Workshop at e-MFP 2024: Emerging practices in digital finance

In November 2024, Erin Taylor and Anette Broløs (Finthropology) had the pleasure of attending the European Microfinance Week e-MFP European Microfinance Week 2024 in Luxembourg organised by the European Microfinance Platform (e-MFP). The old Neumünster Abbey in Luxembourg City once again provided a perfect setting for presentations, workshops and networking by the more than 60 attendees from 55 countries—and for online listeners. 

The conference’s main theme was financial inclusion for forcibly displaced persons. Among the many sessions, we also found that the impact—positive or negative—of digital finance was another main topic.

Erin and Anette facilitated a workshop on “Digitalization of microfinance: Emerging practices and their beneficiaries” (see video) with the purpose of fostering cross-disciplinary and cross-industry discussion and identifying potential for future research, innovation and collaboration. 

In keeping with the DiFF project’s focus, the workshop did not focus solely on MFIs. Instead, it encouraged discussion on all kinds of financial services and their use by low-income people. Erin’s comments drew upon a systematic literature review she carried out with Dr. Isaac Lyne and Dr. Rida Akzar.

The digitalization of financial services and their use by low-income people is a topic of growing importance, not just for MFIs but for all kinds of providers who deliver services for low-income people. However, to date little discussion has taken place regarding practices and beneficiaries. 

The three speakers started the discussion by sharing very short insights into main perspectives.

Dr. Erin B. Taylor, Managing Director and Co-founder of Finthropology, discussed the DiFF project’s findings on the difficulties in measuring the impact of digital financial services. It is difficult to separate effects on income, access to credit and education. Qualitative research is particularly adept in helping to understand why uses and benefits differ from location to location and among different cultures.

Amelia Greenberg, Deputy Director, Cerise+SPTF, focused on some main learnings from studies on the introduction of digital financial services. First of all there is a tendency to focus on the  positive potential of digital finance - and to overlook some of the negative aspects. For instance access to credit - perhaps as part of payment solutions - can be stressful if it results in indebtedness. Similarly there are issues of security and privacy that remain unanswered. As new offers are introduced and new financial partnerships are formed, it might be time to consider if digital is sometimes pursued as a purpose in itself and going too fast? 

Anne Marie van Swinderen, CEO L-IFT, Netherlands, added the many learnings from L-IFT’s work with financial diaries. Understanding people's behaviour with financial tools and the way their habits change following the introduction of new solutions can help build knowledge about best designs and best practices with regards to introductions. She shared stories of use and of people being very smart about using new tools - even without high levels of financial literacy.

Dr. Anette Broløs, Director and Co-founder of Finthropology, facilitated the discussion, in which the many participants from both business, NGOs and academia shared their stories and experiences. 

Comments showed that the uptake and useability of digital finance is a journey of learning for both customers and providers, and that there is great uncertainty in the potential to scale and succeed.  

Attendees also noted that once people start using digital finance—usually because they find it solves a practical problem—they are quite adept at using it to suit their purposes. Indeed, even if they have bad experiences with fraud or scams, they continue to use the digital solutions because of the convenience. 

But digitalization is also about investing in digital back-end infrastructures—and in updating them continuously. One of the original hopes for digital finance was that it would help cut costs and build a larger business volume, thereby permitting the cost of customer services to be brought down markedly. This was particularly expected to help customers access cheaper credit. However, there is scant evidence that digital credit is cheaper. Instead, gains are being made in cutting the financial and transaction costs of making payments, not necessarily by reducing fees, but by saving people transport costs to travel to agents and banks. 

The discussion also underpinned the difficulties in measuring the impact of digital finance. There is still much to be researched.

If you would like to hear the whole discussion, you can find the video from the workshop here.