The Core Vulnerabilities of Microfinance Services and Troubleshooting Strategies for Better Efficiency
Mistakes in the lender’s microloan agreement or client records are no less irritating than delayed project approvals. These and other flaws of the system don’t help the whole industry thrive since it deminers its potential — the more challenges and headaches borrowers have to overcome, the less customer satisfaction and more abandoned deals are projected to occur.
In this guide, let’s analyze the difficulties the microfinance market experiences overall and how its institutions can address those for more positive feedback from their audience. Mind the gap!
Manual Process from A to Z
Despite the modern trend for digitization, there are a lot of service providers who stick to traditional manual paperwork throughout every stage of the microfinance project — from application and onboarding to fund disbursement. This preference can lead to numerous issues, including service delivery downtime, errors, and the overall procedure’s inefficiency.
Going digital is an obvious answer. Not only will it improve the operational accuracy of all the projects under the lender’s roof, but it will also streamline related processes and increase the solution’s attraction in the eyes of the audience. One of the examples is the introduction of customer relationship management software with virtual assistants or AI-based chatbots to guarantee a 24/7 connection between service providers and their clients.
The Lack of Automation
Although AI, ML, and similar technologies seem to rule the modern market, this isn’t the case for several MFIs. Instead of automating repeated tasks, for instance, customers are to make repayments and wait for manual approvement that precedes the loan disbursement. In turn, the administrative workload increases drastically, and so does the frustration and disappointment people experience when waiting for weeks for the desired result.
It doesn’t mean modern microfinance processes have to be overly simplified. The introduction of effective automation systems is for the better for all parties, letting lenders increase their reach and scalability to satisfy the ever-enhancing end-user demands. The shift toward microfinance digitization and automation will improve the overall validity and reliability of such solutions across markets.
A High Risk of Manual Error
This problem doesn’t discriminate against lenders and borrowers:
Lenders may have issues with wrongly stored or operated client records, which can lead to service delays, double fund disbursement to the same customer, and other challenges to address.
Borrowers may decrease their chances of success by applying forms with wrong data (mistyped information, for instance), In turn, it prevents them from accessing the service on time and solving urgent problems in the best way possible.
Here are a few options that modern digital microfinance institutions can employ to improve the quality of their deals:
Electronic signature platforms — the use of such tools facilitates the procedure without compromising its security and ensures the authenticity of clients in turn.
Automated data entry — ICR, OCR, and analogous types of software minimize the risk of error associated with manual data entry.
Smart contracts — in contract enforcement, the use of smart contracts on blockchain lets the system execute contracts automatically.
Real-time reporting — these tools provide valuable insights into operational metrics and financial data of end users, letting service providers guarantee flawless performance with early issue detection and error correction in mind.
Cloud-based document management systems — a steady flow of data is an underestimated element of any microloan relationships. So such tool prove their worth by increasing the overall service consistency, preventing data loss and other prospective hazards.
AI and ML — of course, these technologies let MFIs detect and review anomalies in their interaction with end users and prevent the risk of fraud and data leaks.
Ineffective Regulatory Reporting
MFIs may face a lot of trouble caused by manual preparation of reports and other documents to comply with local and international in-market safety and regulatory standards. Not only does it result in delays in compliance, but it can also lead to penalties and extra charges at both the lender’s and the borrower’s end.
Automation tools based on blockchain, AI, big data analytics, and other technologies can assist interested parties in improving their staff training strategies and overall compliance monitoring efficiency. It is a highway to establishing robust procedures to guarantee timely adherence to all the regulations for proper operation in the market.
Final Thoughts
Automation and digitization are those must-have processes any microfinance institution has to undergo to cater to the modern in-market challenges and satisfy ever-changing needs of audiences. The introduction of blockchain will make money and data transfers safer and cost-efficient, while automated CRMs will establish a solid connection between service providers and customers, leading to their mutual success.
