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ArthFinance – Striving For Prosperity Everywhere

  • A-64, Residential Colony Sitapura Industrial Area,
  • Tonk Road Jaipur-302022
  • arth@arthfinance.com
  • 0141-2988234
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Impact & Adaptation Of Digitization In Microfinance Industry

Microfinance industries across the globe have come a long way. These institutions work as an incentive for small scale industries, small entrepreneurs, and other low-income clients. They provide financial services like small money loans, insurance, money transfers, etc. to that stratum of society that is unable to access or afford them. In Rajasthan, MP, etc., Arth microfinance has been playing a major role in developing and abridging the gap that exists between the poor and the rich. The advancement in the microfinance industry, mostly due to the digitization process, has made it more effective and efficient in its functioning.lamcorper mattis, pulvinar dapibus leo.

ADAPTATION OF DIGITIZATION IN MICROFINANCE INDUSTRY

The digital transformation of industries is inevitable as the technological advancement has spread its tentacles to every nook and corner in the commercial world, and the microfinance industry is no exception. The adaptation of digitization in microfinance institutions has not been a very fast and smooth process. The application of new emerging technology along with the task of training human capital to utilize and get accustomed to this advancing change has been the most challenging aspect of this adaptation.  Let us take a look at different steps towards the adaptation of digitization in the microfinance industry one by one: 

DIGITAL RECORD KEEPING:   The most common step towards digitization in the microfinance industry is building a digital data library of all the clients, customers, analysis reports of loans, outstanding dues, etc. The transformation from physical to digital records have proved to be very beneficial. By linking identity proofs like Aadhar Card in India to customer’s accounts, microfinance companies and industry have been satisfying their needs and concerns for data keeping and security.

DIGITIZE PAYMENTS AND LOANS INTERNALLY: Other than that, microfinance institutions are trying to digitize the internal system. Although the groundwork which focuses on connecting with the real beneficiaries remains unorganized and manual, our own internal processing has become digital, which saves time and manpower.

The challenge still remains in the rural part, where very few people have access to smartphones and digital knowledge, and most proceedings have to go slow and manual.

DIGITIZING CUSTOMER MANAGEMENT SYSTEM: Digitization has also boosted the process of customer management. Staff can now publicize new schemes and products easily through digital platforms. Switching from physical to digital means of qualitative research for customer behavior and their demands and grievances is also a very common step in the process of digitization. 

IMPACT OF DIGITIZATION IN MICROFINANCE INDUSTRY
  1. Effective and efficient functioning: The digitization of microfinance companies has made them more efficient and effective. Recordkeeping, sending payment reminders, updating of credit scores, etc. has never been this easy and less time-consuming.
  2. Better customer management: Now, through digital means like online surveys, calls, and qualitative research on the credit history and purchases of a customer, customer management and interaction has improved. SHGs are doing well in establishing their trust through timely interest submission.
  3. Immunity to external changes: By switching to digital modes of payments and disbursements, microfinance institutions have become more stable as they are now more immune to sudden market changes and other financial conditions like the recent demonetization scheme propounded by the Government of India.
  4. Reduced cost and time: Digitization of microfinance institutions has helped in reducing costs of storing physical data; it has reduced the time for collecting and processing loan repayments; it has also reduced the burden of staff in holding personal meets with a client for payment reminders etc. 
  5. Increased security: One benefit of digitalization comes in the form of a safe and secure database stored in computers, which can be accessed by the microfinance team from anywhere. The books and pages which are prone to damage have been replaced by ever-accessible safe storage servers.
  6. Customer education and staff training: The digitization process has also increased the burden on the microfinance industry to educate their customers as well as their staff to get accustomed to the new digital processes. Clients have been taking much time in putting their faith and keeping up with the steps of making payments, and giving their data, etc. while staff and employees, on the other hand, have very much overcome the hurdles of technological advancement.    
  7. Step towards more development: Digitization approach is the most basic step towards development today. The more you digitize, the more developed the industry becomes. So, the digitization of microfinance industries has pushed it towards the doorway to meet the global level and standards of financing services. 

The process of digitization in microfinance services has brought a transformational and phenomenal change. The prospects of digitization have been more on the positive side as the basic human-centered approach followed by the microfinance industry has not been compromised. Moreover, these institutions have been taking measures to educate clients and customers to get familiar with technological changes. It is very certain that as the world moves towards a more advanced digital revolution, the microfinance industry will have to make changes accordingly. Otherwise, the threat to its relevancy in the present economy and business market may lead to its degenerative perish.