Rethinking MSME financing: It’s your customer’s digital transformation that matters

Around the world and in Sub-Saharan Africa, the Covid-19 pandemic spurred an acceleration in digitalisation, as businesses and people shifted online to transact for goods and services. Meanwhile, banks and MFIs (microfinance institutions) have been engaged in their own shift to digital, and the last few years have seen significant investments in bold, ambitious projects to create consumer credit products that scale.

For many traditional lending institutions, digitalisation projects of this size require building complex technical solutions that, for them to work as promised, may in turn require deep, sophisticated technical knowhow, infrastructure investments, training and upskilling of teams, and a transformation of business practice and culture. To achieve what?

Many banks and MFIs are consciously seeking to avoid replicating the Fintech consumer credit model, which has often resulted in excessive liquidity to consumers, poor collection practices and high interest rates. They’re racing to keep up with Fintechs, while at the same time trying to figure out how to build a new model of more inclusive finance, one that’s not just ambitious about banking the unbanked, but ambitious about doing it in a healthy and sustainable way. But to reach this end, it may help banks and MFIs to stop worrying about their digital transformation, and start looking at their customers’.

young african female tailor smiling while viewing content on her mobile phone sitting with her sewing machine

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