Microfinance has a lengthy history, ranging from neighbourhood-focused pawnshops and credit unions to contemporary microfinance that was influenced by the community/group-based strategy used by the Self-Employed Women's Association and Grameen Bank.
Modern microfinance models were required since traditional financial institutions were unable to address the needs of the poor due to their expensive operating and credit costs. The wealth disparity between rich and poor widened over time. As disparities increased, there was a decline in economic growth, which was accompanied by an increase in social and health issues, as well as discontent among the poor. The wealthier people have benefited more from technological breakthroughs than the impoverished, widening the gap between the rich and the poor.
Recent years have witnessed considerable technological advancements in the financial services industry, including data analytics, machine learning, and artificial intelligence. The microfinance industry, which continued to run conventionally through physical on-field activities like group formation, the distribution of loan application forms, one-on-one conversations with customers, followed by cash disbursements and collections, was only marginally affected by these developments. The industry's relative small size and perceived increased credit risks prevented these customers from making sizable technology investments. The lesser investment in technology projects for microfinance consumers was justified by the fact that these customers don't have a digital footprint.
However, a number of factors are causing the situation to change quickly. First, the microfinance model has developed and succeeded in enhancing stakeholders' confidence, including clients, microfinance firms, investors, regulators, and others. It has survived numerous shocks, such as the most recent pandemic, and come out stronger. Second, governments and regulators have made major investments in generating public goods, such as expanding the use of bank accounts, establishing a distinctive identity, offering payment systems, and bolstering credit bureaus. Third, the spread of Internet usage by the poor and the beginning of the creation of digital footprints have been made possible by expanding telecom penetration at low costs.
Different ways that microfinance companies are utilising technology to reinvent outdated paradigms. The numerous technological elements that we are seeing consist of:
Making applications for aided operation: This will be crucial until microfinance clients are secure and capable of operating in a self-serve mode.
Managing identity: By using biometric and video KYC, which can both be performed in real-time and are foolproof, the system's operational costs and fraud cases are decreased.
Giving communities the authority to administer financial services to their members has more potential than leaving financial firms to handle everything on their own. Communities could administer under a governance structure established by the financial organisation.
Collaborations are encouraged: This is similar to the previous point but applies more broadly. Through technology integrations, partnerships and collaborations between banks, non-banks, multilateral institutions, philanthropic organisations, entities that create livelihoods, sector-tech companies, and others are made possible, which lowers operating costs, financial costs, and credit costs.
Emerging credit and underwriting models: A 360-degree view of the customer and the emergence of creative underwriting models may result from the use of formal financial data on customers obtained from bank transactions, payment transactions, bureau reports available in real-time, and the exploitation of additional data sources from telecom, Internet usage, geo-tagging, social referencing, and various collaborators.
Managing digital repayments: The introduction of numerous digital payback options with built-in client protection has the potential to incur significant costs.
Microfinance organisations have already begun implementing technology into a variety of their operations, from employing mobile applications in the field to linking with banks, public databases for face and photo matching, and other tasks. The main distinction will be between "digitalizing" already-existing processes and adopting a "digital" strategy. Depending on the technology investments made and the attitude adopted, businesses will take different tactics.
There is little doubt that the customer will emerge as the victor in the end.
FAQs on Multiple GST Registration (GSTIN)
GSTIN or GST Identification Number
GST Return Filing for Businesses with Multiple GST Registration
