Building Value in Microfinance Through Digitization: Lessons from Loan Automation Pilots

Digitization has been a source of hope and frustration in the microfinance industry. Hope because it is seen as the means to making MFIs competitive into the future—frustration because, despite the significant resources invested, very few digitization initiatives have transformed the traditional MFI model. CGAP identified promising digital implementations in previous publications and distilled five core principles for successful implementation. In this focus note, the authors report on the tests they ran on those principles with 27 MFIs located around the world. 

This focus note summarizes the overall experience, evaluates the validity of the five principles, offers key lessons learned, and provides evidence that other industry stakeholders can adopt and scale a similar approach – funders, donors, investors, and consulting firms. The insights are based on CGAP's work with five successful credit automation pilots and over 90 dashboards revealing insights about digitization efforts and the customer value created.