{"id":19586,"date":"2016-11-18T16:53:16","date_gmt":"2016-11-18T21:53:16","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/digitalization-in-microfinance-in-u-s\/"},"modified":"2016-11-18T16:53:16","modified_gmt":"2016-11-18T21:53:16","slug":"digitalization-in-microfinance-in-u-s","status":"publish","type":"hck-submission","link":"https:\/\/aiinstitute.hbs.edu\/platform-rctom\/submission\/digitalization-in-microfinance-in-u-s\/","title":{"rendered":"Digitalization in Microfinance in U.S."},"content":{"rendered":"

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Grameen America, Inc (GAI) was founded by the Nobel Peace Prize recipient Muhammad Yunus in 2008 in New York. As a 501(c)(3) nonprofit, GAI offers microloans to women entrepreneurs in the U.S. through the community-based lending model used by Grameen Bank in Bangladesh. Before coming to HBS, I worked in the finance team as a data analyst and had the chance to lead their digital transformation initiatives, which I wish to talk about today.<\/p>\n

Business Model<\/span>
\nGAI\u2019s value proposition has two components: capital and credit access. GAI offers loans starting at $1,500, and borrowers are entitled to incrementally larger loans as they go through loan cycles in the program. Furthermore, a benefit specific to the U.S. economy, GAI partners with Experian to help borrowers build their credit score. In 2015, the largest loan taken out by a single borrower was $11,000, and borrowers on average built a credit score of 670 within 6 months of their first loan [1]. GAI is partially funds it operations by collecting 15% interest on these microloans, which have 99% repayment rate. By Q3 of 2016, GAI has distributed more than $515MM in disbursements to 81,100 women across the U.S [2].<\/p>\n

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Operational Model<\/span>
\nGAI operates in 18 branches across 11 different cities in the U.S., with each branch manager planning the branch\u2019s microloan portfolio and disbursing loans. Each branch has up to 10 center managers to collect interest every week during the borrowers\u2019 weekly meeting. GAI takes pride in the extent of its employees\u2019 facetime with its borrowers, but the amount of labor hours was starting to place a huge burden on its treasury operations.<\/p>\n

GAI recognized that as the volume and size of disbursed loans increased, it would have to invest heavily in digitalization.<\/p>\n

Pain Points
\n<\/span>Before GAI\u2019s digital transformation, there were two major operational pain points, along with the challenges they created:<\/p>\n