Challenges faced by MFI. What about blockchain?

Microfinance institutions serving retail customers have to face quite a specific set of challenges, which cannot be addressed with solutions meant for commercial banks. These challenges include:
Cost of outreach — reaching the unbanked populations of the world means servicing small loan amounts and servicing remote and sparsely populated areas of the planet, which can be dangerously unprofitable without high rates of process automation and mobile delivery.
High Transaction Cost — High transaction cost is a big challenge for microfinance institution. The volume of transactions is very small, whereas the fixed cost of those transactions is very high.
KYC and security challenges — The customers serviced by Microfinance instructions are usually the ones having none or very limited official identification or able to provide tangible security, this makes it extremely difficult for institutions to offer any banking services.
Limited budgets — Making provisions for large upfront investments is not possible for most of the MFIs which limits their capability to purchase world-class banking solutions that can help them fulfil their requirements and support their growth targets.
No doubt, microfinance institutions have shown impressive growth and have been instrumental in the cause of financial inclusion, but a lot remains to be achieved.
Can blockchain help
To date, blockchain technology is overrated, many projects are trying to use this technology and make a new “revolutionary” product.
Why they can’t this work out? On the wave of popularity of blockchain technology, there are many people who want to implement the project without a full understanding of how to use blockchain and often lose money and time for implementation and do not achieve the intended results.
How can blockchain solve problems in the MFI?
Let’s start in order:
Cost of outreach — blockchain technology led to the notion of a crypto currency. At the time of writing this article, the capitalization of the Cryptocurrency is 236,476,661,330 USD and the daily trading volume is 14,494,608,912 USD. Not bad, huh? According to the study, interest in the crypto currency is mostly shown by India, a country in which the level of the average profitability of a person is not large, respectively, MFIs in India are very popular. If we combine these two facts, then it turns out that the problem remains, but with the advent of the crypto currency in the MFO, its solution becomes much simpler and more obvious.
High Transaction Cost — the main advantage of blockchain, its low transaction price and fast confirmation rate, for example in the Ethereum network it is ~ 0.4USD and a confirmation time ~ 40 seconds.
KYC and security challenges — due to a transparent database of history and rating of their users, the MFI can more confidently approve loans to its customers.
Limited budgets — if you return to the number of capitalization and the volume of trading of the crypto currency you can be sure that with the arrival of the crypto currency in the MFI, the audience of MFIs will increase significantly, thereby increasing the income of MFIs.
So, today we highlighted the main problems of MFIs and proposed their solutions with the help of blocking and crypto currency technology, but for more information about the project, which you can become and co-own, you can find here: https://yougive.io
