Microfinance Digitization: Overview, Features, and Future Prospects

    Digitization has become a source of power and inspiration for many markets, and the field of microfinance isn’t an exception. Its tools can drive more progress in the industry, making microfinance institutions more customer-oriented, effective, and competitive. At the same time, it is a better resource allocation strategy with real-time access to ever-changing data. Let’s get a deeper insight into how digital microfinance works in practice.

Digitization Processes in Microfinance

    Without any further ado, let’s take a look at the features that help enthusiasts distinguish digital microfinance from its traditional alternative:

• Digital onboarding — first and foremost, it’s all about the medium for communications and data exchange that takes place when a person or a business applies for a microloan. Given that there is no need for physical paperwork is simpler for its further submission, analysis, storage, and so on.

• Instant loan approval — modern platforms offer immediate scoring and application confirmation, which ensures data-driven and unblurred decision-making.

• Automated repayment systems — they simplify microloan management and ensure you face no risks of missed payments, overpayments, and so on. Of course, it is crucial to decide on a deal with customer-oriented repayment rates.

• Blockchain technology — your data exchange will be more transparent and less time-consuming. These tools are exquisite for cross-border money and data transfers, which makes the service more attention-grabbing across markets.

• Remote customer support — interested parties can always stay in touch with the target lender to discuss any concerns and personalize the deal. Virtual assistants and chatbots are a few samples of technologies contemporary microfinance platforms include to address clients’ demands.

• Electronic KYC — the Know Your Customer technology reduces onboarding time and helps establish more trustworthy relationships. It also showcases the lenders’ security and privacy policies as a competitive edge.

The Strengths of Digital Microfinance Across Markets

    There are several reasons to say “yes” to digitization processes in the microfinance industry. Let’s highlight the most crucial modifications that will help both lenders and borrowers build trust-based and effective communications:

• Better end-user experience — first and foremost, user-friendly interfaces of microloan platforms will guarantee quicker responses, faster loading times, and other features to improve the overall service quality.

• Improved transparency — digital communication is more advanced than manual application forms and other paperwork formats required for traditional microfinance projects. One of the factors is real-time data tracking, which allows for faster monitoring and enhanced reporting value.

• Cost optimization —  another aspect of opting for digital analogs of microloans is that they are simply more cost-efficient. The service delivery won’t take weeks and can be instant, which corresponds to the target audience’s demands and expectations perfectly.

• Data-driven insights — digital microfinance platforms and tools come equipped with additional instruments to streamline the workflow. The list includes machine learning, artificial intelligence, big data analytics, and other algorithms. With more valuable insights to gain in real-time, the decision-making capacity and risk assessment are taken to the next level for both borrowers and lenders. While service providers can estimate customer behavior to modify their offers, end users can proceed with more effective risk management strategies.

• Expanded reach — while the purpose of microfinance is to ensure unprivileged societies and businesses can access modern financial services with ease, a lot of manual aspects that are typical for the traditional version restrict the overall endeavor’s efficiency. That’s not the case with digital microfinance, where mobile apps and online platforms do a great job.

If you wonder why digitalized microfinance is always a better choice than its traditional format, here is a brief comparison of the two. Check the table below:

Key Takeaways: Is Digital Microfinance Worth It?

    At the end of the day, such aspects as instant scoring, digital onboarding, and real-time data analytics simplify the experience and make its results feasible in a more hassle-free manner. You won’t need to wait for weeks to hear back from the target service provider. With more data instantly at your disposal, it is simpler to check the to-sign agreement in detail and estimate the risks and bonuses without rushing.