Microfinance Lending: Which Software do Lenders Really Need?

Published: Sep 22, 2021

Traditional paper-based microfinance lending is losing its market position giving way to software-based digital lending and online access to financial services. As the Research and Market report says, the market volume of digital lending in 2020 exceeded $311 billion and is expected to grow almost two-fold in the upcoming five years. All that becomes possible with highly functional software for lending.

US Digital Platform Market Size by Solution (USD Million)

Why Considering Lending Software for Microfinance? 

Digitization comes from the changing customer expectations and willingness to speed up the routine. Younger populations, such as Millennials and Gen Z borrowers tend to prefer digital lending and mobile-first banking. All that motivates lenders to invest in software for loan origination and loan management. The growing need for easy access to capital leads to the fact that microlending becomes one of the areas that go digital faster than many other lending types.

Microfinance lending is a promising financial tool, especially during the post-pandemic market recovery. It boosts financial stability, financial inclusion and gives protection from life’s setbacks.

A lot of financial service providers have already started with the digital transformation: it reduces costs, increases the reach of loan products, and facilitates data-powered decision-making.

Lending Business Needs and Operations To be Automated

Here are the business needs and operations that can be automated with the microfinance lending software by hesfintech.com:

  • Digital customer onboarding
  • Underwriting and scoring
  • Document management
  • Digital marketing activities
  • Statistics and reporting
  • Collections
  • and a lot more.

Microfinance businesses can develop their unique acceptance criteria for risk analysis, select the necessary payment integrations, compliant authentication procedures, and add personalization. Updated microlending software gives customers instant access to loans, calculations, and personal borrower’s portal.

An end-to-end microfinance lending solution will move the financial business to a new level and scale it up. Most of the routine tasks can be automated, while the abundance of data helps better understand borrowers’ needs and demonstrate the real-time performance of a financial services provider.

What You Need to Know to Get a Microfinance Lending Platform Developed

Develop your business plan. Document why your business needs to go digital and which benefits you expect. For example, the focus on cutting operational costs, changing the business model, use data analytics in credit scoring and automate it thus improving the loan portfolio, etc.

Decide about your legacy software. It may sound surprising, but outdated software (not even brick-and-mortar offices) makes most sufficient costs. Ineffective automation leads to improper credit decisions, lost income, higher costs of human resources. Building a brand new system with a full financial data migration or updating an existing one? It depends on many factors – the HES FinTech specialists can consult you on the best options for microfinance lending technology.

Choose software with a customer-centric approach in mind. Multichannel and omnichannel approaches to offering financial services, credit scoring based on alternative data, personalization, and seamless interaction with a financial service provider – are the key things to consider in 2021-2026. A trusted lending software vendor helps realize customer needs and develop a balanced end-to-end customer-centric digital solution.

Prioritize risk reduction. In addition to tech-based credit scoring, there are other ways to take operational risks under control. For example, traditional lending models in microlending are cash-intensive, which is followed by physical risks. Automatic disbursement to bank accounts, cards, or e-wallets helps mitigate risks. Top-notch loan management software can help with that as well.

Lending software for boosting partnerships and integrations. New collaborations can include new customer acquisition channels, improve marketing activities and provide more institutional-driven innovation. Having a digital platform, MFIs can get better exposure to any kind of partnership with other financial institutions and businesses.

Keep security in mind. Microfinance lending providers need quality software to protect data, prevent fraud, and improve service availability. The HES FinTech engineers have extensive expertise in banking and lending, which most software outsourcing companies may lack. HES develops lending platforms that meet security standards in full: from borrower’s personal data to payment processing, and secure integrations.

The Bottom Line

It is definitely possible to find a new tech-based business model for microfinance lending on any market. Microlending has an opportunity to use the energy of the momentum and provide customers with fast and convenient digital access to finance. While the lending software vendors are there to help. Get adapted to the digital era before it is too late.