How Mobile Repayments Boost Your MFI

Are you still struggling with loan repayments? Then, you must be collecting repayments traditionally by physically visiting one client to another. It is the reason your microfinance is still struggling.

However, you can put an end to the manual collection process and increase the repayment rates now. You must be worried! Don’t worry; we are going to tell you how mobile repayments boost your MFI.

Before we jump into the main topic, let’s learn what mobile banking and mobile repayments are.

Mobile Banking: A Revolution in Financial Services

Simply put, mobile banking is a financial technology based on mobile phones. It allows us to make transactions merely using a mobile app or a code. Today, through mobile banking, people can do almost everything. In particular, you can send money, make payments, transfer to bank accounts, pay bills, take loans, bring remittances and more.

Before mobile banking, most of the population in the third world and developing countries did not have access to traditional banks. Thus, people had to conduct their daily transactions in cash. Thanks to mobile banking, now almost everyone has at least a form of financial account. And they make digital transactions with their mobile phones for everyday life.

Due to its convenient and hassle-free banking options, the industry has been growing rapidly since its inception. I hope the latter is going to be more convincing.

According to Allied Market Research;

“The global mobile banking market was valued at $715.3 million in 2018 and is expected to reach $1,824.7 million by 2026, registering a CAGR of 12.2% from 2019 to 2026.”      

In addition, every business around the world is integrating payment options through mobile banking. And this is no less than a revolution in financial services.

Integrate Mobile Banking with Microfinance

The microfinance industry has already adapted to MFI technology long ago. Though many still run their business manually, that number is low. However, the number of MFIs with a good software solution integrated with mobile banking is very few.

With Microfinance, unprivileged people got access to financial services. Similarly, with Mobile banking, billions of people have access to the digital economy. Moreover, most of the people around love the fact that they can make transactions remotely.

But when it comes to MFIs, they are not yet synced with the digital payment system. Wouldn’t it be better if your organization stepped forward and provided mobile repayment options for clients?

Of course, it would. In fact, it would make your clients more dedicated to your services because, no matter what, people love privacy. But when your employee visits your clients for the loan repayment, the client feels a little irritated.

However, a mobile repayment system could help your organization in this particular situation. With this, clients can send you money anytime from anywhere. Besides, when you have a mobile-repayment system, your clients don’t have the option to give excuses.

In detail, let’s learn why you should integrate your MFI with mobile repayment.

How Mobile Repayments Boost MFIs

There are several ways Mobile Repayment boosts MFIs. Let’s not waste any time and move directly to the points.

No More Physical Collection

What do your field officers do for collection? They must be visiting clients physically to collect the repayments for sure. But don’t you think you are still holding on to the past?

Yes, you are! However, you are not alone; most MFIs worldwide are still taking repayments visiting home to home. Though many have software for smart collection sheets, repayment is still old fashioned.

Mobile banking started more than a decade ago, so MFIs should have been diversified more by now. In particular, they should have integrated mobile repayments for further automation.

Don’t worry; you still have time. And now is the time you adapt to mobile repayment. No more physical collection; just let the clients send you money through mobile banking.  

Increases Repayments

MFIs around the world still struggle to increase repayments. And this is one of the reasons many MFIs fail to sustain in the market. It is a problem that affects MFIs in many ways, including delayed loan disbursement, loan repayment (organization’s own loans), company reputation and more. Therefore, many try to find out solutions.   

Have you ever thought about increasing your MFIs repayment? For sure, you have applied a few methods to do so. But if you couldn’t, your method is not compatible with time. So, it is time to think about the modernization of the repayment system.

But you must be thinking about how mobile repayments boost MFIs with increased repayments?

It actually does increase repayments because it makes the repayments very flexible. Borrowers can make payments on their own from anywhere at any time. On the other hand, it keeps clients from giving excuses like, I was not home, or I am at work.

Customer Satisfaction

Many borrowers often complain about how field officers visit their homes during busy times. It is quite normal that if you visit during weekdays while they are at work, you often come back empty-handed. And in this situation, if you call them, your borrower will feel disappointed.

Now think about mobile re-repayment. Integrating mobile repayment means your loan officer does not need to visit anyone. Rather, your borrower can send you the repayment whenever they want within the deadline.

On the other hand, this repayment method can save your borrower’s integrity. In today’s world, people value their privacy while taking any service. Therefore, collaborating your MFI software with mobile banking is one of the best things you can do right now. It will increase customer satisfaction which will lead to a better company reputation.

Reduce Field Effort

In the Microfinance business, field officers or loan officers put a lot of effort. Until the loan disbursement, everything is easy for the filed officers because the real effort comes from the borrowers. But when it is time to pay back, field officers always run behind borrowers for weekly repayments.

On the other hand, due to the branch manager’s pressure, field officers often wait till night to get the repayment. Sometimes, they need to find the borrowers at work or wait at home until they come back. In short, there is a huge field effort required for repayments. Don’t you feel this is too much to handle?

Mobile repayment can help you with this kind of field effort. In the current situation, your field officer is responsible for getting the repayment no matter what. But when you integrate the mobile repayment option, your borrowers become responsible. As a result, you can reduce the field effort and increase the repayment rates. Therefore, we can easily say that mobile repayments boost your MFI.  

Automated Repayment entry

Undoubtedly, the paperless collection process has made your operation mostly automated, but not 100%. You still need to enter the repayment data while collecting manually.

But you can automate your MFI almost 100% with mobile repayment. In this system, your software is integrated with a payment gateway. And when someone makes payments from mobile banking, your system automatically updates the repayment data.

So, what do you think? Which one is better, Mobile repayment or physical collection?  

For sure, mobile repayments! This is a revolution in the MFI operation. And if you want a sustainable change, you must now integrate the mobile repayments option.

Prevents Fraud

Prevention is better than cure. Then it is your time to prevent any repayment fraud. Whether it is a borrower or your employee, any kind of fraud will financially damage your MFI. Besides, it will damage your company’s reputation.

You might be thinking, what kind of fraud?

Well, many borrowers often complain that they made the payment, but they don’t see it in the book. Either the borrower is wrong, or the field officer did not update the book.

But when it comes to mobile repayment, there is no way anyone can make such a claim. Borrowers can see their digital payment history right from the mobile banking app. And we believe this is a way mobile repayment boosts your MFI significantly.

Operational Cost Cut

Don’t you agree that an operational cost cut boosts your MFI? Of course, a reduced operating cost means more profit.

One of the major challenges of microfinance operations is a higher operation cost. From reaching a customer to repayments, a microfinance organization spends a significant amount of money. In addition, MFIs have a higher risk than any traditional banks.

Now think, what costs your MFI the most? Obviously, the collection process! Your employees visit borrowers every week to collect the money. And it runs for six months to 12 months. Even sometimes more.

Meanwhile, your employee also spends behind transportation, stationery and lunch. Altogether, the operational cost is huge.

Here comes the mobile repayment method. You don’t need an employee to collect the money; your borrowers send you through mobile banking. Moreover, you don’t need to enter the data in the system; it automatically gets updated. Therefore, mobile repayment boosts your MFI by saving from operational costs significantly.   

In short, mobile repayment is a revolution in the Microfinance industry. And those who are taking advantage already know how mobile repayment boosts MFIs. In particular, it increases repayment rates and customer satisfaction, reduces field efforts and cuts operational costs.