How Core Banking Solution in Uganda Impacts MFIs

In the last decade, the microfinance industry has grown significantly around the world. But a few African nations are among the trendsetters. Guess what? Uganda is one of those trendsetters proving its resilience in the region.

However, the industry or MFIs could do better. Ask how? A core banking solution in Uganda could impact the growth more. Don’t know how? We are going to make it clear to you in this blog.

The world is moving faster than you could think. Can you tell us why? Of course, because of information technology. From shopping to financial transactions, we want to do everything online.

For example, compared to traditional banking today, we couldn’t conduct our financial work so easily a decade ago. We needed to visit the branch for a simple deposit, but today we can do it from anywhere and anytime.

Because of this technological revolution, people are leaning forward to technology and want to see it in every sector. But unfortunately, unlike the traditional banking sector, most MFIs in Uganda are still far from that light.    

In simple words, we are trying to say that a core banking solution in Uganda could help the industry in many ways. Let’s see how.

What is Core Banking Solution?

Simply put, a core banking solution is a technology program that helps you run your microfinance or bank digitally. Moreover, it is software that automates everything from borrower evaluation to loan repayments. Is it clear to you? If not, let us give you an example.

Suppose you have a microfinance organization, and you are running it manually. How do you handle everything? Well, you must be doing a lot of paperwork in that case. Your employees visit your client door-to-door, record the data on paper, and evaluate the piles of paper for borrower evaluation.

When you are done evaluating, your organization disburse loans manually. Furthermore, loan officers visit borrower’s door-to-door to collect money every week when it comes to repayments. On top of everything, you must still be doing your accountancy with calculators digging deep in the pile of papers daily.

Don’t you think this is tedious? Isn’t it killing your valuable time and increasing your operational cost?

It is!

Have you ever thought that you could do all those tedious works automatically? If you have, know that a core banking solution is what that do all those work automatically. I hope you understand what the core banking solution is.

Now, let’s discuss how a core banking solution in Uganda can disrupt the MFI industry.

Impacts of Core Banking Solution in Uganda  

Since Ugandan MFIs are expanding rapidly, a core banking solution could help its growth from the core, considering it is not heavily automated yet. But a question remains: How can the core banking solution in Uganda impact the whole Microfinance industry at its best?

Don’t worry; this is what we will talk about now. Just know that among countless benefits, CBS can have a huge impact that drives real results. Let’s see how!

Efficiency in Operation

At its large, a CBS makes your Microfinance operation highly efficient. Ask how!

Well, let me ask you a question first. Aren’t your employees suffering from overwork? Aren’t they lost in piles of paperwork?

I do not doubt that they are suffering. So do you because you are also missing out on many opportunities. Currently, your operation is based on a tedious manual process. Under pressure, your employees also make mistakes which cost in losses.

Literally, your microfinance is doing something way slower than it could have done in a few minutes with a core banking solution. On the other hand, with manual work, you are not future-proofing your organization.   

For example, you need a report on the last 20 days, and when you ask your team, they ask for some time to prepare the report. Everything happens this way, right? Yes, it does. But only when you are operating manually.

However, if you had a CBS, you yourself could generate that report in a few minutes.

So, what is missing is the support of a core banking solution in Uganda, and you get to believe it could make your MFI more efficient than you could imagine. Moreover, the collective impact on the national level could be a phenomenon.

Lower Adverse Selection Risk

Like many other microfinance organizations in the African region, Ugandan MFIs are threatened by collateral damage. Didn’t get it?

Well, let us talk like humans.

Have you ever experienced loan fraud? Like, someone has taken a loan from your organization and disappeared after a few weeks. I hope you can relate to that. It actually happens a lot, not only in Uganda but also all around the world.

But have you ever thought, why did that happen?

It happened because you did not do the background check properly. And it is due to the manual process. However, I cannot say it is your or your employee’s fault. Rather it happened because of the manual process.

Now, imagine if you had a Core banking solution, would it go down the same lane? Probably not. A comprehensive CBS is capable of borrower evaluation based on existing data, and you can see everything through in a few clicks.

So, we would say, if your Microfinance adapts to a core banking solution in Uganda, you are highly likely to have a lower adverse selection risk.     

Security and Data Privacy

In today’s world, data security and privacy are things you must take care of. Or, you will lose the battle to your competitor. Do you know why? Because data is the most important commodity. And you can keep it secured with a better core banking solution.

Undoubtedly, your company data is more exposed in the manual process. Have you ever thought about what will happen if your competitor accesses your customer data?

Well, they will find the most valuable borrowers and offer them loans. In other words, you will lose a valuable borrower. So, make sure your company information is secured. And to do that, find a better CBS with robust security.

Lower Cost and Higher Financial Returns

The real impact of a core banking solution is lower operational costs and higher financial returns.

Let me ask you, what is the main goal of your MFI?

You may say it’s social service, but you need to remain on the side of profit to serve society longer and better. If you do not make a profit, your MFI cannot grow. And if you cannot grow, you cannot expand your service to more people. So, a higher financial return is the ultimate goal.

With the manual process, you need more people to run your organization. Besides, there is a huge stationary expense if you operate manually.

But when you automate your MFI with a CBS, the operational cost comes down to half. It means it saves your operating cost. Thus you get a higher financial return. Moreover, the efficiency you gain with a CBS helps you expand faster.

However, most MFIs fail to make a profit in Uganda due to the higher operating cost. And right now, MFIs need the right core banking solution in Uganda.

In short, a core banking solution in Uganda is much needed for higher impact. It can help your MFI with operational efficiency, data security, lower risk and higher financial returns.