Running a microfinance organization is very challenging, especially with the manual debt collection process. However, a debt collection system can reduce that challenge and benefits your MFI in many ways.
Microfinance organizations deal with deprived people. The loan profile is tiny, and borrowers are large in number. Higher management and branch managers often have no clue of the real-time progress of debt collection. Loan officers struggle to manage paperwork and the collection process together. Reporting for the collection status becomes another devastating job while time passes. Thus, in day-to-day debt collection, credit officers are lost in paperwork and accountancy and lose focus on the target.
That is the scenario for every microfinance organization without the right technology. If we are not wrong, your microfinance is also dealing with the same challenges. Now, you question yourself whether you want your microfinance to remain in that condition and lose profits, or you want an effective solution.
We assume you will go for a digitized solution! But what solutions do you have?
You can overcome the many challenges of microfinance operations, but a debt collection system can solve all the problems addressed in the second paragraph. The technology-based solution that we are talking about has many advantages other than easing the operational difficulties. But before that, let’s give you a heads-up on debt collection software for MFIs.
Debt Collection System for MFIs In a Nutshell
A debt collection system refers to a digitized alternative to the existing paper-based collection process for financial organizations. In the micro-lending business, the paper-based collection process remained the primary tool for decades. But with the growth of the industry, the backdated sheet collection process is no more efficient. Thus, to ease the difficulties of the credit collection process for MFIs, debt collection software came into existence.
A better functioning collection software comes with several features, especially those credit officers need to handle the entire collection process. For example, online day-to-day collection sheet generation, live data entry of collectables, real-time status of debts, collection target status, hybrid functionality etc. Now let’s head towards the benefits of the debt collection system for your microfinance organization.
Benefits of Debt Collection System for MFIs
Talking of the benefits of a debt collection system is easier than you thought. In the microfinance business, debt collection is the most challenging job than any other task throughout the operation. But when software is involved, you can benefit from better management and debt recovery and many others. So let us take you to the details for better understanding.
1. Better Debt Management
There was a time when microfinance institutions had to maintain the records on paper. It is okay if the organization is small and have a small borrower base. But with rapid growth and increased customer numbers, debt management became a very time-consuming job. Credit officers often needed to put extra hours of work into debt management. Meanwhile, they struggled to focus on the collection and put more effort into the documentation process, which eventually increased the bad debt.
Besides, debt management is more difficult for higher management and managers. To keep the accountancy properly, several professionals had to work daily.
In today’s world, debt management is no more an issue to be worried about if you have a debt collection system. Even if you have microfinance software, you must evaluate how efficiently it manages your debt collection process. Not all microfinance software has a debt collection feature. Therefore, to improve your debt management, you should have software that better your operation.
2. Improves Interactions with Borrowers
In the business of financial lending, clients are of great importance. People around the world have become very tech-intensive. Even people in rural areas are adopting technology-based solutions. So, more technology means more interactions. On the other hand, people want to see the digitized process in financial services that they can trust.
A debt collection system at work can improve your organization’s interactions with clients as well. Similarly, the software can also reduce the distance between the higher management, credit officers and clients. But before you employ Microfinance software, make sure it comes with an efficient debt collection feature.
3. Real-Time Reporting on Debt Collection
Real-time reporting is one of the most important benefits of automated debt collection software. With a paper-based collection process, real-time collection reporting is not possible. But if you have dedicated software for your debt collection, your organization can benefit from real-time reporting. The mobile app of a debt collection system can even be more helpful. To be precise, branch managers can see the report remotely on an app whenever they can.
The system is even more effective for credit officers. While on the field collecting debt, they don’t even have to think about the amount collected. So, it just helps the credit officer stay focused on collection.
4. Advanced Debt Monitoring
An automated debt collection system provides you with advanced debt monitoring opportunities remotely. Once branch managers did not have the chance to monitor the collection status. Though they could call the credit officers still would not have the right report on time. With advanced debt monitoring features in the debt collection software, managers can access the collectables in advance and set targets for credit officers. Even they can access the database and filter the data during the collection time.
For microfinance, debt collection software can benefit decision making depending on the real-time data. Early forecasting of the daily or weekly debt collection can also be handy for companies’ other benefits.
5. Increases Debt Recovery Potentials
Aren’t you tired of all the paperwork that you have been doing for a long time?
Most credit collection officers are tired and devasted by the manual collection process. And with the present collection strategy techniques, your employees are demotivated, which affects your debt recovery potentials.
A better debt collection system maximizes debt collection efforts among credit officers. Eventually, it helps your microfinance make more profitable decisions. If you choose the right software, you can even make better strategies to collect more debts by segmenting and prioritizing methods.
6. Appropriate Debt Accountancy
Say goodby to the calculator with the debt collection system!
Keeping the accounts correct is another challenging and time-consuming task for microfinance organizations. But no more, the right debt collection software is nothing less than an accountant. In debt collection software, accountancy is mandatory, and you need to do the data entry. Voila! Your calculator part is done.
Wrong calculation of debt is a common issue in microfinance organizations. And due to that, borrowers are often unhappy with financial lending services. So, with debt collection software, you can say goodbye to that inappropriate accountancy and make borrowers happy. In addition, credit officers are also hugely benefited from automated accountancy. Thus, your microfinance benefits from this appropriate debt accountancy.
In short, a debt collection system is another important feature that you should integrate into your microfinance system to get the best out of it. It benefits MFIs with a strategic collection process, improved debt recovery potentials, debt monitoring and proper accountancy, which eventually helps your microfinance prosper.
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