How technology can solve the major challenges in Microfinance

How technology can solve the major challenges in Microfinance

2 min read

Last week, experts, policy makers, practitioners, researchers and journalists gathered together for the two-day Microfinance India Summit in Delhi. There were a plethora of sessions covering a wide variety of topics, specifically the key constraints limiting the sector’s growth and expansion.

Two key areas emerged as challenges:

1. Effective on April 1st 2014, margin caps may not exceed 10% for large MFIs and 12% for others. In the medium term, this is expected to put significant pressure on MFIs to reduce operational costs.

2. India is one of the world’s least financially aware nations, as reported by a global survey conducted by VISA. With less than 35% of Indians’ qualifying as financially aware, potential MFI customers are less likely to take out a loan, and to pay it back responsibly.

Although these two problems are significantly different, Uniphore’s experience shows that technology can play a meaningful role in alleviating both of them.

If MFIs need to reduce their operational costs, an important step in this direction is cutting the number of branches from which they physically operate, and enabling their mobile field agents to operate over larger geographies. However, in order for this to happen, it is critical that the MFI be able to remotely support and monitor these field agents throughout their daily activities. A mobile fieldforce application, like Uniphore’s mForce, can help MFIs do just that.

The solution automates both data collection as well as loan disbursement and payment collection. All of the information that is traditionally carried out on pen and paper (such as customer onboarding forms, social impact forms, etc) can be captured on a smartphone. This not only reduces the costs of pen-and-paper processes (printing, courier, and data entry), but also eliminates much of the delays in the loan process, thus positively impacting turnaround time and customer satisfaction. The seamless exchange of data between the field and the head office will also bring down operational costs through faster customer identification and error resolution – slashing the number of trips an agent has to make to accomplish these tasks.

The issue of low financial awareness can also be solved through a solution that enables MFIs to more regularly train their clients. People cannot be expected to retain extensive information in one sitting alone, and thus they require a more personalized communication tool that regularly trains and reminds them about how to use credit, budgeting skills, etc. While an MFI cannot consistently do these trainings in person, they can leverage widespread mobile penetration to create a solution. For example, Uniphore’s VoiceNet platform has been used to conduct interact quizzes for an Indian MFI. Using Indian language speech recognition, the system can call any basic feature phone, and ask quiz question related to financial literacy. Answers are recorded and tracked by the organization, so they can use these insights for analysis and further trainings.

Experts and practitioners at the Microfinance Summit equally acknowledged the critical need for technologies of these kinds to enable more efficient and meaningful interactions with both field agents and customers. The future will surely see high levels of technology adoption as MFIs strive to meet the double bottom line.

About Uniphore: Uniphore Technologies Inc is the leader in Multi lingual speech-based software solutions. Uniphore’s solutions allow any machine to understand and respond to natural human speech, thus enabling humans to use the most natural of communication modes, speech, to engage and instruct machines. Uniphore operates from its corporate headquarters at IIT Madras Research Park, Chennai, India and has sales offices in Middle East (Dubai, UAE) as well as in Manila, Philippines.

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