How MFI, NBFC, and Banks can Operate at 10x Faster Speed and Generate More Profits

How MFI, NBFC, and Banks can Operate at 10x Faster Speed and Generate More Profits

March 24, 2023
12:09 pm
banking industry, financial services, MFI, payments

By using digitized technologies, MFI companies, banks, and non-banking financial companies have started to make more money. A company must adopt the right technologies to grow faster in this situation. At the same time, such businesses can reduce their operational costs to a large extent by implementing the technologies.

People have become well-accustomed to digitalized financial transactions nowadays. Therefore, the mobile banking service brings more customer satisfaction. On the other hand, digital processing of various financial services saves people time. Banks and other financial institutions can reduce loan processing by simplifying KYC verification and implementing the latest technologies. In the following section, you can find a guide on how financial institutions can operate faster and generate higher revenue.

Advanced Self-Service Capability

An advanced self-service capability will help small-scale financial companies to a large extent. The banks often hire third parties to deal with various jobs. For example, a third-party service provider is required for KYC verification. Technology can help banks and other financial institutions adopt self-service capabilities. The financial companies will perform multiple complex tasks without requiring any third-party intervention.

On the other hand, banks and other financial institutions must offer self-service facilities to customers. People want banking services without the hassle of a long verification process. Moreover, people also seek transparency in financial transactions. A digitized platform ensures transparency and provides a self-service facility for customers. Financial institutions can render more satisfactory services to customers with minimal interactions.

API integration for Task Management

A financial organization may have to deal with multiple non-skilled and repetitive tasks. Hiring employees to manage such tasks increases the organization’s operational costs. At the same time, the efficiency of humans is limited. You can get an output at a particular level from a human employee.

The APIs can manage various repetitive tasks with precision and achieve higher efficiency. Moreover, API integration helps financial organizations reduce their dependence on human workers. Many tasks will be automated, which eventually reduces operational costs. As a result, financial organizations can become more profit-making institutions.

Instant Payment Processing Networks

Payment processing is a concern for both small and large financial institutions. Imagine that you run a lending company or a MFI. People expect faster loan processing from such companies. However, quicker loan processing is not the easiest thing to achieve for financial institutions.

Developing a secure payment processing channel is essential. Conventional payment processing is time-consuming, and you can reduce the time by embracing electronic payment.

A digital payment process can happen instantly. However, it may take one to three days for MFIs in most cases.

Cloud Computing for Easy Data Access

Data is the most important thing for a business, and today’s financial institutions make decisions based on data. When you collect and understand data in the right way, it will help your financial institution make better decisions. Most banking and non-banking financial companies invest in developing a powerful cloud infrastructure.

Cloud infrastructure provides easy data access to companies. Financial companies can maintain company portfolios and customer data on cloud storage. Data stored in the cloud is accessible anytime, and KYC verification is expedited. Nevertheless, financial institutions often check the data of loyal customers to provide better services. The overall financial verification will happen seamlessly with the cloud data storage.

Biometric Technology for a Faster Identity Verification

The financial industry has been developed on the foundation of trust. Developing trust is essential to improving customer satisfaction. At the same time, businesses should build a trustworthy brand by adapting to standard security practices.

Biometric technology has become a key technology in such a scenario. The technology assures seamless security in the verification process. Moreover, it brings quicker identity verification for financial institutions. As a result, loan requests have been processed faster due to digital identity verification.

Chatbots for an Automated Customer Support

Besides selling a product, financial organizations must render seamless after-sales service. The customers may have multiple queries regarding a product. Nevertheless, they may inquire about obtaining certain information from a financial company. In such cases, small financial institutions and non-banking companies need help managing a separate customer support department.

Instead of recruiting humans for customer support, implementing chatbots can be more cost-effective and productive. The chatbots deliver all necessary information to the customers without requiring human intervention. With the advent of time, chatbots will become more efficient in providing information to customers or clients.

