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Role of Technology in Financing the Poor - Essay Example

Summary
The paper "Role of Technology in Financing the Poor" is an outstanding example of a business essay. The goals of achieving economic growth in many more countries across the globe are unlikely to be attained given that about 1.7 billion working adults make less than $2 a day and have little or no access to fundamental financial services…
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Extract of sample "Role of Technology in Financing the Poor"

ROLE OF TECHNOLOGY IN FINANCING THE POOR By Student’s Name Code + Course Name Professor’s Name University Cite, State Date Table of Contents Executive Summary………………………………………………………………………………3 A. Issue Discussion.………………………………………………………………………….4 B. Issue Outcomes...………………………………………………………………………….4 C. Recommendations…………………………………………………………………………6 References………..……………………………………………………………………………….7 Executive Summary The goals of achieving economic growth in many more countries across the globe is unlikely to be attained given that about 1.7 billion working adults make less than $2 a day and have little or no access to fundamental financial services. Unlike in such underdeveloped countries like Uganda, in developed countries like the US and Australia it has been proven that availing citizens with access to capital as well as the ability to save are the fundamental groundwork of economic growth. However, about 80% of the entire world’s population has no access to even the most basic financial services. In Uganda, the role of technology in financing the poor is evaluated around a myriad of problems. However, for this report, the barrier under analysis is depicted by the fact there is an over-dependence on donor funds for wholesale financing services as well as operational costs and an immediate need for a more sustainable and commercialised sources of finances like local banks. It is also noted that there are technical barriers as well as significant level of transaction costs that make it extremely unaffordable to contact, in a more sustainable way, poor people in both urban and rural Uganda that do not have access to microfinance. Thus, a most sustainable technological solution is deemed necessary to solve the aforementioned finance accessibility challenge for the poor Ugandans. Technology is able to alleviate the problems by way of availing a fairly secured, low-cost and reliable way of capturing basic transaction-based data and thereafter transferring it in a consistent and standardized way to microfinance institutions(MFIs) across Uganda (Nunan, 2007). In essence, it is recommended that a Remote Transaction System should be developed to help link microfinance customers to their respective MFIs. This is mainly because the poor in both urban and rural areas lack access to finance due to absence of a reliable and efficient data capture module like the one proposed. A. Issue Discussion The issue at hand rests with the fact that the poor in both urban and rural Uganda have lack access to finance due to over-dependence on donor funds for wholesale financing services as well as operational costs and an immediate need for a more sustainable and commercialised sources of finances like local banks. Consequently, it is noted that there are technical barriers as well as significant level of transaction costs that make it extremely unaffordable to contact, in a more sustainable way, poor people (Hinson, 2011). The aforementioned barrier is an impending factor to the provision of affordable and reliable finances to the poor through a technological advancement since most of the Ugandans poor live in deeper rural areas where there are little or no access to financial institutions from where they can get and service their respective loans (Ssewanyana, 2009). This means that as much as the poor people in rural areas might have the capacity to repay loans they lack an effective technological platform that can help link them to MFIs located in urban areas. Subsequently, technological features could not be used to fund poor people in rural Uganda because the country faces extreme challenges in regards to infrastructural barriers that prevent any potential provider of technological based finance services in the developing countries to invest (Nunan, 2007). These infrastructural challenges include; power outages, unsustainable telecommunication services that are provided by both the government and private sectors as well as limited levels of technical expertise in matters related to the development of technological platforms. B. Issue Outcomes The following outcomes are noted; First, it is established technology linked with business process changes results to greatest level of returns. It can be established that overlaying a newer level of technological platform solution on the already existing business processes, without any notion of rethinking the procedures, can help increase as opposed to curtailing the cost and complexities involved in conducting business activities. It is important to realize that information technology avails the chances of updating and innovating distinctive business processes (Nunan, 2007). Through such unique innovations, technological platforms can become a bridge for financial industries to attain tremendous increases in scale. With the introduction of RTS in Uganda MFIs, the management team would have the opportunity to update operations on a daily basis and also, they would track down on their respective loan portfolios on personal client capacity. In the past, the lack of technological platforms limited MFIs in Uganda on tracking down on their respective loans on a group basis and had no capacity to perceive customer’s savings (Nunan, 2007). The development of Point-of-Sale terminals that should be extended to such merchants as gas stations franchises would help to make loan repayment and depositing much easier since these franchises acts as virtual extensions and agents of the MFIs (Khoja & Lutafali, 2008). Given that the agents receive a commission fee for availing the transaction service, they are deemed to be beneficiaries of the RTS model. The model postulates that an agent in such a country as Uganda can have a successful business with between 200-400 regular customers that transact at least twice in any given month (Nunan, 2007). Second, it is established that the emerging markets in Uganda require innovative and suitable technologies that are planned for scale purposes. Emerging financial markets with poor people require at least technological solutions that are tailored to meet the distinctive and challenging needs of MFIs (Ssewanyana, 2009). In financial environments where telecommunications and technical support is limited then it is important to note that innovation should be set in order to strike a balance between the perfect of technologies that has to offer and the immediate barriers attributed to the local poor people (Meenu, 2012). In Uganda, it is established that effective and workable decisions were to be made in order to differentiate between technological based solutions that were deemed appropriate and the top notch technological solutions that are deemed of little or no practicability (Ssewanyana, 2009). Third, it is noted that the immediate cost attributed to the development of infrastructure needed for sustaining the technology is considered to be high enough for MFIs to afford. It is important to comprehend that the highest level of capital costs needed for implementing the RTS model solution is incurred in the course of establishing the PoS terminals. This should costs at least $700 in establishing each of the PoS and another $5 needed for issuing smart cards to the rural poor people in Uganda (Ssewanyana, 2009). The RTS model solution is perceived to be more crucial in case the poor have access to more points of access at which they can effectively conduct financial transactions. This is an outcome that puts the local MFIs in a compromising situation given that their respective benefits rests in developing the PoS terminal network even further, however; as the network grows their immediate cost savings declines substantially (Brennan,1992). C. Recommendation i) Scalable infrastructures should be developed in order to connect micro-entrepreneurs to both internal and external level of agents, credit agencies, and credit regulators. This is because the technology like RTS can be evolved to avail functionality that serves to construct links between local MFIs and both the informal and formal financial sector. ii) The local governments should partner with local MFIs to provide effective and reliable services for constructing a technological platform needed for reaching the rural based poor just as it does to the urban and peri-urban based people. This can be done through improving telecommunication services as well as developing educational institutions needed for training technical experts. References List Brennan, B 1992, 'Financing growth', Business Quarterly, 57, 3, p. 115 Hinson, RE 2011, 'Banking the poor: The role of mobiles', Journal of Financial Services Marketing, 15, 4, pp. 320-333. Khoja, F, & Lutafali, S 2008, 'Micro-Financing: An Innovative Application of Social Networking', Ivey Business Journal, 72, 1, pp. 1-9. Meenu, SA 2012, 'Microfinance interventions and customer perceptions: a study of rural poor in Punjab', Decision (0304-0941), 39, 1, pp. 62-76. Nunan, F 2007, 'Reducing poverty through fisheries co-management: an analysis of design and intentions in Uganda', Journal of International Development, 19, 8, pp. 1151-1164. Ssewanyana, JK 2009, 'ICT Usage in Microfinance Institutions in Uganda', African Journal of Information Systems, 1, 3, pp. 5-28. Read More

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