First Access - loan for the motorbike driver, and the other guy who is standing is a loan officer for a financial institution called UGAFODE that uses First Access software to do digital loan origination in Uganda
A Ugandan motorbike rider (left) secures a loan from a microfinance lender (right) using First Access software

They come armed with a clipboard. Across much of Africa and the Middle East, microfinance lending officers visit homes and businesses to assess the value of collateral such as cars, sewing machines or livestock.

Technology such as artificial intelligence is being used in some locations to improve data collection and streamline credit decisions. Yet for the world’s “underbanked” population, who rely heavily on cash — estimated by consultancy Accenture to be a global market opportunity for financial services providers worth $380bn — factors such as weak digital infrastructure mean that the human aspect of financial services is likely to remain critical for some time.

Still, progress is being made in these regions to expand citizens’ access to financial services. Egypt’s Commercial International Bank is developing predictive analytics software that can assess an individual’s willingness and ability to repay loans.

In a country where about two-thirds of citizens lack a bank account, often because traditional credit-scoring methods exclude them, such tools can enable the bank to serve more customers and with less risk.

The small size of loans made to low-income borrowers render them relatively expensive to administer for the microfinance lenders, which include non-governmental organisations, credit unions and commercial banks. Technology can achieve economies of scale that bring these overheads down.

“There’s a lot of potential to reduce transaction costs and increase speed,” says Nicole Van Der Tuin, co-founder and chief executive of First Access, a New York-based software platform for microfinance lenders.

Financial inclusion chart

In Uganda, for example, where it is estimated that less than a third of the population has an account at a financial institution, some lenders use First Access software to combine user data with internal records, making it easier to appraise customers and match them with appropriate products.

In many African countries, however, weak digital and communications infrastructure and non-standardised processes threatens to hold back a shift towards digital banking.

“The single biggest factor limiting large-scale financial inclusion across Africa is the cost of infrastructure and the ability to deliver those solutions across multiple regulatory jurisdictions,” says Andrew Baker, chief technology officer at Absa Group, formerly Barclays Africa.

Ms Der Tuin says automating a “highly repeatable process” such as the loan appraisal process can deliver cost-efficiencies. But she also believes that, in Africa, where loan activities are highly dependent on human decision-making, digital technologies must first be integrated into communities’ existing ways of working before being fully embraced.

“Change management is the biggest barrier,” she says. “We replicate the [local] status quo so that people can learn the platform. Then it’s much easier for them to use mobile apps.”

Some lenders are finding ways to get around the fragmented nature of microfinance processes in Africa.

Absa is exploring a cloud-based AI product that will enable the bank to standardise procedures and security levels in different countries. “In other words, we will be able to build very secure, repeatable services that can be delivered across the entire continent,” Mr Baker says.

Blockchain, the decentralised technology that underpins cryptocurrencies, is also being explored as a means of expanding access to finance in some developing countries. Giulio Coppi, digital specialist at the Norwegian Refugee Council, points to sites such as, which enable peer-to-peer currency exchange.

“It is basically a system to allow people to convert bitcoins into local currencies for traditional transfers and to use bitcoin even where markets and sellers are not accepting it,” he says.

Yet for now, says Mr Coppi, most microfinance institutions would find it difficult to integrate blockchain technologies into their operations. “The entry costs are very high,” he says. “Not every NGO [non-governmental organisation] can build their own distributed ledger system.”

Finance experts say technology can play an important role in improving customer relations, even without human interaction. Rosa Wang, global director of digital finance at Opportunity International, which provides poor communities in developing countries with financial services, sees potential in “interactive voice response” systems that deliver automated messages in local languages.

“In Africa, two-thirds of clients have literacy challenges and they might or might not speak the majority language of the country,” she says. “So the IVR allows an interaction.”

This is also becoming more important as microfinance transactions are increasingly made outside the branch, both electronically and through agents at small shops or mobile phone kiosks.

When Opportunity International tested IVR in Ghana, the results were encouraging, says Ms Wang. “In focus groups, people felt it showed that the microfinance bank cared about them — we didn’t anticipate that.”

She argues that this emotional aspect is particularly important for those taking out very small loans, since it enables lenders to encourage the use of other financial products that are relevant to individuals’ financial security, such as savings accounts and insurance policies.

“The richness of the client experience is important,” says Ms Wang. “And when the transactional piece is [executed] by the clients themselves . . . you need to be more creative.”

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