Microfinance Institutions (MFI) currently service over 130 million clients worldwide (World Bank, 2009), while potentially 3 billion people could benefit from the services offered by this sector. This huge base of clients, and the corresponding transactions which they generate, offer a significant potential for MFI operators to utilize Information Technology (IT) based applications in order to reduce costs and expand services. At the same time, a host of factors including inadequate infrastructure, such as the low penetration of computers and limited availability of data communication services in many geographies, and illiteracy and lack of skills, present significant challenges in being able to realize such potential. The present discussion uses a framework of stakeholder analysis, in order to identify specific problems and possible solutions impacting the future of IT applications in the MFI sector. Stakeholder analysis is a well known technique which is used to design and construct large and complex systems. The present discussion looks at the MFI context which is characterized by multiple stakeholders, with a variety of often divergent goals / requirements at a systems level. Such requirements need to be identified, prioritized and quantified, in order to ensure that they are effectively addressed in the several downstream phases, such as design, development, implementation and ongoing support. The present discussion examines the key stakeholders in the MFI context and their high level requirements. These requirements, which are typically complex and abstract, are then decomposed into elementary attributes, which are amenable to quantification and measurement. While the discussion addresses multiple stakeholders, the detailed analysis is restricted to MFIs and their clients (borrowers of micro credit). Clients are the most important category of stakeholders in any proposed system and the detailed discussion looks at some of the unique characteristics of this group, challenges they pose to designers of IT applications, and some possible ideas which have the potential to make significant impact in future systems. Specific attributes discussed include accessibility, availability and unique identity. The usage of computers and Management Information Systems (MIS) in the MFI sector has been growing rapidly, with an estimated 82% of all MFIs using some form of automation (CGAP, 2009 a) as per recent surveys. However, most of the currently deployed MIS solutions address back office functions and do not engage their clients directly or through intermediaries, using technology based solutions. The present discussion examines a few specific technologies and design ideas which have the potential to improve availability and accessibility of technology based solutions to the client base of MFIs, thereby enhancing the scope of automation in this sector.
TopIntroduction
One of the major challenges facing the Microfinance sector is to
engage its huge client base, now numbering over 130 million
worldwide, effectively, using IT applications. Looking at the Indian
context, with a user base exceeding 50 million, the challenge is to
address the specific problems of poor, illiterate populations,
dispersed across geographic areas with poor access to
infrastructural services such as electricity, computing platforms
and connectivity. Given that transactional frequencies are high,
with daily collections in some cases, it is clear that automating
certain identified aspects of the transaction processing system,
using suitable IT based solutions could deliver significant benefits
in terms of cost efficiencies, timeliness of data, and services to
clients.
Recent statistics for 2007 (Srinivasan, 2008) indicate that Self Help Group (SHG)
clients number around 40 million and MFI clients account for around
14 million in India. At a global level, the latest report of the
Consultative Group to Assist the Poor (CGAP, 2009 b), provides
estimates for 2004, 2005 and 2007, arrived at by different methods,
with 133 million users for 2007. These estimates are not strictly
comparable, due to differences in estimation methodology, as also
differences in definition. However, it is sufficient for this
discussion to note that the number of MFI users globally is already
over one hundred million, and growing rapidly.
It has also been reported that as per recent surveys that only 13% of
the population with annual income levels of Rs 50,000 or less (US $
1,000) are availing credit facilities from banks, while 28.3% of
this income segment have bank accounts. This leaves millions
“unbanked and unaddressed” as mentioned by Dr
Chkarabarty, deputy Governor of India’s Reserve Bank, in
a recent speech1.
What kinds of benefits can technology be expected to deliver to MFI
stakeholders, and what is the experience of MFIs in adopting
technology?
As per a recent survey (May 2009) of 152 MFIs by CGAP (CGAP, 2009 a),
an increasing number of MFIs are computerizing their operations,
particularly for tracking transactions and loans. Currently, only
18% use manual systems, compared to 46% who were doing so as per an
earlier survey in 2004 conducted by CGAP. The same survey also
reports that currently 53% of respondents use customized software,
while 29% use off the shelf commercial software packages. Thus,
there is a clear indication that MFIs recognize the need for
automation, and are rapidly moving in this direction. It has been
reported (www.microfinancereport.com, 2009 a) that smart
phones, biometrics and mobile phones are making MFIs more efficient
and cost effective. Indeed, it is no exaggeration to say that some
technologies like mobile banking have revolutionized the
microfinance landscape, empowering hundreds of millions of poor
clients with access to banking and financial services, which would
have otherwise remained out of their reach (www.microfinancereport.com, 2009 b).