Fri | Oct 7, 2022

Growth & Jobs | Information technology could cut rates in microfinance sector

Published:Monday | August 14, 2017 | 12:00 AM
Gillian Hyde (centre), general manager of JN Small Business Loans (JNSBL), and Thelma Yong (right) deputy general manager, JNSBL, listen attentively to Paul Chin, general manager of Microfinance Services at the Development Bank of Jamaica, as they discuss issues in the micro-small, and medium-enterprise sector at the end of the third breakout session at Hilton Rose Hall Resort and Spa in St James.

Mobile and online technology can improve the operational efficiency of microfinance institutions (MFIs) and result in lower interest rates, Paul Chin, general manager of Microfinance Services at the Development Bank of Jamaica (DBJ), stated as he addressed a session at the Small Business Association of Jamaica MSME Conference, held at the Hilton Rose Hall Resort and Spa in St James on July 20.

Chin told delegates that high administrative costs were the main factors behind soaring interest rates in the MFI sector and those costs are relatively high, as loans are smaller, and require the same management as larger loans.

"However, investments in IT services will help to improve efficiencies, which, over the long term, may help to lower interest rates and cut administrative costs," he advised.

He also said that increased use of smartphones could assist lenders to make disbursements without the borrower stepping into a bank branch and conversely, customers could also make payments and check their balances online. Therefore, the use of mobile and online technology in the MFI sector will lower operating costs and increase the speed of financial transactions.

"Technology also allows the rapid dissemination of best practices, thereby strengthening the institutional capacity of financing institutions," the DBJ general manager explained, adding that microclients generally honoured their loan commitments.

"At present, interest rates in the industry range from a low of 10 per cent and can go above the 40 per cent set by the Ministry of Finance," Chin shared. "And MFIs implemented high interest rates to cover their costs and earn a profit."

He also pointed out that the DBJ provided assistance to MFIs to improve efficiency. And, added to that, the organisation would strengthen the sector by staging a mobile money conference in 2018, which would outline how technology could enhance their business by introducing more clients into the formal banking sector.

New loan-management system helping to increase efficiency

Co-presenter at the recent Small Business Association of Jamaica Conference Gillian Hyde, general manager, JN Small Business Loans, said that technology was already helping to increase efficiency. Citing the Jamaica National subsidiary as an example, she told delegates: "In 2015, we launched our new loan-management system. This system allows us to use tablets to access information; manage client data; and sign up new clients in their office or their locations."

Hyde explained that "the system makes us more customer friendly as clients can access their loan information via the Internet and smartphone, in addition, to access product information and make queries".

She also said that technology facilitated clients who wanted to make payments after business hours. "We have also established kiosks to facilitate our clients who want to make payments after office hours. And, our credit relations officers no longer visit the office at the end of the day to do paperwork as computers facilitated working off site."

Small-business owner Curtis Davis shared that using ICTs has helped his operations.

"Using technology has helped to gather vital information whenever I am doing research about the different products and services. It also makes my business more efficient," he stated.

Minister of Finance and the Public Service Audley Shaw, in his opening address to the conference, also urged increased use of technology in the sector.

Other speakers at the conference included Karl Samuda, minister of industry, commerce, agriculture, and fisheries; Dr Horace Chang, minister without portfolio in the Ministry of Economic Growth and Job Creation; lecturer at the University of the West Indies (UWI), Mona, Dr Kadamawe K'Nife; Dr AndrÈ Haughton, lecturer at the UWI; and Marlene Street Forest, managing director, the Jamaica Stock Exchange.