Microfinance has made great strides in the past 15 years, across the region and globally. In the Arab region nearly 3 million clients are currently served with an outstanding portfolio of $1.7 billon according to the latest studies.
But progress must not stop.
To provide further access to financial services, innovation is necessary to improve efficiency and competitiveness of the sector. Each level of the market-value chain can benefit from innovation, as can the relationship between these levels. AFIIP welcomes proposals from micro-fintech to marketing; blockchain to logistics which can innovate at any of these levels. More information on microfinance can be found here.
Regulations drive the type of organisation that can offer financial services. But innovation can be disruptive by transforming the nature of existing service suppliers, or introducing new operators not yet present in the sector of microfinance.
Financial inclusion is founded on a high-contact relationship with the end clients and therefore constrained when there is a lack of information about them. Innovations to increase information about the client would upgrade trust and efficiency in the sector.
Due to its high-contact nature, microfinance is labour and process intensive. Innovations to create superior methods for delivering the product or service by reinventing cost structure or operationality would streamline processes, reduce costs and increase efficiency.
Many of the products on offer in the sector of microfinance are derivatives of each other. The very large majority are group loans or individual loans, based on similar risk profiling and delivery. Recently, microfinance has expanded to include other products and services such as micro insurance, payment systems and savings. The world of fintech, block chain and big data is primed to improve the current offerings and create new high-tech, high-contact products and services.
Financial Inclusion depends on trust between stakeholders at all levels of the market value-chain. From the financial service provider to the government authority to the wholesale funder, strong relationships are vital. These stakeholders often work with partner service providers to manage cash payments, warranting creative and implementable innovations to improve trust and efficiency.