Thanks for the article, Elisabeth. Enlightening to the end.
What's more, I believe that "to take advantage of what fintechs have to offer", the partnership between MFIs and fintechs should be symbiotic. Essentially, fintechs have to recognize that they are enablers; their digital platform must complement and enhance, via digital transformation, the DNA of microfinance - providing sustainable non-discriminatory access to (micro)credit, products and services with the goal of elevating households above the poverty threshold.
If digital transformation will push MFIs away from their mission (not vision) trajectory, lead to increased lending and default rates (that could potentially exclude poor clients), and create societal disadvantages (e.g. risk of unemployment for youth/millenials who are the primary targets of fintechs), then the strategy for its implementation for MFIs has to be revised. The shift to digital is usually seen as a plus for investors and software developers who profit each time their platform is accessed.
The right balance of tech and touch is a blurry line that each MFI willing to undergo digital transformation must elucidate internally and communicate clearly to all stakeholders (employees especially client-facing staff, the board and investors). Otherwise, traditional microfinance will morph into just another mainstream banking industry outlet, as witnessed with Equity Bank in Kenya.
Most MFIs weigh the pros and cons of adopting digital payment solutions and find it difficult to undergo digital transformation. For one, apart from the costs associated with setting up, it introduces individualistic tendencies in MF niche clients (noticeable in individual lending) and gradually erodes social connectivity (for group lending that makes up the greater part of the portfolio of most MFIs) which is regarded as the soul of microfinance. Fintechs need to realize this and design suitable features that introduce digital group guarantee models that preserve and quite possibly, may assist the deployment of digital credit for group-based lending.
M-Kopa's work is revolutionary and I admire the use of digital platforms to finance asset acquisition designed for healthy living, safer environments and energy savings. Driving and demonstrating responsible social impact digitally is key for fintechs to thrive. The landscape may be changing must the foundation must be protected.
Thanks for the article, Elisabeth. Enlightening to the end.
What's more, I believe that "to take advantage of what fintechs have to offer", the partnership between MFIs and fintechs should be symbiotic. Essentially, fintechs have to recognize that they are enablers; their digital platform must complement and enhance, via digital transformation, the DNA of microfinance - providing sustainable non-discriminatory access to (micro)credit, products and services with the goal of elevating households above the poverty threshold.
If digital transformation will push MFIs away from their mission (not vision) trajectory, lead to increased lending and default rates (that could potentially exclude poor clients), and create societal disadvantages (e.g. risk of unemployment for youth/millenials who are the primary targets of fintechs), then the strategy for its implementation for MFIs has to be revised. The shift to digital is usually seen as a plus for investors and software developers who profit each time their platform is accessed.
The right balance of tech and touch is a blurry line that each MFI willing to undergo digital transformation must elucidate internally and communicate clearly to all stakeholders (employees especially client-facing staff, the board and investors). Otherwise, traditional microfinance will morph into just another mainstream banking industry outlet, as witnessed with Equity Bank in Kenya.
Most MFIs weigh the pros and cons of adopting digital payment solutions and find it difficult to undergo digital transformation. For one, apart from the costs associated with setting up, it introduces individualistic tendencies in MF niche clients (noticeable in individual lending) and gradually erodes social connectivity (for group lending that makes up the greater part of the portfolio of most MFIs) which is regarded as the soul of microfinance. Fintechs need to realize this and design suitable features that introduce digital group guarantee models that preserve and quite possibly, may assist the deployment of digital credit for group-based lending.
M-Kopa's work is revolutionary and I admire the use of digital platforms to finance asset acquisition designed for healthy living, safer environments and energy savings. Driving and demonstrating responsible social impact digitally is key for fintechs to thrive. The landscape may be changing must the foundation must be protected.