Low-income people and groups who would not otherwise have access to financial services are given microfinance as a banking service. Through microfinance, individuals can safely and ethically take out small business loans that are affordable and adhere to ethical lending standards.
Those who work in garments, or small companies, may get a salary of 10 to 30 thousand per month. If they have to buy an essential mobile phone, they cannot buy it with such low income. So they pay through the loan which they get from MRA.
Most of the people in Bangladesh work in agriculture. But their income is so low that they cannot buy rice for themselves. With the help of these loans, rural clients can buy equipment, animals, seeds and fertilisers, as needed and pay back the principle when the harvest arrives in time.
Some people want to start their own small business, like a tong shop. But they don’t have enough money to run the business. On the other hand, since they don’t have sufficient properties, a home, or any collateral, they are not granted a loan from the bank.
Convenience in procedures
The procedure of applying for a manual MRA loan might be difficult because of its complexity. Borrowers may find it difficult and time-consuming to retrieve loans from traditional offices. They frequently have to make the costly and time-consuming trip to the office, which may be far from their homes. The inconvenience is exacerbated by lengthy lineups. Clients who live in such remote areas and have limited access to transportation may find the process especially difficult.
Digital solutions that are implemented, like mobile loan repayments, can greatly lessen these difficulties. It is convenient, time-efficient and accessible from anywhere, which enhances the borrower experience overall and boosts the effectiveness of microfinance operations.
The digital reach
The expansion of microfinance services' reach is one of the biggest benefits of digital transformation. While a physical branch presence may be minimal or nonexistent, NGO-MFIs can still offer financial support to underprivileged and rural locations through digital means.
Through the use of online platforms, mobile banking apps, and digital payment systems, technology can increase the availability of microfinance to all Bangladeshis. By improving accessibility, streamlining transactions, and facilitating effective financial activity monitoring, these tools eventually advance financial inclusion and strengthen communities.
Technology in microfinance has many advantages for both the provider and the client. Since many of their clients live in rural areas where there is inadequate infrastructure, MFIs typically have high transportation costs. These transport costs can be decreased, staffing requirements and cash risk can be decreased, information can be accessed more easily and scalability can happen more quickly when services are digitized.
For example, with bKash the customers can use their phones to conduct a variety of financial transactions on the app. This offers a practical and easily accessible platform for microfinance and includes money transfers, payments, and other financial services.
Digital payment methods and other mobile banking apps also support financial inclusion. With the use of these technologies, people can conduct banking operations without the need for physical infrastructure, which is especially advantageous to those living in remote areas.
Although bKash has achieved significant progress in Bangladesh's financial services digitization, there is still a great deal of room for expansion. Currently, just 22% of adult Bangladeshis use mobile money. Moreover, bKash can offer additional services like business-to-business transactions and microinsurance. Introducing an organized savings program is another choice available to bKash.
Nonetheless, a number of NGO-MFIs in Bangladesh have effectively managed the obstacles associated with digital transformation, resulting in notable advantages. One of Bangladesh's biggest NGO-MFIs, BRAC, has adopted digital technologies to increase the scope of its work. They made mobile banking available, enabling users to effortlessly access their accounts and conduct transactions. Both client happiness and efficiency have increased as a result of this change.
Microfinance serves the world’s under-banked population by providing financial services tailored to the needs of their financially constrained customer base. Many challenges can be solved by the government’s long term intervention of developing uniform digital payment infrastructure providing financial subsidies to local and regional.
Maisha Fahmida is working at Shadhin Fintech Solution Ltd as a legal intern.
