Inclusion of Biometrics in Micro Financing

Biometrics – The Pen and Paper of Microfinance

Microfinance and Biometrics must walk hand-in-hand for faster, reliable and stringent financial transactions chiefly in the remote sections across the Nation. The term Microfinance introduces the micro-loan or micro-credit which imparts loans, collateral savings, credits and insurance to the impoverished segment of the society. To lend a hand in providing such financial transactions, POS machine and financial terminals simplifies the task of rendering the microfinance services to the beneficiaries.

As Biometrics technology enters the micro financing industry, it makes the task of offering benefits to the low salaried people much simpler and secure. The banks, non-banking financial corporation’s (NBFCs) and other microfinance institutions (MFIs) have commenced the adoption of Biometric devices to identify and validate the identity of the needful people applying for low-interest rate loans or credit transactions in the rural areas.

Biometrics – The Pen and Paper of Microfinance

Biometrics technology plays a critical role in bringing the socio-economic development in the rural or semi-urban sections of the Nation from the grass root level of the microfinance. In particular, The technology involves recording of an individual’s psychological attributes or characteristics i.e. fingerprint, face, iris or palm vein impressions at the time of rendering financial aid to him/her.

The introduction of Biometrics technology in the banking and financing sector has brought a sea change in the manner of delivering various services such as microfinance, e-finance and banking to the masses, chiefly to the unbanked masses.

Biometrics technology has the capability to uplift the entire underdeveloped section of any developing country above the mark with accurate identification of the beneficiaries.

Countries like South Africa, Ghana, Pakistan, India and others have implemented the biometric citizen identification processes to register and identify every citizen. The citizen identification can assist the banking, NBFCs or MFIs to identify the beneficiary for loan recoveries.

Channels Used by Microfinance Institutions

As digitization is hitting the financial market, the services offered by the MFIs or NBFCs aims at reducing the flow of cash that makes the whole process accessible and efficient.

Moreover, the fingerprint or iris enabled Point of Sale (POS) or Aadhaar enabled Payment System (AePS) have eased the task of beneficiaries holding Aadhaar card. With the advent of Biometrics technology, the micro financing institutions are able to conduct secure transactions distantly.

Micro financing copulated with the financial terminals or POS systems can bring comfort, access and can render affordable financial services at the doorsteps of the rural citizens without any obligation of attending the far reached banks.

POS System – A Gold-Plated Answer to Microfinance

Biometrics authentication technology has been put into practice by the UIDAI for citizen identification program – ‘Aadhaar’ with a viewpoint of creating a unique identity of every individual. Aadhaar and Biometrics technology has raised the standard of micro financing services in India.

POS systems and financial terminals keep the microfinance industry on the upper hand by rendering ease and simplicity along with few other benefits mentioned below:


Biometric devices like financial terminals and POS aids in achieving the convenience of the micro-credit and micro-loan for the people living in the underdeveloped or remote locations as they no longer have to travel an extra mile to receive the benefits of micro finance services.


Biometric devices like POS and financial terminals employed by the MFIs, NBFCs and banks can provide various financial services with inter operating benefits considerably to those who do not have a stable source of income. The needful class of the society can get a quick and easier transaction facility for multiple accounts under a single roof.

Ease of Transaction

An individual while taking advantage of various micro financing services has to verify oneself by his/her fingerprint or iris impression instead of submitting multiple documents. Consequently, financial transactions can be conducted with ease and security than ever before.

Reduction in Customer Fraud

As the psychological attributes of the applicant act as a key for all the financial activities related to micro-loan or micro-credit, a tremendous reduction has been notified in the fraud related to financial transactions, for instance fraud due to duplicate loan applications.


The incorporation of Biometric devices, in particular – the financial terminals and POS systems should be tailored to meet the explicit necessities of the beneficiaries that the MFIs, NBFCs or other banking establishments wish to serve.


  • Raipal Singh

    Adding biometrics to micro finance software.


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