FinTech: Impact on Microfinance Industry

It is no secret that we are becoming increasingly dependent on digital technologies and it has served us spectacularly well thus far too. Take FinTech, for example; the slew of avant-garde technologies has transformed the world of banking and it is quickly making its way into yet another sub-sector: micro-financing. Serving as intermediaries between low-income clients and better financial products, microfinance institutions are beginning to realize the many, many benefits FinTech has to offer to the ecosystem, such as enhanced convenience, facilitating engagement between lenders and borrowers, etc.

The sector is leading to a dramatic shift in the traditional business model for microfinance organizations. Today, the rapid proliferation of smartphones ensures that regular microfinance initiatives are now transformed. It includes credit approvals, disbursement, tracking, payments, and remittances.

Microfinance as many think of it as a small loan. In Asia, where I’ve spent a lot of time recently, the way this works is that several women co-guarantee each other’s small loans. We’re talking about small loans to set up or to grow a small business. This loan is repaid over, say, six to 12 months. Typically, around five women cross-guarantee each other’s loans.

Some other key advantages have been discussed in detail below:

1. Quick processing: We admit that the concept of micro-financing is relatively new, but that has not kept this new sector from quickly making its way online. That is not surprising though, given that most of our lives are now reliant on the digital realm. So, this transition to online micro-financing is also important because it is an important part of the efforts to ensure that customers receive top-notch services, starting with faster processes for managing service requests, etc. It also allows microfinance lenders to quickly access applicants’ documents online and analyze their requests.
2. Mobile banking: Microfinancing may seem like an alien concept to some, but the truth is that they are as easy as they come and, in fact, quite similar to standard banking and loans. So, it ought to come as no surprise that mobile banking has found its way into the micro-financing sector as well, thanks to FinTech. As for what purpose mobile banking serves in this context — as we said, it is similar to normal banking; so, they enable loan repayments, EMI payments, money transfers, etc.
3. Faster transactions: If there is one thing that everyone seems to know about customers in today’s day and age, it is that customers have continually evolving expectations from every brand they engage with and that the customers want things done and they want them done fast. So, what does that have to do with micro-financing, you ask? Well, in a critical way: by enabling quicker transactions. Customers in this sector too do not have the time or patience to wait around to receive a service. Thankfully, with FinTech, microfinance businesses can easily ensure their customers can take out loans or repay loans and as quickly as possible that.

There is not even a shred of doubt that FinTech brings forth an abundance of potential to the world of microfinancing. It is a given that the concept of micro-financing itself has been transformational and is quickly growing to be a consequential part of the global financial ecosystem and economy. However, fortified by FinTech, micro-financing can aim for and achieve much more than what companies in this sector may have imagined.

This is because FinTech technologies allow the concept of micro-financing to exceed the restrictions of its most basic functions and, instead, offer advanced offerings to customers in the sector and deliver high-quality experiences. Now, one is bound to wonder precisely how one can integrate FinTech with micro-financing. Simple, with help from a trusted provider for FinTech software development services.

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