With our new digital solution, credit unions can deliver loans to small businesses in just 48 hours with less paperwork, fewer transactional costs, and a reduced risk of losses. The World Council of Credit Unions (WOCCU) launched the solution with the National Federation of Credit Unions in Guatemala, FENACOAC, which incorporates our innovative SME-lending methodology – “Franky”.
WOCCU’s USAID-funded, Technology and Innovation for Financial Inclusion (TIFI) project worked with FENACOAC to develop “the “Franky” process. It begins with a loan officer visiting small businesses on-site with a mobile device, scanning financial statements, legal registrations, and any other documentation, which are then uploaded onto a central database. “Franky” got its name because it was put together using ideas and experiences from four different WOCCU and FENACOAC employees.
Screenshots of the new digital lending application
1. CLARIFIED LOAN APPLICATION REQUIREMENTS
The digital tool will prompt the credit officer to work through the loan application with the small business owner, clarifying the loan application requirements in real-time. By traveling to the place of business of the small business owner, the credit officer can work with the applicant to identify the required documents and information.
2. STRENGTHENING CREDIT UNION/MEMBER RELATIONSHIPS
Enabling credit officers to visit small business owners in their place of business will provide benefits to both the CUs and the small business owners. The credit unions will develop stronger relationships with clients, support the clients through the application process, and evaluate the physical assets of the small business. Deploying their human resources to the field will also enable cross-selling various other credit union essential services to small businesses including payroll management, savings, and insurance.
3. DECREASED EXPENSES FOR APPLICANTS
The small business owners will no longer have to visit a credit union branch, resulting in decreased travel costs, decreased time away from their businesses, and decreased risks associated with travel especially during the COVID-19 pandemic.
4. REDUCED TURN AROUND TIME FOR APPROVAL
Through the new methodology and built-in calculations, a credit union will be able to approve a loan in a matter of hours, rather than weeks. Data will be stored on a central database providing a constant dearth of data, enable additional data analytics when analyzing future loan applications, and inform a market strategy across various regions within Guatemala based on lending trends.
5. INCREASED EFFICIENCY FOR CREDIT UNIONS
While the new methodology is expected to reduce the risk of losing money on non-performing loans, the digital tool will also permit loan officers to analyze multiple loans at the same time – saving time and increasing the credit union loan portfolio capacity.
Digitized lending has the ability to enable credit unions to improve their lending practices, increase loan volume, decrease lending risks, and provide a wealth of benefits to credit union members. As credit unions continue to digitize their operations, digitizing their lending operations should be a priority pillar of their transformation and be constantly reviewed as part of their digital transformation strategy. WOCCU looks to continue our engagement with our members as they consider the possibilities of digitizing existing lending practices or developing new practices as part of their transformation strategy. As part of our engagement, we look to you, our partners, to share your experiences and we encourage you to reach out to our project team and let us know your thoughts. To spur the conversation, we have included some framing questions below. We would love to hear your feedback and thoughts on the questions below and beyond!
