Technology for Micro Finance Institutions “ Strategic Advantages

20 Jul, 2016  Posted By Pramodh Vittal   Posted in Finance

Based on a report by  CRISIL on the top 25 Micro Finance Institutions (MFIs) in India in 2015, the critical points of impact for the MFIs have been identified as the following:

  1. Increasing profitability
    1. Reduction in Operating expenses
    2. Improvement in operational efficiencies
  2. Improvement of branch efficiency
  3. Enhanced stakeholder confidence
  4. Healthy asset quality
  5. Maintenance of borrower discipline
  6. Awareness of borrower credit during the complete lifecycle

In view of the above-mentioned factors, a key enabler for efficient and effective execution and monitoring for MFIs would be the use of technology. This technology would not be an extension of a core banking solution used by commercial banks but something unique and specific to MFIs to ensure efficient monitoring of real-time collection, customer performance, both at the branch and main office levels.

Thinking aloud, here are some of the features such a technology solution could showcase:

  1. A cloud-based product that can be integrated with the MFIs core banking system to provide real-time reports of various types of transactions at the various levels of hierarchy.
  2. Business Intelligence/Analytics to help improve efficiencies and understand the end-customer better. This could eventually include opening up the facility to offer other products to the same consumer on basis of patterns.
  3. Comprehensive audit system allowing increase of transparency of operations to enhance stakeholder confidence.
  4. Availability of an integrated LMS platform, enabling the learning gathered in the organization to be made available to the relevant personnel in a structured form to ensure uniformity and efficiency.

This would ensure scalability and repeatability of business by MFIs leading to larger penetration in the rural sector, thereby facilitating participation by a larger section of the people.

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