MicroFinTech: Expanding Financial Inclusion with Cost-Cutting Innovation

Description

Microfinance is a renowned albeit controversial solution for giving financial access to the unbanked, even if micro-transactions increase costs, limiting outreach potential. The economic and financial sustainability of Microfinance Institutions (MFIs) is a prerequisite for widening a potentially unlimited client base. Automation decreases costs, expanding the outreach potential, and improving transparency and efficiency. Technological solutions range from branchless mobile banking to geo-localization of customers, digital/social networking for group lending, blockchain validation, big data, and artificial intelligence, up to “MicroFinTech” - FinTech applications adapted to microfinance. Of interest to both scholars, students, and professors of financial technology and microfinance, this book examines these trendy solutions comprehensively, going beyond the existing literature and showing potential applications to the traditional sustainability versus outreach trade-off. Contents List of Figures List of Tables 1 Introduction References 2 The Microfinance Background 2.1 Why Traditional Banking Is Unfit for the Poor 2.1.1 The Economic Lives of the Poor 2.1.2 Climbing the Social Ladder from the Bottom of the Pyramid 2.1.3 The Key Principles in Microfinance 2.2 From Microlending to Microfinance: Moneylenders, ROSCAs, Credit Cooperatives, and Group Lending 2.3 What Is Microfinance? Characteristics and Differences with Traditional Banking 2.3.1 Different Ways of Achieving the Same Result: Getting Money Back! 2.3.2 Precautionary Savings and Risk Management: Microdeposits and Microinsurance 2.4 The Magic in Microfinance: Is It a Solution for Adverse Selection, Moral Hazard, and Strategic Default? 2.4.1 Transaction Cost Governance 2.4.2 Value Co-creating Stakeholders 2.5 The Interest Rate Paradox: Why Cheap Credit Might Harm the Poor References 3 Microfinance Issues 3.1 From Survival to Self-Sufficiency: How NGOs with a Social Vision Might Become Commercial Banks 3.1.1 Microfinance Investment Vehicles: The Missing Link in the Demand–Supply Chain of Funding? 3.1.2 Uncorrelated Investments, Risk, and Portfolio Diversification 3.2 Funding Sources and Lending Structures: Should Finance for the Poor Be Subsidized? 3.3 The Interaction Between Microloans, Microdeposits, and Microinsurance 3.4 Dreams for the Present and Goals for the Future: Combining Outreach with Sustainability 3.5 Microfinance Banana Skins (Outreach and Sustainability Bottlenecks) 3.6 Poverty Traps and Microfinance: From Financial Inclusion to Sustainable Development 3.7 Green Microfinance and ESG Compliance References 4 The Impact of Technology on Microfinance 4.1 Leveraging Financial Inclusion with Digital Technology 4.2 Technology and Microfinance Risk Factors 4.3 The Impact of Technology on the Supply and Value Chains 4.4 Credit Scoring with Electronic Payment Records 4.5 M-banking and Point-of-Service Payment Technologies 4.6 Geolocation of Clients and Branches 4.7 Digital Scalability and Cloud Computing 4.8 Digital Group Borrowing (Lending) and Social Networks 4.9 Crowdfunding and Peer-To-Peer Innovations Linked to Group Borrowing 4.9.1 Crowdfunded Digital Platforms Interacting with Microfinance Institutions 4.10 Big Data and Artificial Intelligence 4.10.1 Financial Diaries and Social Habits of the Poor: A Digital Collection Matching Top-Down Budgeting with Bottom-Up Evidence 4.10.2 Survival Cash Flow Management 4.11 Agency Banking and Biometrics 4.11.1 Blockchains 4.11.2 Internet of Value 4.11.3 Linking Blockchains to Social Networks and P2P Lending 4.12 The Intangible Portfolio 4.13 Startup Microfinancing References 5 Fintechs 5.1 Fintech Applications 5.2 Financial Bottlenecks: Inefficiencies and Friction Points 5.3 Fintech Business Models 5.4 Banks Versus Fintechs: Cross-Pollination and Scalability 5.5 Fintech Valuation 5.5.1 Insights from Listed FinTechs 5.5.2 The Accounting Background for Valuation 5.6 Valuation Methods 5.6.1 The Financial approach 5.6.2 Empirical approaches (Market multipliers) 5.7 Challenges and Failures: Why Fintechs Burn Out References 6 Microfintech Applications 6.1 From Fintech to Microfintech: Upgrading and Adapting the Business Model 6.2 The Uneasy Adoption of Fintech Strategies for Financial Inclusion 6.2.1 Matching the Demand with the Supply of Financial Products 6.2.2 Regulatory Sandboxes 6.3 Boosting Scalability and Outreach with Technology-Driven Sustainability 6.3.1 Sustainability Metrics 6.3.2 Operating Leverage and Scalability 6.3.3 Metcalfe’s Law and Network Scalability 6.3.4 Operating Leverage and Liquidity 6.4 Sponsoring Technology with Impact Investment and Results-Based Financing 6.5 Leveraging MFIs With P2P Lending and Crowdfunding 6.6 The Networked Digital Ecosystem 6.7 Digitalization of Self-Help Groups 6.8 The Dark Side of Microfintech 6.9 Microfinance Digitizers: From Kiva to M-pesa and Lendwithcare 6.10 Reinterpreting the Key Microfinance Principles References Conclusion References Index