Mobile and online technology can and have significantly improved the efficiency in the operations of microfinance institutions lowering the interest rates from the digitization of finance. It was discussed during a session at the Small Business Association of Jamaica MSME Conference, held at the Hilton Rose Hall Resort and Spa, in St James, on the 20th of July. Paul Chin who is a general manager of Microfinance Services at the Development Bank of Jamaica (DBJ) explained to the delegates how administrative costs fuelled the soaring interest rates in the micro finance sector. Advancements and investments in IT services have improved the efficiency which cuts administrative costs and thus lowering the interest rates.
Lenders can quickly make loan disbursements through the use of smartphones in the absence of the borrower. Similarly, the clients can make their repayments and check their balances using their phones and other technologies increasing the speed of financial transactions and reducing the procedures taken to complete the process.
Gillian Hyde, general manager, JN Small Business Loans, and the co-presenter during this session said that their company uses technology to access information and manage the data of their clients while signing up new customers in their offices and other locations. Hyde argued that the system makes their services company customer friendly and flexible to their customers who can make request and inquiries at any time of the day. The speakers at the event emphasized on the increased use of technology in the sector.
New accounts in micro finance are continually opened daily with many clients hailing from developing countries and also individuals with low incomes. The borrowers from the microfinance institutions are mostly unaware of the dangers of borrowing the money and also the vulnerabilities to abuses from the institutions. In a survey by Smart Campaign, the consumer movement surveyed 4000 micro credit borrowers in four countries and documented their findings in a report. According to the report, Peru and Georgia protect their consumers whereas, in Pakistan and Benin, the protection was robust.
Most of the clients in the microcredit sector do not take their time to understand the partnership they are getting into with the microfinance institutions. It includes the terms and conditions of their loans. In Georgia, multiple clients have once issued loans in US dollars. Unfortunately, the Georgian currency depreciated dramatically, and higher loan repayments by the customers affected their financial capabilities. There have been cases of scammers claiming to be credible micro finance institutions and made away with individuals savings.
Few customers take their time to understand the sophistication in markets and how it impacts on their credit rating. Clients should endeavor to establish that rules and regulations placed forward by a microfinance institution are understood and fair while highlighting the essential information including the modes and terms of repayment. The organizations should respect their clients and maintain a healthy cooperation.
Professional women in Washington, D.C. area, teamed up and founded the Women’s Microfinance Initiative (WMI) which is a non-profit organization. The founding of the organization sprout from a discussion of an initiative that would allow local women to reach out to their counterparts in the developing nations. Robyn Nietert and Betsy Gordon, who resided in Carderock Springs neighborhood in Bethesda, brainstormed the idea in spring 2007. WMI has U.S.-based board members working with interns and other volunteers to use non-exploitative approaches for making a society financial stable. The organization offers loans to women who cannot access financial services. It issues affordable and collateral free loans to promote the economic participation of women with the hope of achieving prosperity for the poor in the rural areas of Uganda, Kenya, and Tanzania. WMI helps the society to grow small businesses and empower their lives through affordable basic needs education, healthcare and savings for the future and emergencies. Two years into the WMI village-level loan program and the women are then promoted to access financial services in banks and financial autonomy and join the formal economy of their country.
Women’s Microfinance Initiative disburse the loans through village-level organizations and collaborates with the organizations to develop social-outreach programs. Some of the organizations that have partnered with WMI include Andrew Stevenson Architect, Arlington Academy of Hope, The law firm of Baker and & McKenzie, Boeing among others committed to improving the financial status of marginalized people such as the women in the society.
Accion East is an organization that offers affordable micro finance solution to small businesses owners. The non-profit organization operates nationwide and has empowered small business owners to start their businesses and thrive through the challenging financial times. Apart from financial solutions, the organization provides financial education to the entrepreneurs who are mostly minorities inclusive of women who afterward strengthen the social status of their families and transform the same into the society through the creation of employment.
