Lessons learnt from digitalising microfinance institutions in Central America

Digitalisation is often a key component of the technical assistance ADA provides to microfinance institutions (MFIs) as it enables the MFIs to become more efficient by increasing their outreach at lower operational costs and risks.

Implementing digital quick wins

Between 2019 and 2022, ADA supported the Central American and Caribbean Microfinance Network (REDCAMIF) in implementing digital quick wins at 17 member MFIs in Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and Panama. These projects implemented remote portfolio management for client advisors, transactional applications, payment options and also increased data protection as well as IT security. 

A client-centric approach was taken to adapt the MFI’s services to the clients’ needs, which required changes to the organisational culture, processes and IT infrastructure of the MFIs. 

Easier access for clients, greater efficiency for staff

Clients can now apply for loans, request information and make payments online. In addition to offering clients a better experience, the new mobile applications facilitate access to the MFI’s products and services as customers no longer have to travel to branches, thereby enabling the financial inclusion of previously unbanked people. 

These services proved very popular as soon as they were launched: from September 2021 to December 2022, in 13 of the 17 MFIs, more than 70 000 customers (of which 61% were women) used the new digital services or products. At the same time, two MFIs that implemented digital loan application tools reduced their disbursement time by four days.

The new mobile payment options are not just beneficial for daily banking operations but also facilitate loan repayments. This in turn improves the quality of the MFI’s loan portfolio while the automated data processing makes managing the portfolio easier and more efficient. 

For example, Finsol, an MFI in Honduras, modified its entire portfolio management process. As a result, remote staff can now consult portfolio reports on their mobile phones to schedule client visits instead of needing to request this information from headquarters. 

Study summarises lessons learned and key takeaways

ADA and REDCAMIF have summarised the different experiences, results and lessons learned by the MFIs throughout the project to encourage other MFIs to facilitate financial inclusion with digital tools.