Implementing Point of Sale Technology in Microfinance: An Evaluation of Come to Save (CTS) Cooperatives, Bangladesh

Background

Microfinance is considered as one of the development interventions, which have been recognized as powerful instrument for poverty reduction of the low income households. Microfinance has enabled the poor to build assets, increase income, and reduce their vulnerability. There are still relatively few financially sustainable MFIs with significant breadth and depth in outreach in Asia including Bangladesh. It has been widely recognized that the main constraint for the sector is not the lack of funds but the lack of capacity in operating sustainable institutions (Setboonsarng & Zhang, 2006). As a means, information and communication technologies (ICT) have emerged as a powerful tool to reduce operating costs, making it viable for financial institutions to expand into rural and low-income areas. ICT innovations such as a personal computer connected to the internet, a mobile phone, ATM or POS device located at a retail, may be less expensive to establish than branches located in rural areas and more convenient for customers (Ivatury, 2005). Unlike pure cash based transactions, ICT-based transactions can take place with less time or with no time required from a teller. Rather than hand over cash to a teller when making a deposit or loan repayment, a customer can give cash to a store clerk, swipe a debit card through a POS card reader, and input an identification number to authorize the transaction. The store’s account at the financial institution would be debited by an amount equivalent to the cash deposit, and the customer’s would be credited. Since the transaction is electronic, from the institution’s perspective, it is less costly to process.