Journey To Inhouse Loan Management System

Loan Management System is a very core part of any lending institution, but it’s also a part that is most of the time outsourced and is considered a wild west even by many big Fintech organizations. But many a time this leads to a delay and increased expense of a new project dependent on it and many times few changes in the product if the vendor is unable to provide what is exactly required, which is pretty much all the product for any lending institution.

We are a rapidly growing Fintech lending company and like to experiment with many bleeding-edge technologies and products, and we need for these to be out in the market as soon as possible, and we want it to have a few limitations as possible, we didn’t want any vendor to limit our product and we should decide on our own what is possible and what is not.

Every lending company experimenting with new products regularly should try to keep their LMS in-house. Due to many advantages:-

Flexibility:-

Having in-house LMS brings itself a lot of flexibility when it comes to building a new product. We are free to decide completely on our own the product specifications without involving any 3rd vendor to tell us what they can and can’t provide. Who would be accessing requirements based on its larger system providing the same service to a large number of customers. Conflict of interest might also arise sometimes.

Cost Saving:-

In-housing something may save or increase cost, based on your usage, if your usage is very low you might end up spending more in development. But if your usage is considerable you will definitely save a lot of money and this is the cost for any lending company. This could be even more significant if you use some open-source software.

Security:-

This might not exactly be the issue if you are using some big provider, but still, someone else has access to all your data, and if you took service from some new company, this could be a real issue. This point should be considered very serious as it has various long-lasting impacts.

Transparency:-

With an in-house system, you know each and everything happening in the system, each and every calculation, which might not be the case when outsourcing. There will be several times when you will need to know exactly how calculations are happening to explain to internal and external auditors, RBI, and most importantly customers themselves many times, etc.

Ownership:-

You are the owner of the product and you can modify and design as you desire without any restrictions from the capabilities of some 3rd party vendor. It’s your own ground to do and try anything and everything as you desire.

Explorability:-

You can explore different types of products from prototyping to MVP to final product. As you desire and scratch it if required without the issue of any contracts being signed.

Learning:-

This might sound weird but when exploring with your in-house system you can come to learn a lot of things and come up with ideas that might help in the development of a new product or improvement of some existing product.

Moratorium during covid was a big thing and with outsourced LMS you were pretty much bound to implement a moratorium the same way your vendor designed and executed it similarly. But with our in-house LMS, we were free to experiment with it however we wanted and went ahead with what suited best with our companies requirements and objectives.

Points to consider when designing LMS:-

Security:-

This should be the biggest point to consider when designing an in-house loan management system since all your transaction data will reside on this. Any issue here could have some serious impact on your organization’s reputation and customer trust. Which is something very hard to gain but very easy to lose.

Scalability:-

It should scale perfectly with your business. Since you would definitely be scaling your business, you wouldn’t be having book size year after year, you would definitely want that to increase and your system must be able to support that increase.

It doesn’t necessarily need to be built from scratch there are many good open sources with excellent community support out there to be used. We used one of these open sources Apache Fineract (originally MIFOS X). It’s maintained by Apache, one of the biggest open source communities in the world.

Setting up Apache Fineract is very simple and it’s built using very common technologies Java, Spring Boot, Mysql, AngularJS. It’s based on multi-tenant architecture and scales very well with the increasing workload.

Stay tuned for an upcoming blog on how to set up your own in-house LMS using MIFOS X.

Till then you are welcome to explore our LMS for free built on top of Fineract and test its capabilities to decide if you need your own in-house LMS. To explore our mail please mail to one of all of shivam.agrawal@indifi.com, jos.paul@indifi.com, animesh.sharma@indifi.com.

Shivam Agrawal

(shivamagrawal1129@gmail.com)

Senior Software Engineer

Indifi Technologies