Microfinance is a very important aspect of economic activity in rural areas and places typically not served by banks and traditional lenders. It links millions of people to financial services that would have otherwise been unavailable to them. It provides benefits not only for potential customers but also opportunities to businesses.
A successful businessman’s perspective on microfinance
Noted businessman Sharone Perlstein is optimistic about the future of microfinance. He believes that the expanding alliance of microfinance and digital resources will lead to new possibilities. He sees microfinance as an excellent alternative to the expensive mediation services provided by traditional financial service companies such as banks. These mediation services, for Perlstein, are bound to become redundant in the future and microfinance will emerge as a major financial service option for customers.
Perlstein was initially drawn to microfinance mainly because he recognized its potential to serve as an effective way to bring financial services to underserved populations. He believes there are billions of people worldwide who can benefit from it. Even though it does not entail “big money”, the amounts people obtain through microfinance services such as microloans are usually enough to enable economic activities such as the starting of small businesses or their expansion. Microfinance is viewed as a way to provide sustainable opportunities.
Moreover, Perlstein believes that mobile technology plays an important role in the success of microfinance. This is because most locations that microfinance serves don’t have the technological infrastructure needed to facilitate financial services. As such, communication between borrowers and providers of microfinance services is done through mobile phones. Additionally, mobile technology provides a significant contribution in enabling background checks before granting microloans to specific individuals. It also makes it easy for lenders to contact borrowers to follow up on their payments. All of these are in line with the findings of a World Bank report on microfinance, particularly on the need for it to have alternative delivery channels such as mobile financial services.
ERP software in the microfinance setting
While Perlstein believes that there’s an exciting future for microfinance, it can’t be denied that there are many hurdles and challenges facing microfinance institutions. Microfinance is expected to help those on the poverty line in accessing financial services. However, not many companies are able to operate microfinance services feasibly and efficiently. For this, it can be helpful to use enterprise resource planning (ERP) software.
ERP software is particularly great for large financial service companies that seek to venture into microfinance. These large companies such as banks can undertake microfinance business ventures with better results if they are able to properly organize their operations better. ERP software makes it easy to track workflow and transactions. Moreover, it enables informed decision making, effectively integrates businesses processes to enable better control, and enhances business operation speed, transparency, and efficiency.
It can be said that microfinance has not yet achieved its full potential in bringing about financial inclusion. Many places worldwide continue to lack access to financial services. However, with the new technological advancements available at present, microfinance can further improve. Companies that offer microfinance services can operate more efficiently and be encouraged to expand microfinance operations.