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How Mobile Banking Can Help African MFIs

How mobile banking can help African MFIs

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Mobile banking is awesome! And now we cannot think of our daily life without it. But have you ever imagined running your microfinance with mobile banking? If you already haven’t, we guess you are missing out on many opportunities.

Mobile banking is everywhere, from credit cards to electric bills, bank transfers to e-commerce transactions. But microfinance industry in Africa is still far away from the grace of mobile banking. That is sad.

But what is the reason African MFIs have not yet integrated mobile banking? There are multiple reasons, but the lack of a better core banking solution is the major one.

You might be thinking about how mobile banking relates to core banking solutions, right? Your doubt makes sense, and we will make things clear soon.

But before that, let’s talk about Mobile Banking in Africa.

Mobile Banking in Africa

How big is the African mobile money market? This question will help us understand how mobile banking can help African MFIs.

The African Mobile money market is huge. And it continues to grow stronger like its economy. Today, almost everyone with a mobile phone has a mobile banking account.

According to Quartz Africa,

“Africa now accounts for 70% of the world’s $1 trillion mobile money value. The value of Africa’s mobile money transactions edged up 39% to $701.4 billion in 2021 from $495 billion in 2020, highlighting the future of African banking is mobile.

70%! This is unbelievable, isn’t it?

Then, can you understand the potential of mobile banking for MFIs? Without any doubt, it is huge.

But why?

I guess you already know the challenges of Microfinance operations in Africa. Among all the challenges, the cost of outreach and operation is a major drawback. Besides, the low repayment rate is also affecting MFIs significantly. But mobile banking can solve this problem mostly. And we are going to discuss this in detail soon.

Let us ask you a simple question. If you want to integrate mobile banking into your MFI, how will you do it?

For this, you need software that will automate your entire mobile banking process. What does it mean anyway? It means that if you have a Core Banking Solution (CBS) designed to handle mobile transactions, whenever someone makes repayments, it will be automatically adjusted to your system.   

What if you don’t integrate? Well, in order to receive repayments, you don’t need any software. But things will be really tough to handle.

Suppose you have 5k borrowers, and half of them make the repayments on your mobile banking account. How will it go? This is not going to be easy to manage. The manual accountancy will require many workforces to handle this.

However, your problem is solved if you have a CBS capable of integrating mobile payments. You don’t need to touch anything; the software will automate everything. Hope you understand the relationship between CBS and mobile banking.

How Mobile Banking Can Help African MFIs

If we start talking about the benefits of mobile banking for African MFIs, we can go on and on. But in this blog, we will discuss a few points about how mobile banking can help African MFIs.

1. Automated Loan Disbursement

What image comes to your mind when it comes to manual loan disbursement? A lot of clients are standing in the queue at your office. Your employees are often unable to manage the crowd and noise everywhere. Doesn’t it feel irritating?

Have you ever thought about automated loan disbursement? How cool would it be, right? It is not a dream anymore; with mobile banking and a core banking solution, you can easily do this.

In this process, everyone is happy. Your clients receive the loans without any hassle. And your office is a peaceful, noise-free workstation like others.

loan disbursement

2. Automated Loan Repayments

This is the most important way how mobile banking can help African MFIs. Consistent repayment is the answer when you ask how you can boost your microcredit in Africa. In most cases, due to the low repayment rates, African MFIs struggle to make profits. But if you integrate mobile banking, it will boost your repayment rates.

You might be confused.

Well, think about a client who is away for his work. If you visit his home during the daytime, will you be able to get the repayment? In most of the time, you won’t.

However, if you have a mobile banking system integrated, your borrowers can easily make the payment whenever possible. Even they don’t have the option to excuse.

3. Automated Repayment Adjustment

I hope you understand how automated repayment adjustment is important for your organization. When you receive repayment through mobile banking, it is tough to adjust the amount manually. On the other hand, people often make mistakes during manual data entry.

But what if you don’t even need to adjust manually? You are not dreaming. Sophisticated software integrated with mobile banking will adjust the repayments automatically. Not clear yet?

For example, what happens when you pay your credit card bills or deposit them into your bank account? Your bills or deposit amount is adjusted automatically with the banking software. And you can see your payments on the bank’s app instantly. With a good core banking solution, everything happens similarly to banks. Isn’t it awesome? I hope you understand now.

4. Automatically Manage your MFI

You must have thought of automatically handling your MFI. But for sure, you can not make it fully automatic because of the door-to-door collection process.

Due to the door-to-door collection process, most MFIs need to employ more people. And it costs you a lot of money. On the other hand, the hassle of this process also makes the field officers and borrowers dissatisfied.

Therefore, mobile banking can make your MFI fully automated. And with the help of a better CBS integrated with mobile banking, you can check everything 24/7. Everyone is happy!

5. Reduces operational cost  

Outreach and operational cost are why most MFIs fail in the African market. If you think your MFI is one of them, mobile banking is one way to solve the problem.

Africa is a huge market for Microfinance institutions. But many organizations cannot reach them due to a higher outreach cost. But have you ever thought about how you could reduce that gap?

Probably you have but have not yet come across any solution. Think no further because mobile banking is here to reduce your operating costs and boost your MFI’s profits. And in this process, a comprehensive core banking solution will help. We hope you understand how mobile banking can help African MFIs by reducing outreach and operational cost.

Let’s not stretch it further. Hope you understand how mobile banking can help African MFIs with automated disbursement, repayments and many more facilities.

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