Microfinance is defined as giving out small loans to people who need them the most. Worldwide, it is a billion-dollar industry that provides help to millions of people. There are also thousands of institutions, big and small, that provide microfinancing loans.
There are two main problems in the world of microfinance – repayment of loans and interest rates. There should be a clear deal between the lender and the person who borrows the money. To ensure that the one who borrows can repay, the lender has to employ people who will go out and collect the payments. Even before the deal is closed, there should be someone doing background checks to ensure that the person who applied for the loan deserves to get it.
The problem is not just on the side of the lender. Those who have borrowed the money also encounter problems regarding the interest rates that they are paying. There are also some cases in which they have already made payments, but these are not reflected in the database of the company. Hence, it is assumed that they are yet to pay a certain amount.
How technology helps
With the help of modern technology, lenders need not employ a lot of people in the field. They can do everything online. This hastens the transactions. It also reduces the operational costs. As such, they are now able to reduce the interest rates, which is highly beneficial to those who can’t afford the rising rates. All loans are disbursed electronically. There is also an algorithm that helps automatically define the interest rates depending on the information on the application form. This allows borrowers to make informed decisions before taking the loans.
They can also set up an online profile that allows them to check how much they are yet to pay and if their payments have already been entered into the system.
There are also a lot of issues regarding payments and how they are not reflected in the system. Modern technology helps resolve such issues. The borrower only needs to log in, file a complaint and wait for someone to reach out regarding the problem. It will be immediately dealt with. There is also a toll-free number which they can use to call for conflict resolution. If the complaints are not dealt with at this point, it will be raised to a higher authority until problems are resolved.
This means that microfinance has become easier than ever. People who are in need of money can now seek help anytime without worrying about how much they need to pay, or which company provides them the loans that they need. You can also look at Sharone Perlstein and his expertise in the world of microfinance.