Microfinance has a significant role in bridging the gap between the formal financial institutions and the rural poor. Microfinance Software provides smart banking functionalities and enables you to focus on other areas of business. The Microfinance Institutions’ (MFIs) access to financial resources coupled with a huge selection of unbanked populations with no prior credit history makes microfinance a very lucrative sector.
Over the past few years, microfinance software institutions have shown impressive growth and have been instrumental in furthering the cause of financial inclusion. These institutions are the only factor equipped to resolve the existing cash crunch among low-income individuals situated in the suburban and rural areas.
MFIs offer financial services and small business loans within communities which have limited resources and very few avenues for economic growth. By empowering the people within these communities with their microloan products, MFIs help these small businesses develop using their existing talent and skill sets.
Despite the incremental growth of MFIs, a lot remains to be achieved in terms of their operational efficiency. The cost of outreach would have a negative impact on the business model, making it dangerously unprofitable if the processes involved are completely manual.
The lack of scalability often makes smaller microfinance systems end up in a struggle to preserve their profitability and performance amidst cutting edge competition. The intrusive involvement of government organisations to promote SHG linkage programs through banks has placed MFIs under considerable duress.
Changing dynamics among unbanked borrowers and the lack of technical support diminishes the overall operational efficiency of these institutions. Existing geographic factors make it very difficult for the MFIs to communicate with their prospective clients who are located in the far-flung areas. This creates problems in sustainability and expansion for an organisation.
Also, supporting a broad range of lending activities amidst this chaos becomes costly and extremely difficult. To compete with large-scale commercial banks, MFIs need world-class financial software within their substantial IT budgets. An integrated banking software solution like CloudBankin is ideal for both group and individual microfinance lending.