SPECIAL REPORT: Q & A on the $120k European Microfinance Award for Financial Inclusion through Technology

MicroCapital: Each year, the European Microfinance Award covers a different theme. Why technology and why now?

Christoph Pausch: We are at a fascinating time in the evolution of financial inclusion. A whole new range of technology-enabled solutions has the potential to reduce costs, improve efficiencies, facilitate communication and remove artificial borders for people who have been excluded from the formal economy. These solutions include credit, insurance, savings, payments and transfer services. As a strengthening alternative to cash, mobile money can have special benefits for women, rural communities and the very poor. Among the Award applicants, we hope and expect to see a real diversity of financial services providers beyond traditional MFIs, such as mobile network operators and money transfer organisations.

MC: Do these technology-enabled services carry new risks for clients?

CP: The organisers chose Financial Inclusion through Technology to focus not just on the opportunities of this rapidly changing landscape, but the risks to clients as well. Technology, as we have seen in the news recently, can lead to abuses of privacy. This is true in financial inclusion as well. Reducing the human element of the microfinance model can threaten the safeguards that protect clients, exposing them to risks such as increased over-indebtedness, fraud or misuse of data. This is especially true when working with vulnerable people, many of whom have low financial literacy or numeracy. But technology is not going away; you can’t put the toothpaste back in the tube! So the focus should be on responsible finance: client protection, safeguards, and monitoring or regulation where appropriate. Whichever the winner of this year’s Award turns out to be, it’ll be an organisation that has thought carefully about all these issues and put responsibility to the client at the centre of its work.

MC: Client offerings tend to get all the attention. What’s new in the back office?

CP: The evaluation teams will be looking for technology solutions not just on the client-facing side, but on the institutional side, too – for example, ways in which back-office technology can help loan officers and bank agents communicate from remote areas, access data in real time or verify clients’ IDs. This might involve biometric data or tablets to access cloud-based management information systems, directly improving service delivery.

MC: How has this ninth European Microfinance Award evolved since the first?

CP: It’s changed a lot! It’s now annual, after being biennial for the first few years. In addition to the EUR 100,000 for the winner, cash prizes of EUR 10,000 are now presented to the two runners-up as well. And the evolution of the Award themes reflects the sector’s continued move beyond microcredit towards a more holistic perception of financial inclusion. Mainly though, the Award has increased in exposure each year. Previous winners have benefitted from great opportunities for investment and partnership. This is something that we at e-MFP and the other Award organisers try to maximise. The purpose of the Award is not just to reward excellence but also to highlight successful models that can be reproduced elsewhere!

Christoph Pausch serves as Executive Secretary of e-MFP. The European Microfinance Award is jointly organised by the Luxembourg Ministry of Foreign and European Affairs, e-MFP and the Inclusive Finance Network Luxembourg. Applications for the European Microfinance Award are due May 23.

This report is part of a sponsored series on European Microfinance Week, which will be held in Luxembourg from November 14 through November 16, 2018. MicroCapital has been engaged to promote and cover the event on-site.

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