How do technologies promote the development of financial inclusion within an MFI?

Financial Inclusion refers to the process by which customers, groups and businesses can access the basic financial services (cash deposits and withdrawals, money transfers, tontines, credits including disbursements and repayments, insurance, …) provided by the formal financial sector. To enable access and use of these basic financial services, it must be affordable for all, and the emergence of financially and institutionally sustainable microfinance institutions is required to meet the needs of the community. their customers and the general public. New developing technologies must be applied in a sustainable manner to make financial services accessible to the largest possible number of poor clients in urban and rural areas.

Some existing technology solutions and the benefits they offer to MFIs and clients

The use of technology by microfinance institutions greatly enhances organizational effectiveness. Several solutions already exist and offer enough benefits to IMFS and their customers. We can cite some of them:

  • Biometric solutions for registering, storing and verifying documents: Companies such as Jumio, Mitek Systems, and Abbyy, all providers specializing in optical character recognition, document capture and processing, have developed global mobile imaging and dynamic data capture solutions. These solutions enable a mobile agent’s or merchant’s smartphones and webcams to capture the image of IDs and credit cards for verification and payment. They have recently developed the “Face Match” identity verification tools, a feature that matches ID photos to the face of the end user. We have also seen specialist providers such as Nuance, VoiceTrust, InAuth, and VoicePay having developed biometric fingerprint and voice recognition solutions to authenticate transactions and reduce fraud. All these solutions are intended to reduce the risk of fraud and increase the speed of services offered.
  • Taroworks: The Grameen Foundation’s App Lab Uganda in partnership with Salesforce, an application developer, has developed a field team management tool, which has been deployed in Uganda, and has helped accelerate the development process for recording of mobile money transactions. The capabilities of the tool include monitoring and evaluation, portfolio monitoring (including risk portfolios), transactions and results, and training.
  • Mobile Phone: Beyond Branches in Nigeria recently began offering mobile agent services to financial institution customers through an attractive business model. The start-up identifies and trains retailers to become agents equipped with a mobile device (laptop, tablet) with internet access. Once the quality control tests are successful, agents have the right to offer Beyond Branches brand services that include deposit and cash withdrawals from accounts and bill payment transactions;
  • Spotcash (mobile phone): Tangazoletu, a software company in Kenya, has developed an application called Spotcash that allows clients of savings and credit cooperatives (COOPEC) and MFIs to perform cash deposit and withdrawal transactions to their savings account by sending an SMS to the financial institution. The money is then transferred to or from the customer’s mobile money account.
  • SmartMoney (mobile phone): A solution developed in 2010 by an African-American team of experts in finance, technology and development. It aims to reduce poverty and improve living conditions by providing secure, accessible and affordable financial services to remote rural communities in developing countries. Indeed, SmartMoney is a new form of electronic money “mobile money” that is stored and exchanged using a mobile phone. It aims to reduce poverty and violence and to improve living conditions by replacing cash with mobile money.
  • Electronic Payment Terminal (TPE): Disbursement and repayment transactions are made regardless of the geographic location of the transaction or the customer. All the loan officers or animators who are in direct contact with the beneficiaries or customers have an Electronic Payment Terminal (EPT) or a tablet connected to a central server of the institution. The main advantage is that payment “kiting” is prevented within the same institution or network. Because the database is centralized, all connected agencies can identify and track multiple or over-indebted customers.
  • Mobile phone for the management of unpaid bills: The management of unpaid bills is done by automating due date reminders and by implementing a mobile phone system of staff task management and escalated client intervention.

Some risks of using technological solutions that may be harmful to customers

Despite the many benefits that technologies bring to organizations and customers, there are risks that MFIs have to deal with on a daily basis. These can be serious risks and can be inter-related between the various technological solutions as they attempt to promote customer’s use of these new developing technologies in the financial sector, particularly at the microfinance level. We can cite:

  • Limited access to technology platforms or solutions due to lack of liquidity or cash at Mobile Agent or Retailer: Lack of liquidity or cash at the mobile agent or retailer level can affect the effectiveness of withdrawal operations. Thus, this insufficiency deprives the customers of access to their account and therefore reduces the number of transactions that can be performed by the mobile agent. As an illustration, according to the ANA surveys, the lack of liquidity in Tanzania leads to the denial of an average of five transactions per agent per day, which equals 14% of daily transactions. In Uganda, the refusal rate of transactions per agent per day is 10%.
  • Lack of transparency of fees and conditions of service: Lack of transparency leaves consumers without a full understanding of the prices, terms, and conditions of the financial services they use. This can make them reluctant to always use electronic means of payment and thus prevent new customers from joining. The lack of transparency also leads to price fraud, that is, unauthorized charges.
  • Fraud registration when data or personal information of customers are not well secured: Some employees can take advantage of their positions in the institution and access the private information of customers and then target their accounts. They can then make withdrawals on these accounts without the client’s knowledge.
  • Inability to carry out a transaction because of the internet connection or the mobile network: Internet connection can be problematic in developing countries, especially in rural areas. This influences the effectiveness and the quality of transactions and technological solutions.

Daniel A. Dassou
Inclusion [Social Ratings] SL