SPECIAL REPORT: 7th European Microfinance Award: $112k for Education Funding

Christoph Pausch serves as Executive Secretary of the European Microfinance Platform (e-MFP). The European Microfinance Award is jointly organised by the Luxembourg Ministry of Foreign and European Affairs – Directorate for Development Cooperation, e-MFP and the Inclusive Finance Network Luxembourg, with the support of the European Investment Bank. For more details, please visit http://www.european-microfinance-award.com.

MicroCapital: Why is education access the topic of this year’s Award?

Christoph Pausch: Education is the strongest predictor of economic
well-being, and it can also have a major impact on health, women’s empowerment and even population growth. Unfortunately, in countries where microfinance institutions (MFIs) operate, free public education is far from universal. Whether because of poor quality, distance or outright unavailability, parents often choose private schools. And even where schools are free, there are often significant costs for books, uniforms and other supplies.

There are hundreds of millions of families whose incomes are high enough to afford schooling, but still low and irregular enough for payment to be a formidable challenge. The potential for MFIs to deploy well-designed financial products to expand education access to improve families’ well-being is tremendous.

MC: Please cite a few examples of how MFIs can approach education.

CP: There are two ways to think about this. The more obvious is to target the demand side: products that help households afford education. These can look like typical microcredit or savings products, such as commitment plans that help families regularly set aside small amounts of cash or term deposits that help families save lump sums (for example, from harvest time) until fees are due. Another possibility is insurance that covers school costs in case of an income shock (e.g. failed harvest, illness or death) or programmes that allow migrants to direct their remittances to pay for schooling.

MFIs can also target the supply side. Many low-cost schools have budgets similar in size to the small and medium-sized enterprises MFIs already serve. They can lend schools capital to address insufficient or outdated educational materials and physical infrastructure. MFIs can also help schools manage their cash flow; it can be tricky to use fees that come in two or three times per year to pay out salaries every week or two. Intermediating between the schools and the families of their students – serving the needs of both while reducing risks for all involved – is the trifecta of financial inclusion.

MC: What is the importance of the Award within the industry today?

CP: The European Microfinance Award serves two parallel goals: rewarding MFIs that innovate in important areas and also disseminating their best practices to be replicated by others. EUR 100,000 (USD 112,000) attracts serious applicants, which then go through an equally serious selection process. Finalists’ applications are reviewed by over 15 individuals, including industry experts and accomplished members of the Award’s High Jury. We also try to choose topics that are ahead of the curve: this year is Access to Education, last year it was Post-Disaster and Conflict and before that it was the Environment.

In 2008, it was Socially Responsible Microfinance – well before this became the talk of the industry. In this way, the Award encourages the sector to expand toward important new frontiers.

This interview launches a sponsored series on European Microfinance Week, which will be held from November 16 through November 18 by e-MFP, a 125-member network located in Luxembourg.

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