To respond to the need of providing banking services to the unbanked and low-income individuals, microfinance has come as a solution. The high-risk profile and lack of information, act as obstacles for low-income earners and small enterprises to get access to financing and financial products. FinTech comes with innovative solutions backed by revolutionising technology to give a new life and opportunity for the microfinance sector.
Micro Finance a new life for financing
The traditional banking financial products do not cater to the need of providing financial services to low-income individuals, people with limited resources and small enterprises. Micro Finance solutions allow this market segment to access reasonable small financing under ethical and legal lending practices. Providing such type of financial products on the market is deemed as high risk and associated with low-profit margins. Financial Technology is delivering innovative and revolutionizing microfinance solution at a lower cost with more reliability as well as extending access to larger market coverage.
Micro Finance solutions when backed by FInTech potentials
- Increase Efficiency: Flexibility to provide affordable and accessible products and services, plus the solutions are faster to tailor the provider service offering based on changes in consumer behaviour.
- Digitize Data: With access and platform with digitize data, Fintech tools such as machine learning can be used to access the profile of individuals and companies easier and with larger data source input.
- Alternative credit scoring: Alternative credit scoring methods are being tested in places like Guatemala, which may leverage psychometric or mobile data to accurately assess individuals’ creditworthiness with the goal of expanding financial inclusion.
- Lower cost: With financial technology solutions, the cost of borrowings can be reduced significantly as there is paperwork and Fintech offers more possibilities for work to be automated and be done faster which contributes to lower cost of services.