If Benedict Kramer were a small farmer from Uganda who needed a loan, he would do the following: "I would go to an acquaintance who would write down on a piece of paper for me that I am Benedict Kramer and with this piece of paper as collateral, I would then go to a microfinance institution." Identity cards do not exist in Uganda. Hence, the approximately 2,500 small and medium-sized microfinance institutions (MFIs) in Uganda are left with little choice but to accept a worthless piece of paper. The situation is similar at tens of thousands of MFIs in other African countries. The consequences are large losses in loan repayments because identities can be easily forged. This in turn leads to extremely high interest rates. Small borrowers in Uganda pay more than 60 percent interest on their loans. An intricate situation, but it gets worse.
"When you walk into an MFI office in Uganda, often the first thing you will see is a pile of several cubic meters of paper lying on the floor. This is their customer data." MFI staffs write multiple copies of all customer information, each transaction recorded on paper by hand. "It's so confusing and error-prone that nobody really knows who owes what to whom."
His company, awamo, founded together with Roland Claussen and Philipp Neub, therefore has two major objectives. The first is to improve access to affordable loans by helping to reduce interest rates, and the second is to extend the reach of financial services to a greater proportion of the population; the majority of the local population lives in such secluded areas that even for the widespread MFI it is currently too costly to reach them.
Instead of paper, awamo relies on tablet PCs with an integrated fingerprint scanner which can unambiguously identify the borrower, even without identity papers. At the same time, the devices will increase the level of mobility of the staff from microfinance institutions and increase the reliability of customer data, for which awamo has developed another software program. By the year 2017, the management information system should be capable of generating credit reports that forecast the probabilities of default.
Kramer´s concept convinced the company´s first investors, who invested 500,000 euros in awamo. Recently, the 26 year-old moved from Frankfurt (Germany) to Uganda with four employees in order to win over the MFIs.