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Getting Digital Finance Right: Six Digital Finance Toolkits for MFI Managers

by on Jul 10, 2017  |  posted in Digital Finance  |  0 Comments

New digital technologies are doing wonders to achieve SEEP’s and UNCDF/MicroLead’s mission by expanding access to finance, especially to women and rural markets. When properly implemented, digital financial services (DFS) can provide increased access and convenience for remote clients, particularly when it comes to small savings deposits.

Overcoming Challenges in DFS Implementation

The fact is, implementing DFS can be daunting. There are a bewildering mix of choices, all dependent on factors such as external and internal infrastructures, the financial service provider’s (FSP’s) resources, and the local and institutional cultures. As a microfinance institution (MFI) manager in the nineties and early 2000s, my biggest headache was figuring out which loan software to choose. Selecting the correct digital finance platform today is even more confusing. It’s also more expensive, raising the stakes of making the right decision.

But the promise of digital finance – for institutions and clients – is too tantalizing to ignore. Managers must make these hard choices for the good of their institutions and clients.

The good news? UNCDF/MicroLead is making these decisions easier with its series of DFS toolkits.

For years, UNCDF/MicroLead, funded by The MasterCard Foundation, has supported financial institutions in developing new digital technologies to expand access to underserved populations. Now, the project is taking the lessons learned and has developed a series of DFS toolkits aimed at FSP managers. The toolkits – totaling six in all – were all developed in consultation with institutions who’ve actually implemented these systems. They address six potential DFS models, providing decision trees, checklists, and case studies, so FSP managers can figure out which model is right for their institution, clients, and environment before investing in costly systems.

The DFS Toolkits

The first two toolkits, Use Mobile as a Tool and Be an Agent, address variations on using mobile as a service, where FSP staff perform transactions using mobile devices, such as phones, point of sale devices, and tablets. These two models are probably the simplest for financial institutions to engage. But just because they’re easier, it doesn’t mean they are right for every institution.

The third and most recently released toolkit is Leverage an Existing Agent Network. In this third model, the FSP forms a partnership with a digital financial service provider (DFSP), which is typically an MNO. The FSP then provides its own products and services using the DFSP’s network. It’s a form of agency banking, where customers can deposit into and withdraw from their FSP account using their mobile money account and/or make over-the-counter transactions.

In addition to the business model for leveraging an existing agent network, the toolkit features case studies of MFIs who used the model, including the MFI UGAFODE in Uganda. UGAFODE’s prime goal in going digital was to reach new saving clients. By leveraging an existing agent network, UGAFODE tapped into a larger market and was able to reach clients in remote areas where it didn’t have brick-and-mortar branches. The MFI was also able to increase its revenues through additional commissions and fees and expand its brand recognition.

Three more toolkits from MicroLead are on their way this summer. But if you’d like to get the first toolkits now, click here. You’ll receive an email with links to download the first three toolkits which are available in both French and English.

Kirsten Weiss is a freelance writer and communications consultant with MicroLead. MicroLead is a UNCDF-managed global initiative challenging regulated FSPs to develop and roll-out deposit services which respond to the rural vacuum of services. With the generous support of the Bill & Melinda Gates Foundation, The MasterCard Foundation and the LIFT Fund in Myanmar, MicroLead works with a variety of FSPs and technical service providers to reach rural markets, particularly women, with demand-driven, responsibly priced products offered via alternative delivery channels such as rural agents, mobile phones, roving agents, point of sales devices and group linkages. This is combined with financial education, so customers not only have access but can effectively use quality services.

Follow them on Twitter @UNCDFMicroLead

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