How to Improve the Microfinance Industry with Modern Inventions?
Banking Vs Microfinance Industry
Banking and Microfinance Industry are quite similar. Although these two types of business are related to the financial services, still there are many differences. Just take an example for that.
Taking loans from the Bank and Microfinance Company (MFI) is not the same thing. It’s nearly impossible to get a credit from the banking institutions for the poor people or unorganized business. Without providing valuable resources, none can take loan from Banks.
But Microfinance Loans are not that hard to get. People with fewer or no resource can get credit from the MFIs. There is no requirement of excellent credit score, previous credit records, and submission of collateral and so on. These things are crucial to get a bank loan. But Microfinance companies can award credits to the people without those things.
Thee meltdown of the Microfinance Industry was seen in the nations like Nicaragua, Morocco, Mexico. We have seen this kind of scenario in India, too. In the late 2010, the MFI industry in Andhra Pradesh has collapsed. ‘Unable to pay loan’ scenario has affected many families as well as the companies.
As MFIs don’t asses a person before providing micro loans, there is a chance not the get the repayment. There are other issues like extremely high rate of interest on micro loans. People take loans in times of emergency, so they don’t have the chance to bargain with the ROI of Loan. It was seen that some MFIs have charged extreme ROI at the time of providing loans.
Is there any Solution?
The industry leaders are relentlessly trying to find the answer “how to eradicate the issues of Microfinance Industry?” MFIs are crucial to eradicate poverty from the face of the world. So, it needs to survive.
Now, it’s time to introduce modern technologies into the Microfinance Industry. We can utilize modern inventions like Digitalization, Artificial Intelligence, Machine Learning and Big Data with it. These things can be implemented in advanced Microfinance Management System.
Microfinance Management System can be called as “Microfinance Software.” There are many areas to explore in this regard. If the software were integrated with those modern developments, they can help in erasing many issues that are plaguing the MFI industry.
Role of Modern Technologies
We need to explore all the areas of modern technologies and see how it will improve the Microfinance Industry.
Artificial Intelligence and Machine Learning
Actually, Machine Learning is a process of the Artificial Intelligence. With the machine learning, a machine or software can learn from the prior set of information and data. It does that automatically. So, when implementing the same into modern Microfinance software, it will learn from the past mistakes as well as achievements and try to replicate successful methods and cut-off all previous mistakes.
With Digitalization, MFIs can go global. The presence of internet can be found almost all parts of the world. With it, more people can know about the services of Microfinance and avail it. The more people it will reach, the more people will get the benefits.
Finance business can generate lots of data and records. These data and information are very crucial to analyze the overall business scenario of Microfinance. But the emergence of Big Data has revolutionized it. Incorporating Big Data with online microfinance software would be crucial for the bright future of Microfinance Industry. It will help the industry leaders to make crucial and quick decision by exploring the crucial insights.