Focus on the Microfinance Community Response to the COVID Pandemic: Insight of the Boulder Digital Transformation of MFIs programme – Week 2
By Violette Cubier, InFiNe.lu Grantee
Week 2: 13/09/2021
Introduction
This week’s module was on the response of the microfinance community to the COVID pandemic, and key intakes from the crisis. The module was presented by Robert Peck Christen, President and founding member of the Boulder Institute, and Anup Singh, Regional Head for Microsave Consulting, as a guest speaker. The module was complemented with some live discussions, exercises and readings summarizing articles by leading organizations such as BRAC Bangladesh, CARD Bank, Grooming Center, Fondo Esperanza.
As stressed by Robert Peck Christen and by some participants, the COVID pandemic has had major impacts on staff, clients, and business models. With the COVID crisis, most MFIs have accelerated their digitalization process, with a focus on digitalizing communication with clients and employees, as well as on digitalizing disbursements and repayments. Digital channels have been particularly useful in reaching out to rural clients and in implementing contactless operations.
Challenges of the digitalization process
There are however many challenges associated with this digitalization process. Participants were split in 8 groups during the live session, to reflect on what were the greatest challenges in their digitalization process during this time of pandemic. Participants mentioned the following key challenges:
A low level of digital and technological literacy among clients (this was mentioned by many participants as one of the greatest challenges);
Illiteracy of clients and low level of mobile ownership, leading to an inability to use smartphones;
Dilution of group solidarity: the solidarity loans methodology is being challenged in a context where clients cannot meet regularly.
Budget requirements: digitalizing operations can be very costly, and many MFIs struggle finding adequate funding sources;
Access to adapted IT resources to develop digital solutions: with the pandemic, the availability of IT providers has been limited;
Rigidity of core banking systems, making it difficult to integrate new products and processes;
The delivery of adapted training to staff on the use of technologies, and development of skills internally;
Limited knowledge on how to use data (many participants mentioned the fact that it is difficult to turn data into useful insight to feed decision making);
Fraud linked to relaxed loan conditions / processes, and new risks arising with digitalization;
Lack of support from the governance;
Limited infrastructure / connectivity issues;
Resistance to change / challenges in changing work culture and mind-set.