Process Automation through AI and ML

Intelligent Automation is another key technology for MFI and non-banking financial organizations. The banking sector has already implemented automation and started reaping the benefits. Nowadays, banks can manage multiple tasks without human intervention. Small-scale financial companies should also focus on automation to reduce operational costs.

Artificial intelligence can make an organization less dependent on human resources. Various non-skilled tasks will be performed quickly and accurately. At the same time, machine learning can slowly take over a skilled job while making it easier to manage.

Facilitating Micro Services

Traditionally, the banking sector works with a monolithic approach, which refers to a uniform approach for everyone. But financial requirements vary from one person to another. A lender should check the creditworthiness of a person. Every person has a unique credit behavior, and financial companies must understand their clients with precision.

Understanding the clients helps financial institutions provide various MFI services.

Instead of adopting one approach for everyone, financial companies can offer more customized products for their clients. Introducing such products will enhance the credibility of financial institutions to a large extent.

Internet of Things for Faster performance

Financial companies must embrace the Internet of Things (IoT) to improve performance. The technology helps with faster payment processing. Moreover, financial institutions can introduce smart notifications for their customers. The Internet of Things can also help in developing and managing digital wallets.

Advanced Analytics through Big Data

Financial organizations should adapt to advanced analytics for better decision-making. Making the right decisions is the key to running a business seamlessly. A data-driven approach to decision-making can improve decision accuracy. Moreover, business managers can make critical decisions with more conviction.

Conclusion

So, these are the technologies that MFI, non-banking, and banking institutions can adopt to improve productivity. Technology helps financial companies render better services to their clients. Moreover, adapting to the latest technologies improves organizations’ security of sensitive data. As a result, NBFCs and banks can reduce operational costs and improve revenue. The overall profitability of such organizations increases drastically.

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How Does Cash Collection Work for Microfinance Institutions (MFI)?

How Does Cash Collection Work for Microfinance Institutions (MFI)?

July 20, 2022
11:42 am
cash collection, Cash settlements, digitization, loan repayments, MFI

Post-pandemic banks and non-bank lenders active in microfinance have begun implementing hybrid collection strategies from borrowers. To minimize process disturbances, they are attempting to combine physical and digital collection modalities. As a result, cash collections work differently for MFIs depending on the type of loan undertaken.

Due to the comfort level of the primary borrower base in making cash payments, repayments in the microfinance sector have historically been made in group meetings.

Microfinance has played a significant role in India’s financial status. By offering microcredit, MFIs (Microfinance Institutions) significantly contribute to promoting inclusive growth for low-and middle-income populations without access to formal finance.

Loan collection needs to be considered for any financial institution. They must work per the guidelines, ensuring the debtor faces no problems.

What are microfinance and the types of institutions?

Financial firms, and microfinance institutions (MFIs), offer small loans to those without access to banking services. The term “small loans” has different meanings in different nations. All loans in India that are less than Rs. 1 lakh can be categorized as microloans. There are three different types of microfinance institutions offering microfinance:

What are the goals of microfinance institutions?

In recent years, microfinance institutions have grown in popularity and are increasingly viewed as useful tools for reducing poverty. Most MFIs have excellent track records and are profitable since they have effective loan repayment methods, while others are pretty self-sufficient. The following are the main objectives of microfinance institutions:

Become a financial organization that supports the creation of sustainable communities.
Aid in the distribution of resources that assist the socially disadvantaged. In this sense, women are given special attention because they have successfully started businesses that generate money.
Consider the possibilities for accelerating the end of poverty.
Create possibilities for the poor to work for themselves.
Empowering rural residents by teaching them basic skills would enable them to launch income-generating ventures.

Let us check the different ways of improving cash collections in microfinance institutions:

Microcredit

One of the most effective methods for reducing poverty is microfinance, which offers tiny financial products. It also includes helping the impoverished in rural, semi-urban, and metropolitan areas to aid in their upliftment and improve their standard of living. Microcredit has been characterized as the provision of thrift, credit, and other financial services and goods in a minimal quantity. The RBI’s NBFC-MFI license is what allows MFIs to operate in India.

