A Wake-Up Call for Microfinance Institutions
50 Gen-Zs were asked to name 5 microfinance banks in Nigeria, surprisingly silence prevailed in the room; this crop of young men and women were oblivion of the institution that once drove the #economy of Nigeria by providing financial succour for the underserved populace. However, these young minds could name a thousand and one Fintechs In Nigeria. Does this spell extinction for the MFIs?! For decades, microfinance institutions were at the core of enabling financial inclusion to the underserved across Africa; they gave out credit without collateral and empowered poor communities to enable them to earn. Although there has been a massive proliferation and advancement of Fintechs in Nigeria in the most recent past, the same cannot be said of #MFIs. And in this digital era, non-adopters do not stand a chance of remaining relevant in the future. This may be a wake-up call for MFIs and MFBs on the need to introspect on their processes and business playbook if they must remain relevant.
The COVID-19 crisis forced traditional microfinance institutions to adapt to a very different way of working. While a few MFIs did not return to business post-Covid because they had not integrated tech into their processes, many other MFIs were experimenting by using digital means to enable them to work with their clients while social distancing. Hence traditional MFIs must rethink their approach to #technology. While many have argued that the audience of these MFIs are not necessarily tech-savvy, they must realise that adaptation to tech is growing very fast, hence CEOs and MDs of MFIs must begin to ask themselves hard questions like What is the future of MFIs? Should they take digital transformation more seriously? What will it take to get there? What are the chances of success if they collaborate with other players? And what is at stake if they don’t modernize?
While we understand that #microfinance seeks to provide financial services for that segment of the population in Nigeria that does not have ready access to formal #financial services. However with the COVID-19 pandemic came a lot of revelations, and these revelations have become the new normal in terms of how #businesses are operating across the world. The pandemic has shown that the MFIs must review their channels of interaction with their market; their use of data; flexible product diversification; tech #integration; and be loud on PR. (To be contd)