At yesterday’s meeting of the European Microfinance Platform’s (e-MFP’s) Digital Innovations for Financial Empowerment Action Group, a wide range of presenters described their challenges and successes in implementing financial technologies.
Simon Priollaud, a digital financial services consultant with France-based data firm Inbox Group, described how difficult it has been to get farmers in Kenya to use microinsurance policies that they have already bought with their corn seeds at no extra charge. The insurance, which is provided by East Africa’s Agriculture and Climate Risk Enterprise (ACRE Africa) reimburses the cost of seed from Zimbabwe’s Seed Co if there is no rain within 21 days. Upon planting, the farmer can use even the simplest of mobile phones to register, and a satellite system logs the planting location and date.
So why were less than 5 percent of seed buyers registering? Some of the farmers didn’t (or couldn’t) read the card in the seed packet carefully enough. Many thought that the information was vouching for the authenticity of the seeds. Jacinta Kamemba, the information technology director of France-based Groupe Microfinance Participative pour l’Afrique (PAMIGA), cited the issue of superstition. Many people in rural Kenya believe that any kind of insurance – particularly health microinsurance – causes whatever malady is covered by the policy.
Ms Kamemba stated that microfinance institutions (MFIs) are becoming more open to the idea of offering digital financial services, partially because they worry they could be displaced by fintech providers. Among the myriad challenges – including getting buy-in from all levels of the organization, is that “cost is quite an issue; technology is never cheap.” She cited the example of seven MFIs in Senegal working together to negotiate better pricing from technology providers. Philippe Breul, the managing partner of Belgian consultancy PHB Development, explained how another MFI adopted a high-end software system and then offset part of the expense by re-selling excess capacity to other MFIs. However, convincing an MFI to invest in replicating the idea is not easy. PHB consultant Victorin Salifou stated it this way: “no one wants to be a guinea pig.”
El Jasouli Sidi Yasser, the CEO of Belgium’s MFI Insight Analytics, described his firm’s cloud-based business process management system for MFIs. It is designed to illuminate key performance indicators for both monitoring and predictive purposes. Mr Yasser states that the system can cut operational costs by 15 percent to 20 percent and reduce delinquency by 25 percent. For a small MFI, an initial needs survey can cost less than USD 10,000, and if purchased, the software system can cost under USD 5,000 per year.
Matteo Snidero, the head of information technology for German fund manager Finance in Motion, argued that pay-as-you-go and revenue-share-based pricing of banking software systems has leveled the playing field for smaller MFIs. Such an institution may not be able to attract a big outside investment to implement an in-house system, and Mr Snidero’s experience has led him “to believe that you can’t do financial inclusion without a strong focus on digitalization.” In support of this concept, Finance in Motion is supporting the Fincluders Fintech Start-Up Challenge, which will be held on November 28 and November 29 in Berlin, Germany.
This story is part of a sponsored series on European Microfinance Week, which is being held through November 18 by e-MFP, a 124-member network located in Luxembourg. MicroCapital has been engaged to cover the event on-site.
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