Collections

Individual and group loans with set repayment terms are frequently available from microfinance institutions. Depending on the plan and the institutions, the loan repayments could be weekly, monthly, or biweekly. A compelling collection strategy keeps MFIs’ goodwill with the borrowers while enabling them to convert receivables into liquid assets as rapidly as possible. In addition, microfinance institutions put down different cash collection options, helping debtors to repay easily

Digital Penetration

Market experts believe that the best way to help MFIs with collections is by teaching borrowers about making on-time payments and giving them the option to do it digitally. Thanks to the widespread use of smartphones and the reach of the mobile internet in India, every user can easily access digital apps. There are multiple apps available for loan repayment and receiving.

One could compare the repayment of the loan to paying any utility bill (such as an electricity bill or a mobile recharge bill), most of which have already gone digital thanks to India’s interoperable bill payment network. In addition, MFIs can help users know and learn which app is the best.

Loan Collection Using Apps

Using apps for loan collection is the best way. Some schemes are run by NPCI, following the guidelines set by the financial authorities. It connects all payment service providers to utility providers for easy payment options. Service Providers like MIMOIQ also provide the best platform that helps microfinance institutes with cash collection. For instance, MIMOIQ includes all the utility bill payment services available through online “agents” like Google Pay, BHIM UPI, and Amazon Pay.

Loan repayments by these microfinance institutions can be simplified using UPI payment apps such as PhonePe and Google Pay. The client pays the outstanding loan balance by displaying their customer identification number. The process acts as a self-serve model, and to complete the transaction, the borrower would need to be provided with contextual knowledge via SMS and WhatsApp.

Using Trusted Cash Collection Service

Along with UPI, companies can also use reliable cash collection services. As mentioned, MIMOIQ is the leading cash collection service. You may increase your cash flow by using MIMO Cash Collection Service to handle your cash management requirements and protect your cash deposits. MIMO provides a user-friendly solution that meets all your cash-related needs, from cash deposition to e-money transfer. In addition, the risk of improper cash handling and stealing is reduced because qualified specialists manage the whole collection and deposit procedure.

Financial Literacy on Repayments

Regarding cash collections or repayments, it is essential to have literacy on repayments. It is the responsibility of MFIs to inform borrowers of the risks of postponing payments through a variety of channels and to encourage them to make on-time payments whenever possible.

Along with this information, it is essential to provide simple DIY payment instructions for using UPI apps to make loan payments. Most households utilize the three most popular communication channels: SMS, WhatsApp, and IVR.

Different Groups by Microfinance Institutions for Loan Collections

The Joint Liability Group (JLG)

This informal club, typically of 4–10 people, looks for loans with mutual guarantees. Usually, the loans are used for farming or closely related activities. This group of borrowers includes tenants, farmers, and rural employees. In this JLG, everyone shares equal responsibility for prompt debt payback.

Self-Help Centers (SHG)

This self-help group consists of people from comparable socioeconomic backgrounds. These small business owners band together for a brief time and establish a shared fund for their operational requirements. These organizations fall under the category of non-profits. In addition, the group handles the collection of debt. In this type of cooperative loan, collateral is not necessary.

Bank Grameen Model

Prof. Muhammad Yunus, a Nobel Prize winner, developed the Grameen Model in Bangladesh during the 1970s. In India, Regional Rural Banks (RRBs) were founded. The complete growth of the rural economy is the main goal of this system.

Rural Cooperatives

In India, rural cooperatives were created after the country gained freedom. Poor people’s resources were combined, and this fund was used to provide financial services. Although this system had intricate monitoring protocols, it exclusively benefited creditworthy customers in rural India.

Being Digitized with Professional Service

A lot of MFIs still maintain records on paper. Digitizing all data is the best way to overcome the problem of cash collections. MFIs should prioritize investing in data management systems so they can begin collecting data in the future rather than getting bogged down with digitizing outdated data. One should prioritize figuring out how to organize data to be valuable, effectively, and reliably collected online. The old data being digitized is a plus. MIMOIQ is the ideal platform MFIs can use for loan repayment.