More than 2 billion people cannot access formal financial services and most of them are located in developing countries. Yet, when it comes to reducing the financial inclusion gap, microfinanceinstitutions are one of the most efficient at helping low-income communities access financial products and services.
However, one of the main obstacles microfinanceinstitutions, especially African institutions, are facing today is the cost of infrastructure, as well as the difficulty to expand their reach to other areas. Technology can definitely be a means to cutting such costs and growing the business by reaching other communities and help them develop, but in order to accomplish such goals, technological solutions need to be correctly implemented.
While there are some truly phenomenal tools available to financial institutions, such as blockchain, microfinanceinstitutions cannot yet integrate such technologies into the way they operate and can be extremely costly. Nonetheless, there are several solutions that are easy to adopt and can definitely make a difference to both customers and companies.
How technology can help develop microfinance institutions
Customer relations are essential to these institutions, mainly due to the clients they tend to. Their clients tend to not have credit histories, assets they can put as collateral or records of their work activities, all of which have a very real impact on their possibilities of accessing formal financial products and services.
Furthermore, the have limited literacy and numeracy, as well as a basic education and almost no experience with financial services, which is why they rely on personal relationships to build trust and ultimately purchase products or hire services. Hence, they need personalized products to tend to their specific economic reality and agents that can advice them accordingly.
Yet, contrary to popular belief, by adopting technology, customer relations can be strengthened, not weakened or replaced. Nonetheless, in order to achieve an efficient integration between microfinanceinstitutions and technology, there are a few things to keep in mind:
Create a thoughtful action plan
Investing in technology without any clear objectives or specific operation plans will definitely result in an extensive loss of money and time. Digital solutions can cut operation costs, expand the entity’s reach to new clients and improve user experience, but in order to do so, you will need to first define clear objectives to then find the ideal tool to meet them.
Adopt an easy-to-integrate technological tool
Technological systems can generate big costs, yet when used in the right way, they can result in more efficiency. By finding a flexible platform that can be easily integrated with other software and systems, businesses can continue to grow and adapt without the need to change their platforms or reinvest. Additionally, by adopting only one system, clients only need to learn it once, saving time and reducing any possible inconvenience.
Digitize your data
Many microfinanceinstitutions still keep records on paper and although digitizing data can be extremely useful, choosing to digitize decades of records might just seem overwhelming. Instead of digitizing old records, adopt a system that allows you to collect new data. Often, by collecting their own data from their own clients, microfinanceinstitutions can get very valuable insights, such as the impact credits have on their lives, how they make their payments and the type of services and products they prefer.
In order to continue growing and tending to their clients’ needs without losing money in the process, microfinanceinstitutions need to accept and adopt new technologies. They are compatible and can amply assist institutions achieve their goals, thus helping more low-income individuals and companies develop and escape poverty.