Non-Bank Financial Institutions (NBFIs) must deploy data management systems to reduce their cost of operation and drive down interest rates, Ishmael Kwesi-Otchere, Managing Consultant of Microfin Consult, a management rural and SME-focused consultancy firm has said.

Operational costs of NBFIs are generally high and is reflected in the interest rates charged on loans and advances made to Small and Micro Enterprises (SMEs).

While interest rates of universal banks stands at about 33 percent per anum, that of NBFIs is about 20 percent per month--which translates into 240 percent per anum.

He said: “Traditionally, MFIs are known to charge high interest rates due to high operational costs such as cost of borrowing and high risk premiums.This is because for them to be sustainable, they will have to transfer the high cost of operations to the clients at high interest rates which usually has a negative effect on micro-enterprises and small businesses.”

Mr. Kwesi-Otchere was speaking at a training programme for rural banks and microfinance institutions on how to effectively operate the Microfin Planning Tool—which is an excel-based business planning and budgeting software—to drive growth and productivity.

The four-day event held in Winneba in the Central Region, pooled about 17 participants drawn from small and medium enterprises, savings and loans companies and microfinance institutions—including two officials from the Apex Bank of Sierra Leone—where taken through hands-on training on how to use the electronic software.

The Microfin software takes assumptions on future organisational growth, current and future loan and savings products and other budgeting needs to generate future balance sheets, income statements, and cash flow statements for future budgeting, analysis, and comparison with actual results.

When effectively leveraged, businesses can capture market share, reduce interest rates, test the impact of operational decision on the financial statements, and make credible presentations to donors, investors, and others.

Mr. Kwesi-Otchere indicated that the training programme was to equip participants efficiently analyse data, improve effectiveness and reduce the operational risks in their respective organizations.

He indicated: “This training exercise seeks to empower participants to use data to analyse client behavior and related operational risks using the Microfin business planning and corporate budgeting software.”

President and CEO of MFF Resources, developers of the Microfin software, Howard Brady, who was the facilitator for the training programme, said the system will help businesses to make the right budget decisions as it translates operational projections into balance sheets.

He said MFIscould be most impactful by leveraging technology to manage data, identify clients’ needs and design appropriate products for them.

“For instance, rural banks and MFIs using the Microfin software can test assumptions before making their various products available to guard against credit risks and other associated operational risks.

A participant and Head of Budget Department, Apex Bank of Sierra Leone, Samuel Gbonda, said the training program was hugely beneficial.

“We have always found it difficult to project accurately, and that is why we decided to attend this training; we can now make accurate projections to assess the performance and sustainability of business organizations,” he told the B&FT.