Free & Open Source Software for Microfinance: Increasing Efficiency and Extending Benefits to the Poor

Free & Open Source Software for Microfinance: Increasing Efficiency and Extending Benefits to the Poor

Britta Augsburg (The Institute for Fiscal Studies (Centre for Evaluation of Development Policies), UK), Jan Philipp Schmidt (United Nations University MERIT, The Netherlands) and Karuna Krishnaswamy (CGAP/World Bank, India)
Copyright: © 2011 |Pages: 15
DOI: 10.4018/978-1-61520-993-4.ch002
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In this chapter we investigate the potential of open source software to increase the impact of microfinance (MF) especially for the very poor. We argue that especially small and medium organizations play a crucial role, because they are more flexible in operations and familiar with the local context. We consider how new information and communication technology (ICT) can increase outreach of MF to the very poor within a self-sustainable holistic approach. We consider the potential of free/open source software projects to address the computing needs of small and remote MFIs, and we describe the reasons why no suitable solutions have emerged yet. While the use of FOSS and ICTs in general can help increase outreach, we feel the need to draw attention to the challenges that come with it; one should not forget that access to basic financial services is not all that is needed by the very poor.
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[…] our agenda [The Millennium Development Goals] is still achievable globally and in most or even all countries — but only if we break with business as usual and dramatically accelerate and scale up action until 2015 […]

UN Secretary General Kofi Annan; Annan (2005, p. 11)


Background: Why Small Microfinance Organizations Are Needed

While we are safe to say that microfinance is a successful and important tool in alleviating poverty, it is difficult, if not impossible, to track how many institutions are involved. The issue starts by defining what a “microfinance institution” actually refers to. The term is mostly used for all types of formal and semi-formal institutions that offer microfinance services but does not specify how many of their operations should be devoted to microfinance services and how their client profile should look like. This leaves a wide range of institutions including, but not limiting to, banks1, regulated MFIs2, (micro) credit companies3, credit (and savings) cooperatives and credit unions4 and Development NGOs and other non-profit microfinance intermediary facilitators.

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