SPECIAL REPORT: Good News, “Painful” News About Digital Finance at the Final Day of European Microfinance Week

European Microfinance WeekIn moderating Friday’s panel on “Integrating digital financial services” at European Microfinance Week, Philippe Breul of PHB Development opened with several examples of success: (1) Microfinance institution (MFI) Musoni Kenya reducing loan turnaround time from 72 to 6 hours; (2) Indian MFI Ujjivan boosting loan officers’ caseloads by 134 percent; and (3) Opportunity Bank Serbia, which operates in an area of better mobile connectivity than the other two MFIs, providing immediate credit decisions in response to 80 percent of loan applications. Mr Breul stated that the time period required to save enough on costs to offset the expense of the tablets and other elements of digital systems can be as low as one to two years.

Bram Peters of FINCA described the experience of FINCA Tanzania, including finding that it can bring on 50 new banking agents for the cost of opening one new branch. As an example of challenges encountered, the rollout of mobile payments has been followed by a significant drop in attendance at meetings of borrowing groups because loan payments no longer must be remitted in person: “Village banking was [synonymous with] FINCA, and that is changing. It is a painful process.”

In response to a question regarding how comfortable regulators are with paperless operations, Mr Peters said, “I would never roll this out without going to the central bank and getting a ‘no objection’ letter.”

Fatoumata Camara of the World Savings and Retail Banking Institute discussed the Popote mobile banking card launched by the Tanzania Postal Bank in 2013. The program has brought the bank 47 percent higher profit, asset growth of 48 percent, an increase in savings deposits of 41 percent and an increase in lending of 59 percent with a non-performing loan ratio of 3.2 percent.

Andrew Tushabe of UOB Rwanda described the mHose mobile banking service, which is supported by US-based payment firm Visa. Of 57,000 customers, 12,000 are active, moving USD 2.5 million per month. Of these transactions, half are loan repayments. The second most common transaction type is the purchase of airtime for mobile phones. Among the benefits of the new service are: (1) the ability to serve all areas of the country; (2) less carrying of cash by loan officers “in bags on motorcycles” and (3) improved staff retention as a result of increased client satisfaction.

However, Mr Tushabe warned that “It doesn’t come so easy,” citing difficulties such as: (1) client literacy regarding phone use; (2) inconsistent mobile phone connectivity; and (3) low cash liquidity among agents. Also, the organization’s portfolio-at-risk ratio is increasing. It has sought to address this risk by accentuating the importance of attendance at group meetings, and it may change the frequency of these meetings from weekly to monthly. Additional efforts have involved working to get timely info on arrears and following up quickly when payments are overdue. UOB Rwanda is also considering taking direct draws from savings accounts to repay loans.

This story is the final installment of a sponsored series on European Microfinance Week, which is held each November by the European Microfinance Platform (e-MFP), a 125-member network located in Luxembourg. MicroCapital reported live throughout the event.

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