Africa is one of the fastest-growing microfinance markets in the world, but sadly, it cannot reach its potential because of the existing challenges. Most microfinance organizations even fail to profit from the African market. However, online core banking solutions could help African MFIs to boost their profits, which we will explain to you in this blog.
Africa is a vast market for MFIs; however, it is the most scattered. Most of the potential borrowers live in rural areas. And the lack of awareness, higher operation costs, and risk factors make that market even more difficult to reach. Do you think this is why you should stay away from your potential clients?
You should not; rather, you must find a way to reach that untapped market. And to do that, you can adapt to an online core banking solution with advanced disbursement and repayment methods.
You might be wondering how online core banking solutions will rescue your microfinance and save the African market. We are coming to that! But let’s learn more about the challenges that African MFIs face.
Challenges of Microfinance Operation in Africa
It is not easy to operate microfinance in the African region. In fact, it is not even easy in any part of the world. Every place has its own challenges. But let’s see why African microfinance institutions fail to operate.
Among the key challenges of microfinance operations, African MFIs are still running their operation manually. And it makes their operation more difficult.
Besides, the outreach cost is higher in Africa than in any other region. We have already said that Africa is a scattered market, and potential clients live in remote and rural places. Reaching them a few times is fine, but if you want to reach them every week, it will cost you money. And it is what every MFI do. So, operation cost goes high.
Loan fraud is another reason many MFIs cannot make their desired profit. And we hope your microfinance has also experienced that. It is a very common problem in the African market, and MFIs regularly deal with it.
Among these, there are many other challenges that African MFIs have to deal with. Don’t worry; Africa is not the only region suffering from this issue. It is a global problem for the entire industry. But we must deal with this, and here comes online Core Banking Solutions.
Don’t frown; we are telling the truth. And to solve the problem, Africa needs online core banking solutions. Let’s get to this in detail.
Why do African MFIs need an Online Core Banking Solution?
Online core banking solution is amazing, and it is what African MFIs need in particular. For a long time, desktop solutions have been helping the MFI industry to bring speed to operation. But it seems like that time is over, and if you plan to expand and see the real result, online CBS has no alternative.
There are countless benefits of online core banking solutions, but today we will discuss a few of the most important. And I hope you will understand why African MFIs need it so badly.
Helps you Remotely Operate your MFI
Communication is everything, and to stay ahead of the game; you need to adapt to how the world communicates.
How does the world communicate today?
Well, most are trying to transform their business with digital means. So, you should also do that. Since your market is scattered and most potential borrowers live in remote areas, you must connect them remotely.
A better online core banking solution can help you connect your borrowers to you. Besides, it will connect your branch with your field officers. A hybrid solution can even function without an internet connection. So, you are still connected when running your operation in a remote area without an internet connection.
Real-time Borrower and Market Evaluation
Do you want a fraud borrower on board? Do you want to lend money to a community with a bad reputation?
I guess you would never want to land your business in such trouble.
But the question is, how do you know such sensitive information? Well, a good online core banking solution can help you with that.
You might be thinking, is it even possible? Oh, yea!
Depending on your historical data, you evaluate your borrowers before approving their loans. Besides, a business intelligence tool integrated into a core banking solution might help you with market analysis. And all of this can happen in real-time.
Can you imagine how this technology can change your microfinance game forever? In Asia and other markets, MFIs are already using such tools and making progress. And it is for sure that this cutting-edge technology will benefit African MFIs the most.
Reduces Outreach and Operational cost
One of the top challenges that African microfinance organizations face is higher outreach and operational cost. And you know that cost reduction is crucial for your organization’s survival.
But how do you do it?
Well, let’s see how does your MFI spend money?
Firstly, microfinance requires many stationaries to run their operation manually – papers, pens, ledger books, collection sheets, printers and whatnot. No matter how small or big your MFI is, it costs a lot of money.
Secondly, you need a big workforce to run the company. The workforce includes accountants, managers, and, most importantly, field officers. Salary is not the only expense you are paying; you are also paying a huge convince bill. But have you ever thought if you could reduce the cost?
You could significantly reduce the cost with an online core banking solution. And it is what African MFIs need right now.
With online CBS, you don’t need a collection sheet because the online digital collection sheet can make you paperless. So, you can fully cut the stationary cost.
When you don’t need to manage ledger books, you don’t need a big team for accounting. Besides, an online core banking solution can integrate mobile banking, which will help you receive repayments. Agent banking can also help in this case. So, you can keep your team small with a CBS and save that money. AFS is a great example, and it is helping African MFIs to reach their objectives.
Helps you Retain Borrowers
Borrower retention is much more important than you think. The more borrowers you can retain, the more business you have. But it is not something that comes without effort.
So, what do you need? You need to satisfy your customer.
To satisfy your customers, ensure you provide them with everything they need. From communication to repayment, make their customer journey smooth, flawless and convenient.
According to several reports and user feedback, an online core banking solution can help you increase customer satisfaction.
An online CBS integrated with agent banking or mobile banking also improves repayment rates. So, we highly recommend that you adapt to a good online core banking solution as soon as possible to improve customer retention.
To recap, African MFIs need an online core banking solution to boost their business because it helps them do everything right. I hope you find this blog useful and that it helps you understand why your MFI need an online CBS.