Leaders of microfinance banks (MFBs) in Nigeria are facing questions about their IT strategy. They need a plan defining what their MFB needs to do to serve a changing client base in a market quickly evolving with technology. Digital financial services, agent banking, and e-payments are fundamentally changing the financial services industry. According to Central Bank of Nigeria (CBN) statistics, the value of e-payment transactions rose by 32.5% between 2016 and 2017.
While there are countless different apps and digital financial services to consider, the objective of your IT strategy is clear and straight forward. Your IT strategy must enable your MFB to deliver on your business goals — growth, sustainability, profitability, impact.
Building cloud technology into your IT strategy
According to an article published by Forbes, nearly 80% of enterprise information technology (IT) will move to the cloud by the year 2025, leaving their on-premise systems behind. This prediction includes financial institutions and financial service providers around the world including commercial banks, rural banks, microfinance banks and institutions and financing NGOs.
“Organisations that do not have a high-level cloud strategy driven by their business strategy will significantly increase their risk of failure and wasted investment.”David Cearley, Vice President and Gartner Fellow
Cloud-based technology or ‘the cloud’ delivers well-documented business benefits. When a business or organisation replaces its dated, on-premise IT system with a modern cloud-based platform, they benefit in three key ways according to IBM: flexibility, efficiency and strategic value. For microfinance banks, the value of cloud technology can lead to:
- Becoming more efficient
- Making informed decisions
- Growing and reaching more clients
Your microfinance bank benefits from cloud technology both in the short and long term. The benefits are especially significant for growing institutions. However, as a leader of a microfinance bank, you must also consider the risks your IT strategy poses.
Addressing common concerns about cloud technology
Though there are risks connected to relying on cloud-based services, you can manage these risks. According to the USAID procurement guidelines for financial institutions, one of the most effective ways to mitigate the risks is through a “systematic and thoughtful approach to qualifying and selecting cloud service partners, combined with careful attention to service level agreements”.
“Cloud computing represents one of the most misunderstood, yet valuable, innovations in current IT and business strategies.”Daryl Plummer, Vice President and Gartner Fellow
To mitigate your risks, you need to consider your financial institution’s operating environment: secure data storage, a protected network, and a secure community cloud-based core banking system.
Your financial institution’s security is Oradian’s priority. Security is designed into the design and architecture of our cloud-based core banking system, Instafin. Oradian’s security governance enables financial institutions to operate continuously and comply with regulations in Nigeria, while maintaining the lowest possible security risk.
Download your free guide for improving your IT strategy and security with Oradian
Defining your IT strategy for the future
According to an article published by Forbes, nearly 80% of enterprise information technology (IT) will move to the cloud by the year 2025, leaving their on-premise systems behind. This prediction includes financial institutions and financial service providers around the world — commercial banks, rural banks, microfinance institutions and financing NGOs alike.
For example, Cantilan Bank, Inc. (CANBNK), one of the largest rural banks in the Philippines, reached a national milestone by becoming the first financial institution regulated by the Bangko Sentral NG Pilipinas(BSP) to move their core banking operations to the cloud. CANBNK’s digital transformation was supported by the Asian Development Bank as a pilot project to demonstrate the benefits of cloud technology in terms of effectiveness, efficiency, risk mitigation and outreach.
Benefits your microfinance institution can gain with cloud technology
Cloud-based technology or the cloud delivers significant business benefits. Because countless businesses are reaping the benefits already, the results are well documented. When a business or organisation replaces its dated, on-premise IT system with a modern cloud-based platform, they benefits in three key ways according to IBM: flexibility, efficiency and strategic value.
For microfinance institutions, the value of cloud technology leads to becoming more efficient, making informed decisions, growing and reaching more clients in remote, hard-to-reach communities. Your microfinance institution benefits from cloud technology both in the short-term and long-term. The benefits are especially significant for growing institutions. Take the example of opening a new branch.
Become more efficient
With cloud technology, your financial institution can open new branches quickly and without heavy capital investment. Each branch only needs to have an Internet connection and a laptop to access your cloud-based core banking system. This speeds up the time it requires to open a new branch — an access point for financial services
Make informed decisions
Using real-time data that is consolidated from all of your branches, you can create reports that show you which branches are overflowing with demand for your services. This gives you an overview of your market and where it makes the most sense to open a new branch — for your business and for your community.
Reach more clients
With the ability to open new branches quickly and place them wisely throughout your market, your microfinance institution can reach more clients in a more efficient manner. This is critical to supporting your communities and reaching your financial inclusion mission.
Myths about cloud technology are misleading business leaders
Despite the proven benefits of cloud technology, skeptics remain. As Vice President and Gartner Fellow Daryl Plummer states, “Cloud computing represents one of the most misunderstood, yet valuable, innovations in current IT and business strategies.” In a report written by Gartner, How and Why Leaders Must Implement Cloud Computing, some of the most common myths are:
- Cloud is less secure than on-premise systems
- The cloud is a data centre
- Cloud is not for mission-critical use
- Cloud should be used for everything
- “The CEO says so” is a strong enough cloud strategy
While myths about cloud technology are widespread, experts emphasise that “Organisations that do not have a high-level cloud strategy driven by their business strategy will significantly increase their risk of failure and wasted investment.”David Cearley
How to successfully move your microfinance institution to the cloud
Replacing an on-premise system and going to the cloud is not just about technology. To reap the full benefits of the cloud, your microfinance institution needs to align your technology strategy with your business strategy, create a change management plan, get buy-in from all areas of your business, develop an implementation and training plan, etc.
Oradian works with microfinance institutions one-on-one through each step of digital transformation from on-premises systems to our cloud-based core banking platform. To get started, contact us and we will get back to you shortly.
In the meantime, there are useful guidelines and helpful thought exercises that can help you as a leader of a microfinance institution prepare your move to the cloud.