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Banking CRM for the microfinance industry

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The microfinance industryThe microfinance industry is growing and has the potential to create jobs, reduce poverty and bring social and economic equality by creating wealth and woman empowerment. Microfinance is a reliable tool to eradicate debt traps, provide alternatives, and foster trust and a savings culture within the local community. It is estimated that more than 665 million accounts worldwide fall into the microfinance segment with a sizeable proportion belonging to regions in Asia and Africa. There is significant correlation between poverty alleviation and the state of the microfinance industry, although it is hard to substantiate this observation (source: Wikipedia).

According to the World Bank, the industry is not even close to meeting demand. 500 million people living in poverty could benefit from a small business loan, and only one-third of the world’s population has access to any kind of bank account!

While the potential is beyond debate, many problems prevent the industry from realizing the same:

• The sheer number of customers and members and the small ticket size of loans, deposits, insurance policies and payments combine to make this a high volume-low value game.

• Inadequate knowledge, infrastructure, specialization and tools prevent microfinance institutions (MFIs) from offering the right products.

• Compared to conventional banking, microfinance is less profitable and less sustainable.

• MFIs are unable to effectively cross sell and up sell to existing customers.

• The microfinance network is not effective at propagating social and welfare schemes and messages.

• MFIs lack a holistic view of the customer including family history and needs, which is necessary in order to provide the right suggestions and service.

Banking CRMBanking CRM is a Customer Relationship Management (CRM) platform that specializes in banking operations. It has some or all of the below features:

• A centralized customer database with data pertaining to unique customer ID, segmentation, household statistics, demographics, preferences and overall relationship. The customer capture system also usually has the ability to capture regulatory compliance data including KYC, blacklist checks and approval by required authorities.

• Service requests that can be configured to capture and track received requests, pre-configured service requests and workflows for common banking practices, with escalation and routing templates. In addition, the solution has an out of the box offering for recording complaints, queries and frequently requested services.

• Sales and mass marketing management with out of the box offers for generic banking products and the ability to create templates out of them. In addition, there is an origination

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How banking CRM can benefit the microfinance sectorCustomer understanding

Identifying potential customers is of utmost importance in the microfinance industry, as is recognizing their needs in order to recommend the right product. A sound marketing plan is required to attract the right customers for different product offerings. Marketing campaigns can be delivered through traditional channels like email, telephone, print, billboards, roadshows and pamphlets. The content and offers of these campaigns can be stored in the system for future reference and audit. The response to a campaign can be recorded in the system, which can also list out opportunities for different products. The system can store and track leads, and follow them up. It can also be set up with a set of standard questionnaires to capture important customer information. These features minimize field representative training requirements and increase transparency.

Capture onboarding

Before onboarding customers, details including standard information establishing identity, social and domiciliary status, and granular financial information on collaterals, other loans, deposits, insurance products or remittances can be captured in the system and a unique customer identifier assigned for future transactions. This process helps in knowing the customer, understanding his needs, qualifying him for various products and above all, building a relationship. The unique reference number enables retrieval of all the above

information, which is required from a compliance, convenience and business perspective. For example, a customer who has been with the institution for many years and availed of several products and services need not prove identity every time he acquires a new product. Also, the institution can offer better rates and service to him, in recognition of his loyalty.

Advisory offers

The institution can also enhance routine services, such as collection of loan installments and insurance premiums or query resolution, with the help of banking CRM. A well-defined workflow with escalation rules can be put in place to note requests and ensure that they are attended to within stipulated timelines.

The customer knowledge gathered by the system can also guide bank executives as they deliver advisory services. For example, the system would prompt an executive to offer a new loan product designed for small businesses, to a livestock dealer when he calls the bank. Or it might recommend an upgrade based on past history.

It is also possible to incentivize customers by rewarding desirable behavior, such as timely payment of loan installments, maintenance of minimum balance and so on, with loyalty points that can be redeemed for gifts, cash or extra services.

The reach of the microfinance network can be leveraged to communicate social and welfare schemes effectively. For example, the

system linked to the sales system to onboard the customer directly into the respective account systems.

• A comprehensive 360 degree customer perspective including transaction history, segment, product holdings and sales and

marketing information coupled with analytics on cross sell and up sell of products.

• Accessibility over multiple channels including the web, kiosks, smart devices and offline devices apart from traditional channels like postal mail, email, telephone, fax and chat.

ConclusionThe microfinance industry is faced with great challenges. However the changes brought about by the industry on successful implementation and working is greater and hence it is imperative

to use the right tools like CRM to augment the chances of success in this industry. Banking CRM has a lot to offer this industry and can make a positive difference in enabling its success.

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Shriram ParthasarathyPrincipal Consultant, Infosys

availability of a new variety of seeds can be notified only to farmers, or a reminder to administer polio drops can be sent only to those with young children.

• Growth planning

Banking institutions can use CRM system data to strategize growth. For instance, they can identify the products to market to different customer segments, and the right time to do so. Or they could measure staff productivity and plan hiring requirements accordingly.

One of the biggest advantages of banking CRM is its ability to measure “returns from

customers” in terms of their profitability, revenue generation potential, and overall viability. This information can be used to fine tune offerings. For example, the loans of habitual defaulters can be restructured in order to facilitate prompt repayment. The CRM system can also measure the impact of microfinance on different sections of society and capture customer feedback on the same issue. This information can be used to measure the institution’s success and define future direction.

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