express lost patience with the slimmer margins implicit to doing business with lower-income customers. And the slow growth of these products – in an environment of declining revenue and other challenges – made them expendable.

But part of Amex’s failure is the fact that it was never an ideal emissary for the financial inclusion message in the first place. Analysts and investors had long been critical of its decision to go down-market, fearing that it would dilute the company’s affluent-focused brand. Once true believers like Schulman were gone, the writing may already have been on the wall. So hopefully this setback won’t deter other major players from embracing the challenges and potential of the low-income market – indeed, many already are. But don’t be surprised if it makes them proceed with even more caution when translating their good intentions into actual products.

– James Militzer


In Case You Missed It … This Week on NextBillion

WASH Can’t Be Achieved Without Business

The Exciting Promise of Digital Payments in Peru

Virtual Companies Come to Life: How New Methods in Student Training Can Build Sustainable Entrepreneurship in Kenya

Adapting to Climate Change (Part 1): Health Care

A Solution to Urban Blight? Crowdfunding’s Potential to Transform Cities


Top photo: Oleg Dulin/Flickr.

Health Care, Investing
financial inclusion, impact investing