The future of data-driven relationship innovation in the microfinance industry

Abstract

Data-driven innovation (DDI) initiatives by microfinance institutes have transformed the global poverty alleviation landscape. Despite the fact that relationship building is one of the primary goals of DDI initiatives in microfinance operations, there has been little research on the dimensions of relationship quality. This study examines how DDI initiatives recognize and incorporate relational dimensions in their service offerings to alleviate poverty. Drawing on a systematic literature review, thematic analysis and interviews with 20 microfinance managers, this research explores the relationship quality parameters that need to be leveraged. Grounded in the resource-based theory, the findings of this study confirm trust and commitment as two key relationship capabilities. The findings contribute to a better understanding of how microfinance institutes can use DDI to achieve sustainable competitive advantage.

Addressing the grand challenges of poverty with data‐driven creative service offerings

“…For example, analytics managers in the microfinance industry can serve poor customers by spotting patterns in borrowing/expenditure practices to encourage savings, education for children, healthcare, or investment. Managers can also exercise ambidexterity in service innovations by developing models to anticipate client needs (e.g., education loans for clients' children) and tailor loan programs to individual borrowers (Hani et al, 2022). These findings reflect the statement of the CEO of Grameen Foundation, “Big data can be a powerful tool to help combat poverty.…”

“…Overall, our findings provide two mutually inclusive avenues of impact. The first avenue requires managers of such social ventures to invest in data‐driven digital innovations through business models, platforms, and services to enhance operational efficiency (e.g., loan repayment behavior, defaults, and credit losses), customer relationship management (customer lifetime value), and portfolio growth (e.g., creative service offerings) (Hani et al, 2022; Nambiar, 2019). The second avenue necessitates managers to link between data‐driven digital innovations and social impact through creative service offerings to address the grand challenges, such as poverty, healthcare, education, food, energy, and overall quality of life (Aksoy et al, 2019; Chandy et al, 2017; Hsu et al, 2018; Lee et al, 2019; Yunus et al, 2010).…”

“…These microlevel understandings underpin the distinctive data analytics skills, data integration process, organizational disciplines, information processing capacity, and decision rules and structures in forming BPDA capability for creative service offerings (e.g., healthcare, food, education, energy, and farming). The novelty of our study is represented through robust theoretical reasoning into each microfoundation and the overall delineation of them on data-driven innovation capability in tackling the grand challenges of poverty (Hani et al, 2022).…”

“…Extant studies acknowledge that big data analytics performs a vital role in transforming traditional businesses into digital ones, particularly in developed countries (Braun & Garriga, 2018; Mariani & Wamba, 2020; Wang & Wang, 2020). Thus, the challenge arises to use big data analytics to create substantial value for customers living in poverty, especially in developing countries (e.g., Akter et al, 2021; Hani et al, 2022). In this vein, the study considers firms' capability to analyze big poverty data as a vital strategic tool to offer creative service offerings.…”

Determinants of Microfinance Adoption, Challenges Encountered, and Principal Solutions: An Empirical Analysis Using Theory of Planned Behaviour

“…In attempts to explain satisfaction and intention to use microfinance, several theories were reviewed such as Resource Based View Theory (RBVT), Technology Acceptance Model (TAM), Stakeholder Theory(ST), Customer Satisfaction Theory (CST) and Theory of Planned Behavior (TPB). The firm's resource-based perspective (RBV) places a strong emphasis on having access to and making use of valuable, uncommon, unique, and novel resources in order to create long-lasting competitive advantage (Sajib, 2022). TAM describes the scenario in which new technology advancements are presented to clients, but it does not address actual system usage (Kelly et al, 2022).…”