Reda Maamari is a pioneer in the field of microfinance in the region. He is a founding member of Al Majmoua, the leading MFI in Lebanon, and of Sanabel, the Microfinance Network of Arab countries. Over the last decade, Reda has focused his attention on innovation in the private sector spanning the fields of insurance and finance. The Arabic Microfinance Gateway interviewed him about his latest project, the Arab Financial Inclusion Innovation Prize (AFIIP).
Reda: The AFIIP idea came about during Sanabel’s annual conference in Beirut last November. The regional microfinance network celebrated its 15th anniversary and many of “us” - the founders - were invited. It was a great opportunity to reconnect and to reflect upon the journey of the sector.
The Arab microfinance industry has achieved a lot, yet not enough compared to other regions with similar socioeconomic conditions. According to the latest available data, more than half of Sanabel’s 79 member institutions, which represent the leading MFIs in the region, serve more than 2.8 million active clients with a gross loan portfolio that exceeds $2 billion. Nevertheless, more than 60 percent of the adult population in the region’s developing countries remain unbanked, according to the 2017 Findex data. Opportunities to expand financial inclusion in the developing countries of the region are thus significant, particularly among youth and women.
Statistics aside, we have a lot of social pressures as a region that we are all aware of: high unemployment – particularly among the large youth population, political instability, displaced populations, and widening gaps between the haves and the have nots; just to name a few. At the same time, there is a growing start-up scene in the region that is moving fast in all domains. We cannot live or work in isolation anymore, everything is interconnected. Moreover, financial service providers (FSPs) in the region are facing competition from new actors and providers, so business as usual won’t work anymore and hence innovation is needed. We want to encourage people to think outside of the box and spur innovation to propel the industry forward and solve for the pressing issues.
Opportunities to expand financial inclusion in the developing countries of the region are significant, particularly among youth and women.
Gateway: How do you define innovation?
Reda: Just to be clear from the onset, innovation is not only about technology. Surely technology is a great catalyst, if and only if, it is implemented properly to respond to actual market needs. Innovation could be a new idea or approach that improves an existing situation. It is this simple tweak that would have a great impact. It could also be either at the provider or at the client level. For example, if the proposed idea can help clients better manage their business, then this is innovation. If there is a new way for providers to explain products to the market, then this is innovation. On the AFIIP site, we define three kinds of innovation: core innovation – innovating from within with incremental changes; adjacent innovation – bringing successful practices or products and services to new markets or bringing new products and services to an existing domain; and transformational innovation – creating new offerings for new markets. Blockchain and fintech, for example, have shown their transformational capacity and ability to create new fields of operation.
Gateway: What are the main objectives of the Prize?
Reda: AFIIP is created to reward innovations which can increase the outreach and reduce the costs of financial services to better serve low-income businesses and individuals. FSPs in the region are busy resolving day-to-day issues and do not have the luxury of time to experiment much with innovation. We want to create a dialogue between the business innovators in the region, who are not yet plugged into the world of microfinance, and the MFIs that are not plugged into the cutting-edge innovations that are driving our new world. We hope that with the Prize, we can create that much-needed space and dialogue between individuals and institutions at different levels and from different sectors to experiment and innovate.
We want to create a dialogue between the business innovators in the region, who are not yet plugged into the world of microfinance, and the MFIs that are not plugged into the cutting-edge innovations that are driving our new world.
Gateway: Who is eligible for the Prize?
Reda: Eligible innovations must be by Arab nationals for the Arab world. Residency in an Arab country is not required, but at least one member of the team must hold an Arab nationality. The proposed innovation must be for implementation in the Arab world, defined as the 22 member countries of the Arab league. We welcome individuals, small businesses, MFIs, NGOs, students, cooperatives, commercial banks, local development banks, leasing firms, insurance companies, and fintech enterprises to apply for the Prize. The most important thing is that applicants must be able to show that their innovation can be successfully applied to their market of choice. The innovative proposals could be at any stage of development and could span the range of financial and non-financial services contributing to financial inclusion such as credit, savings, insurance, payment services, Islamic finance, fund transfers, responsible investment, collective banking, and business development services for micro-enterprises.
Gateway: What does the future hold for AFIIP?
Reda: AFIIP is an ongoing award program. We hope that over the coming three to five years, AFIIP would build the dialogue needed between the relevant actors to find solutions to pressing issues and harness the synergy between financial inclusion and innovation. The region is facing some complex issues and they are not the same across countries. Therefore, we need to look at challenges with the optic of innovation, something that people from the private sector are usually more experienced with. I hope we could become a regional hub for innovative ideas and open up relationships with relevant incubators and start-ups across the region to further financial inclusion and achieve some of the sustainable development goals. Both sides have a lot to contribute to each other, it’s a win-win situation.
In honor of International Women’s Day, FinDev Gateway features FinEquity (formerly known as the Women’s Financial Inclusion Community of Practice), a special corner of FinDev where practitioners working to increase women’s financial inclusion can share ideas, resources and lessons learned. Uloma Ogba of UNCDF tells us what she values about this community of practice.