Who is serving the ‘The Other 3 Billion’

“Access to credit is a basic human right.” – says Professor Muhammad Yunus with a rationale that every human being must be given an opportunity to grow. Capital is...

Cloud Lending Solutions 29th August 2014

Location:  Hyderabad, India Industry: Financial Services 2007 Sales:  NA Grameen Bank, the organization founded by Nobel Prize winner Muhammad Yunus, may be the best-known practitioner of microfinance, which provides small loans and other financial services to the poor. But advisory board member Tarun Khanna, a professor at Harvard Business School, believes Hyderabad, India-based SKS Microfinance (privcapId=26522095) could have even more impact. (Khanna is on the board of the organization.) For one, it's "unabashedly for profit," Khanna says, which means it's growing fast and plowing those profits back into building new systems and greater scale. Already, SKS has 14,000 employees and 3.5 million customers throughout India, and is adding 300,000 new customers each month.

“Access to credit is a basic human right.” – says Professor Muhammad Yunus with a rationale that every human being must be given an opportunity to grow. Capital is an enabler for this transformation.



Traditional banks do a good job of providing capital and formal banking services to the top of the pyramid, but choose to ignore the other 3 billion simply because it is not economical for them to serve the bottom of the pyramid.



Here’s a fact: In the US, close to 60 million households (~90 million people) in the US are either under underserved/banked and traditional banks can’t serve them profitably – In fact, a 2010 FDIC survey found that while 73% of banks were aware of the unbanked and under-banked populations in their market, less than 18% identified expanding services to these consumers as a priority in their business strategy.



Not to mention that innovation as usual is happening outside the banks. Success stories of Lending Club, Prosper, Square among others validates this hypothesis.



The collective result is the rise of non-traditional lending institutions such as Microfinance Institutions (MFI), Peer-to-peer (P2P) or Marketplace lenders or simply online lenders.  The challenge for these non-bank lenders would be to scale while keeping costs down – no point in guessing that cloud based technology will be an enabler to overcome this core challenge.



Although there are shining examples of profitable MFIs, challenge remains for long tail of smaller and local MFIs to operate profitably. Cloud Computing is no longer a technology outbreak, it is truly a vehicle for achieving true business transformation. The proof is in rapid customer adoption for everything from HR to Core Banking to CRM to Financials and other essential applications. It is even more relevant to non-bank lenders such as MFIs as they look to operate very very lean, yet provide the best service to their borrowers.



Banking in the cloud is here to stay!

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