Tackling Multiple Loans with Biometric Applications: Benefits for Microfinance Banks
Tackling Multiple Loans with Biometric Applications: Benefits for Microfinance Banks
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Tackling Multiple Loans with Biometric Applications: Benefits for Microfinance Banks

Biometrics Becoming Popular

The use of Biometrics applications in Microfinance banking is receiving a boast and working quit well for some countries to tackling multiple loans. This is due to the fact that microfinance banks in these countries are receiving enormous support from the government and the cooperation they receive from their member institution.

I read in the news of how a microfinance bank in Papua New Guinea introduced biometric fingerprint scanner that authenticates transaction.

You can read more at https://www.biometricupdate.com/201901/papa-new-guinea-micro-bank-deploys-fingerprint-biometrics-to-improve-financial-inclusion.

This initiative will greatly improve accessibility of funds mostly for women who reside in semi-urban and rural areas.

 

The Issues

One major problem that is yet solved but identified is the issue of curbing multiples loans by suspecting individuals. This is a problem that the Nigerian microfinance banks is facing. Microfinance banks practice in Nigeria is presently not getting the attention it deserves when it comes to how to properly address this issue.

The Financial Institutions supervision department of the Central Bank of Nigeria (CBN) way back in December 2017 gave deadline instruction to Other Financial Institutions (OFIs) in Nigeria which include all microfinance banks to freeze accounts of individuals without Biometric Verification Number (BVN). The essence for this is quite appraisable, but does not solve the problem of multiple loans for microfinance banks.

The Central banks of Nigeria is working on an initiative; The Global Standing Instruction to curb the issue of multiple loans. I tell you, little might be achieved without the cooperation of partner institution. Microfinance banks are so target centred that giving out multiple loans to prospective client is not a problem. Some buy out loans, while some encourage additional loans to their client as long as these clients have extra money in their account.

Read more about the Global Standing Instruction here;

https://microfinancearena.com/global-standing-instruction-gsi-central-bank-of-nigeria-cbns-new-tool-to-tackle-multiple-loans/

The Solution and Benefits

Biometric verification if properly explored will solve a lot of issues, but for focus of the topic we look at the benefits of fingerprint verification to microfinance bank and what can be deployed.

In tackling multiple loans, fingerprint biometric will help the process if information of microfinance banks account holders and their guarantors are captured. Not only for linking accounts of individual customer, but for searching for existing transaction done by these customer to avoid granting additional loans to existing holder.

Biometric identity and verifications will enhance microloans while at the same time improve access to microfinance operations.

To simplify the process of tackling multiple loans, biometric tables can be deployed in outlets to capture clients in rural communities which eliminates the problem of distance and accessibility.

Apart from the introduction of the BVN to capture accounts, the biometric application can be used to achieve a lot. These could be to reduce fraud, encourage local participation and promote financial inclusion.

 

Conclusion

The number of microfinance banks in Nigeria will continue to increase irrespective of the proposed recapitalization process which might cause mergers and acquisitions amongst MFBs. This is because the market for micro-loan is fertile in Nigeria, most especially in Lagos state and some commercial areas where micro-credit is at its peak. Competition for sizable market is on the increase hence the growth in digitized friendly financial services offered by few microfinance banks. The future of micro financing will continue to grow. This leaves us to the challenges that will envelop microfinance banks that refuse to evolve in their processes, thereby creating opportunities for fraudsters to have access to multiple loans which they ordinarily wouldn’t pay back.

 

Looking at the uneven distribution of microfinance administration and processes in Nigeria, are we ready for fully digitalized automated microfinance process?

 

Watch out for my next article;

Financial Inclusion: Employing Digital Technologies in Micro financing

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