Tech evolution has saved so much time, money, and human resource by automating things and bringing in digitalization for credits and payments.
The terms are synonyms for savings and banks & lending institutions around the world are enjoying the transformation. Now they can do better in the continued process of lending that earlier was human-intensive, but now can be automated.
The need for smaller credits, and their instant nature of approvals has attracted the attention and adoption from borrowers who may never opt for larger loans – for lack of payback capacity or creditworthiness. This is where micro-lending takes the centre stage and makes MFIs, NBFCs or other alternative lending platforms more significant.
Micro-Lending and the Need for Automation
Despite the less intricate processes or low loan amounts, the need for credit assessment remains the same even for micro-lenders. Micro-lending continues to be a mammoth task involving the recording and relay of several data points for informed decisions and real-time disbursements.
Digitalization and Automation can help encourage borrowers to self-onboard the mobile apps allowing data collection.Digital channels help boost the customer engagement and retention. Borrowing can be evidently made more rewarding and profitable.
Some Evident Advantages of Micro-finance Digitalization
The customer gets access to loans with less questions asked and fulfils a need. Micro-finance at least appears private to many borrowers even though they are aware their online behaviour is being tracked. They aren’t answerable as to why they need that small loan.
Operational Risk Coverage:
There is no cash-in-transit risk. All the payback happens effectively through digital channels making it easy for lenders to record and receive.
Since the tracking and transactions happen online, the customer feels well protected and covered in terms of history and repayments.
Boon to Small Businesses:
The micro-lending accessibility has empowered several small businesses to transparently and confidently access loans. They do not need to show a huge track record or bank balance to prove their creditworthiness.
Cross Industry Collaborations:
Digitalization apparently boosts inter dependability and collaborations between industries such as banks and telecom for communications.
The Boon to Relationship Banking with Digitalization of Micro-lending
The digitalization of MFIs allows data collection to an optimal level – allowing analytics and personalization to occur at a later stage. Customer personalization and recommendations can effectively boost the borrower-lender relationship and trust.
Chatbots can also play a pivotal role here in keeping the customers engaged and entertained. The borrowers in micro-lending are often those who do not have access to mainstream or larger loans. Given that, micro-lending also opens avenues for these small borrowers to aspire high and fulfil their dreams.
The fact that it all becomes automated and digitalized- a mobile user can actively opt for lending and sit back without the need to manually track and record the paybacks.
Digitalization Can Protect MFIs from Risk of Being Kicked Out by Fintechs
An AI-powered engine for micro-lending can help MFIs remain as agile and cognizant in lending as larger fintechs. They can collect data, personalize experiences and deliver a better borrowing experience to their customers.