Before the emergence of the Covid- 19 pandemic, the microfinance sector was constantly struggling with the evolving regulatory environment and changing technologies such as blockchain and artificial intelligence. The established and entrenched order has been shaken forcing quick adaption to be the new normal. Most of the institutions are wondering whether the rapid advances in digitization and personalization of services will make banking halls irrelevant. A new ecosystem has been created with a complex architecture but with a possibility to allow quick growth and optimal customer experience. The pandemic has worsened the struggle calling for a reset and restart.
Embracing agility is one way to reset. Creating a culture of agility in financial services. Microfinance institutions should start devising and implementing agile ways of doing things. Those that will do so will ensure they focus on their customers, continuously create value, embrace simplicity, evolve and involve people. Culture should also be reoriented to address matters diversity, collaboration, dependability, adaptability, excellence and curiosity.
Pandemic forces are creating new demand for risk management. Data science emerging business models and value chains are changing the way microfinance businesses do their work as they try to keep up with the dynamism in the environment.
Risk management plans help microfinance institutions to save money and protect their future by establishing procedures to avoid threats as well as minimize their impacts should they happen. Modern risk frameworks can also help them to create safe work environments for employee productivity, ensure stability of business operations, protection of assets and establishment of insurance needs so as to determine the important premiums that should be paid.
Compliance function is another strategy to reset. It has previously been observed that despite having strengthened the control environment and enhanced compliance with regulatory requirements over the last decade, the focus and mindset of compliance in many firms remains overly risk-averse, conservative and still struggling with the remediation of past problems, resulting in limited bandwidth to support – as well as continuing to challenge – the business.
Compliance should evolve in order to increase effectiveness and efficiency with increase in monitoring and surveillance reducing microfinance businesses noncompliance losses.
Data analytics as a reset technique holds a special place in the financial services sector. Microfinance businesses can easily undertake prediction, access risk profile for credit applicants and in the process work afresh on credit policies as well as serve as an early warning system to manage risks and stop all manner of fraudulent cases. The power of data and decision making to improve productivity cannot be underestimated. Better decisions are made to ensure excellent and personalized customer experience. Additionally, investment decisions are made based on data from analytics tools and microfinance valuations do not just depend on financial statements.
Embracing and securing ecosystem strategy implementation technique should be a restart if microfinance businesses are looking to successfully navigate Covid- 19. Threats in an operating environment come with ecosystem and supply chain disruptions. All over the world, livelihoods have been disrupted both for corporates and small enterprises without any exemption. It is at such moments as this that microfinance leaders should make informed decisions and takes quick actions to save lives and businesses from fallout. What Covid- 19 pandemic has taught business leaders is that having a clear picture on potential impact of business threats to organizations helps to put in place responsive mechanisms and prioritize business activities so as to make the most of the available resources. Covid- 19 cut Gross Domestic Product (GDP), presented oil price shocks and forced governments to think of fiscal stimulus to cushion businesses, safeguard economics and livelihoods. Securing the ecosystem and paying special attention to the supply chain can help the microfinance businesses survive the crisis and support economic growth. Travel bans and lockdowns limit movement of supplies across border and also within specific countries hence disrupting and introducing new ways of working for organizations. The main action that organizations take when ecosystems are disrupted is to ensure business continuity. On a positive note, disruptions come with lessons to help business leaders review their organizations continuity plans and ecosystem vetting protocols. The lessons can range from:
a) Ecosystem jurisdiction risk exposure;
b) Ecosystem due diligence revision protocol;
c) Listing region specific risk rating;
d) Mapping of critical value chain players noting they vary with strategy that is being implemented;
e) Ecosystem transparency enhancement;
f) Possible government partnerships and linkages;
g)Robustness of the existing legal frameworks;
h) Emerging threats in the business operating environment.
The global village is becoming more complex and microfinance businesses may have to raise their bar to convert the risks into business opportunities and creation of sustainable edge. They should forever be in an attitude of ‘waiting for the next challenge’ to reset and restart.
Dr. Kellen Kiambati holds a PhD in Business Administration with a focus in strategic management from JKUAT and an MBA from KEMU. She is a certified business process associate (CBPA) and a member of the institute of Human Resource Management of Kenya. She is the author of Business Research Methods and can be reached on firstname.lastname@example.org .