Interview: The Challenges of the Microfinance System

Natech Banking Solutions was the Main Partner of the Digital Banking Scorecard 2024 conference and report organized by Future Banking on March 19, 2024.

Read this insightful interview with Bernd Wendeln, Chief Commercial Officer at Natech Banking Solutions, where he discusses the challenges in the Microfinance sector, the state of the market in Banks and the CEE region, and the role of technology in transforming Microfinance.

The Role of Technology in Transforming Microfinance

Microfinance institutions (MFIs) are at a turning point where technology can significantly increase their impact. According to Bernd Wendeln:

“MFI’s path to digitalization is riddled with challenges. Key among these is enhancing customer interaction through digital channels, as current manual methods for processing loans and payments lag the accelerating pace of technological advancement and the growing expectations of digital-first customers.”

Limited access to modern customer interaction platforms and systemic fragmentation makes it challenging to deliver a cohesive and seamless digital experience.

Numerous organizations are hindered by outdated, non-integrated systems that depend on paper-based processes. These systems impede data-driven decision-making and real-time responsiveness.

Additionally, maintaining these legacy systems is expensive, and resources for upgrading IT infrastructure are frequently limited.

“The core of microfinance technology needs to surmount current limitations to foster innovation and growth or to serve customers digitally. As customer needs evolve, the ability to swiftly adapt and introduce new products is essential. To advance, microfinance must embrace scalable, integrated, agile and cloud-based solutions that democratize access to advanced computing resources.”

The State of Microfinance in the Balkans and CEE

The potential for microfinance in the region is vast, with demand significantly surpassing current supply, resulting in an estimated gap of around €3 billion in the Balkans and Central and Eastern Europe.

“In Romania, precisely, the financial gap is estimated at over €850 million, according to a report from the European Microfinance Network. Projections indicate a rising demand for microfinance loans in the coming years, presenting Romania and the broader region as fertile ground for expanding existing Microfinance Institutions and establishing new ones. To effectively tap into this burgeoning market, existing and new financial institutions must recognize this opportunity and develop compelling product offerings.”

Capitalizing on the Potential

To further capitalize on this potential further, financial institutions offering microfinancing should implement a swift and seamless banking experience, which will be crucial for capturing this market.

Additionally, offering comprehensive digital channels, including web and mobile platforms, will allow customers to manage their applications and loans effortlessly, thereby enhancing their overall experience and satisfaction.

Source and Acknowledgements

This interview was originally published in Romanian on on March 13, 2024.

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