Technology for Microfinance Managers

Issues and Solutions

RMEP 2008

BASIX

August 2008

Micro-Finance reach in India

Microfinance in India through its two major channels – SHG Linkage and MFIs – served over 33 million Indians, up by 9 million over FY 2006-07

4 out of 5 microfinance clients in India are women. Micro-credit portfolio of India Microfinance was

Rs. 22,000 crore 75% are accounted for by SHG Linkage, 20% by large

MFIs and 5% by medium and small MFIs SHG Linkage reports over Rs. 3,500 crore savings, only

MFI Bank, KBS Bank reports about Rs. 40 crore savings portfolio

MFIs operate in 209 out of 331 districts of the country, 28% of the new clients are from Urban areas.

Source : Sa-dhan, Bharat Micro-finance Report,2008

Demand of Micro-Finance services in India

Through all channels, reach is only 30 million 250 million people live below poverty line Rupee One lakh per individual needed for

livelihood promotion, hence trillion of Rs needed Penetration of life insurance services in rural India

is <10%. Asset, health, weather and other general insurance services are still nascent

Micro savings and remittance products have huge potential under BC model

Challenges in Micro Finance High Volume of Financial Transaction but value

wise very low Majority of the financial transactions are off-site

in nature Geographic spread of operations and density of

customers Lack of infrastructure facilities like power,

broadband etc Unsecured lending and no documented financial

history is available Combination of above, lead to high operating

cost

Growing interest in Microfinance

Private Investors and equity funds are now financing fast growing and nascent MFIs

Some state governments are funding SHG-programmes

Govt. of India has appointed NABARD to manage the Microfinance Development & Equity Fund (MFDEF)

Microfinance Bill pending in Parliament

Role of Technology in MFI

Transaction automation enables data capturing of business operations

Single set of data, multiple information to different stake holders

Standardization of product offering Increases efficiency, reduces transaction

cost Reliability of information from branches

Technology is an enabler for scaling up

Role of Technology in MFI

Micro-Finance involves large scale micro transactions, technology enables -Reconciliation of customer, banker and other funders balances -Tracking of fund movements from/to branches -Detection of frauds and misappropriations- Audit trail of financial transactions

Technology is a tool for risk monitoring

WHY MIS? Good information system aids in better

management of resources Analyze target Vs achievements, critical

operational parameters Motivate field staff and to create healthy

competition, increase the efficiency of Human Resources

To strengthen financial performance Plays vital role in strategic decisions, enabling

course correction

Right information at right time is key to success

What MIS do we need?

Loan Tracking Ability to define loan products Suitable for different model of lending Loan Disbursement and Repayments Portfolio monitoring Write Off & Re-scheduling Social Performance Indicator Tracking Automatic calculation of incentives loan officers

Critical Information requirements of various stake holders • Field staff operations information • Management Reporting • Statutory requirements• Funding agencies reporting • Customer MIS

Information requirements of MFIs

Field staff requirements

Loans appraised/sanctioned Vs disbursement particulars

Day wise collection statementsLoans overdue reportsPortfolio Performance Reports

Management Reporting Operating Summaries

Weekly (Inflows & Outflows at branch level) Monthly (Demand, Collection and Balances)

Employee Performance Reports Key Portfolio Indicators (Financial Health)

Loan Outstanding & No. of A/C’sRepayment %Principal At Risk (PAR)Non Performing Assets (NPA)Aging Analysis of Overdue Financial RatiosFirst Time Overdue (FTOD) Drop out customer reports

Statutory Requirements

RBI (Central Bank) Compliance ReportsDelinquent loan provisioning/Bad debts Written-

off detailsSavings/Cash Security Particulars

Financial Accounting StatementsBorrower/Member Sub-ledgers and balancesSecured/Unsecured loan portfolio details

Income (Interest earned on loans) particulars

Funding Agencies Reporting

MIS reports as agreed at the time of Grant/Debt/Equity appraisal, as per the MOU

Key Indicators of the operating periodPortfolio Indicators Growth IndicatorsOutreach Indicators

Stock Statements Any other information that they may ask from time

to time..

Portfolio Diversification

Loan Products Loan Activities

Lending Methodologies Joint Liability Groups Self Help Groups On-lending Direct Lending

Key elements of MIS

Geographic DistributionResponsibility Center ConceptPortfolio diversification Lending MethodologiesEfficient portfolio monitoring ReportsFTOD, Drop out customer reports

Benefits of Technology 100% Automation of all Business/ functional

areas Integrity between operations modules to

Financial accounting High Data security and inter-operable Flexible Loan/Savings/Insurance product

definitions and its revisions Automated Loan Documentations Tools for controlling and effective monitoring Various MIS reports for analysis from field level

to top Management.

How BASIX used Technology

for MF services

Adopted IT as a strategy and set up a IT division (BASIX Information Technology Solutions for Livelihoods)

Appointed a IT partner for development support Recruited IT and Domain specialists Conducted detailed system study and followed SDLC

process systematically System audit conducted at different levels of

development and implementation. Ensured constant year to year operations productivity

improvements Revised business strategies are aligned with MIS

Harnessing IT for MF services

Samruddhi Collection card BASIXPM

BASIXiStation BASIXCollect

Devices Used for Automation of Field Transactions

Proposed Blue Print of BC Model & CSC @ MEGHALAYA

Central server

SBI*

BC MODELCSC(Customer Service

Centre)

Powered by :

Powered by :

The data entered in both the systems will be uploaded to

respective remote servers and customer can access all services under one roof

HHTDesktop PC orLaptop

Central Server

DecentralizedServer

4321

V SAT / InternetGSM / CDMA

BASIX IT Architecture

MobileIntegrated with biometric device

Key Learning's

Recruitment of cross domain (IT and Functional) specialists for managing software is always useful

Content with having the MIS meet 80-90% of information needs

More complex MIS less likely to work Be practical in your thinking An MIS will not meet all the flexibility hoped for Run parallel manual accounting/MIS for the first

six months

Assess your MIS needs Initiate the process Acquire good MIS Adopt IT in your business Make your work simple ..

Our suggestions

Thank You

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