Accion was founded in 1991 as the domestic arm of Accion International, a global microfinance organization, to provide people with financial tools that would deliver them from poverty. From its operation in major U.S. metropolitan areas, the group has expanded its operations globally through dedication and continued innovation in microfinance. It is among the leading microfinance institutions in the United States that have received some awards for their services.
In 1998, the company received the presidential award for excellence in Microenterprise development for program innovation. Through the years the company has continuously been awarded for its achievements including the partner of the year honoree award in 2009 by Boston Business Journal Corporate Citizenship. Accion offers micro loans from $500 to $50,000 where its consultants engage with their clients directly when assessing their credit and business status. The company also provides loans for start-ups firms and credit development loans.
The microfinance sector in India remains united in the provision of their services through Microfinance Institutions Network (MFIN) association. The organization was found in 2009 and has remained functional in India where it is headquartered. The primary objective that inspired the creation of this partnership was to empower the economically underserved communities to achieve financial independence and nurture sustainable livelihoods. To ensure the achievement of this goal, Microfinance Institutions Network has continually worked closely with regulators and critical stakeholders to accomplish larger financial inclusion goal through the use of microfinance.
MFIN ensures its functionality through of self-regulation, Advocacy & Development and making impacts in research and analytics. Self-regulation has maintained transparency and good governance in the functioning of this association of the prominent microfinance institutions in India. The client remains to be the most valued stakeholder of the organization thus the association endeavors to protect and strengthen the customer financially.
MFIN receives recognition as a Primary Representative Body and Self-Regulatory Organization for the Non-Banking Finance Companies (NBFC). The microfinance institutions that encompass MFIN are regulated by the Reserve Bank of India. Currently, the association is comprised of 42 NBFC MFIs. The organizations constitute an approximately 89% of the microfinance businesses in India.
Svatantra Microfinance which is a mid-sized microfinance institution is on the quest to double its loan disbursals to ₹800 crore by 2019 as it expands its operations to more states. The microfinance institution plans to expand its processes across the country and generate a balance sheet of Rs 500 crore in a duration of two years. From the current 85 branches, Svatantra Microfinance plans to grow its footprint to around 190 branches that will be distributed across the 10-12 states.
The company has embraced developments of technology and launched ‘Saathi’ which is a digitalized solution. ‘Saathi’ functions to provide an entire spectrum of operations in the process of loan origination, management, disbursement, and collection. According to Vineet Chattree, the company`s director, Svatantra Microfinance plans to open both organic and inorganic expansion options. Currently, the company is evaluating various products inclusive of affordable home finance and small and medium enterprise lending products
The company, which is based in Mumbai plans to expand their operations in more states this year and generate funds from social capital ventures domestically and globally. Nine financial institutions support Svatantra Microfinance inclusive of public and private sector banks and NBFCs. The company further seeks to enter some global markets from the huge demand-supply gap in the segment to enhance its growth.
Every business strives to become the best in the provision of its services to remain reputable and relevant in the market. In pursuit of this goal, Artoo financial technology firm recently partnered with Annapurna Microfinance. The two partners are in search of a product that enhances loans processing which is less manual by exploring interventions from the available in technology. The partnership will make loan processing efficient through the use of intelligent Digital Loan Origination System from Artoo that reduces the time used to process the loans.
Annapurna Microfinance is established and popular in rural, suburban and tribal communities in different states inclusive of Meghalaya, Tripura, Madhya Pradesh, Maharashtra, and others. Annapurna Microfinance will deploy digital platform by Artoo in several branches of the states. Annapurna targets to distribute loans worth INR 100 Crores in a duration of 12 months.
The partnership was a strategy to respond to the evolving markets that necessitated the update of current processes that would lead to quick and easy credit to the underserved population. The use of Artoo`s platform has minimized human errors and bias and established trust and credibility with the clients. The move for the two microfinance institutions have expanded their reach and enhanced their success. They plan to continue their progress by venturing into micro-housing loans in the future.