Working Toward Greater Collaboration Between Microfinance and Digital Finance

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MFIs become master agents of the agent banking provider — meaning the MFI’s branches are contracted by the bank to offer its agent banking services. However, this model still clearly has a conflict of interest: Both the MFI and the agent banking provider are offering loan and savings products to customers through agent banking.
MFIs use agent banking outlets for payment digitization — enabling digital loan disbursement, loan repayment and savings deposits. For MFIs, handling payment digitization through agent banking is better than conducting it through MFS agent networks, as there are no transaction limitations and high cash-out charges, as in the case with MFS. However, there is a conflict of interest in this model too, as a customer can also open and deposit savings in a bank account at an agent banking outlet, just as they can with an MFI using that outlet.
Neither of these models is perfect. Both have ambiguity in how MFIs and agent banking providers define their respective roles (as master agent and agent outlet) and responsibilities (for engaging full-time staff, handling cash management and its associated risks, etc.), and how they handle profit-sharing and avoid future competition and product cannibalization. Importantly, microfinance regulators and MFI-affiliated bodies like the Credit and Development Forum also seem skeptical that there’s a clear business korea whatsapp number data model of collaboration between MFIs and agent banking.



Though at present we only see poor partnership paradigms in the country, MFIs and fintechs can better serve grassroots customers if they work together. MFIs offer unmatchable convenience that can help fintechs reach new customers, as they provide credit disbursement and repayment at the customer’s doorstep, while requiring minimal documentation for Know Your Customer and creditworthiness assessment purposes. MFIs also have embedded various social programs into their services, such as skill development training, preventive healthcare, value chain development, etc. This means there is the additional benefit of social capital and skill-building if a fintech associates with an MFI.