technology in microfinance
DESCRIPTION
customer information system and management is one of the basic problems of microfinance sector. Technology can help to address this problem at large.TRANSCRIPT
ICT in MicrofinanceCourse:MFABP
Indian Institute of Plantation Management, Bangalore
Presented by: Bidhu Bhushan Binit(11PGDM08)
Contents Transformation of Indian financial(banking)
sector Typical Information flow and genesis of
Problem Potential Answer Technology -levels of implementation -facilitating infrastructure DCCB, Bidar case Conclusion
Transformation through Technology
Customer of a particular branch
Technology aided channels
Convenient serviceService to clients at a fraction of the costs incurred earlierMore reach
Information flow and genesis of problem
group agent MFI head office
• Information storage
• Data analysis
• Decision making
• Cash logistics
Multiple recording & multiple data hand-offs
Information inconsistencyTough to synchronize information between centres,branch and head officeErrors due to multiple data handoffs
Decline in quality of customer information
Potential Answer
Technology can address the fundamental issue constraining the growth of the microfinance sector, i.e Customer information systems and management.
Levels of implementation
Central System Field level
Main computing platform for the multiple channels
Handling huge amount of customer data
Simultaneous analysis
Tracking and monitoring of a customer across multiple channels
Standardized information collection
Transmission to central location
Eliminating multiple hand offs
Agent:- as a decentralized branch, able to perform head office function
MICROFINANCE AND ICT INNOVATION
Back office Management Information System
Mobile Computing
Branch Office franchise model
Card service, EFTOPS and ATMS
Internet Banking
Remittance Microfinance Outreach to International
Labour Migrants
Back-Office Management Information System (MIS) The most fundamental ICT application is back-
office MIS.
Sophisticated MIS is prerequisite for MFIs to monitor the quality, sustainability, and efficiency of its loan portfolio, to monitor development impact, and manage general administrative tasks.
MFIs also track the non-financial information. So, they need modified off-the-self software package for these requirements.
Mobile Computing The back-office MIS helps the MFIs to
monitor its loan portfolio, this functionality is undermined if the data analysed by the MIS is not up-to-date or contains errors.
Through mobile computing systems the Loan officer have a palmtop computer, so that the financial transaction can be recorded directly into the MIS.
It has significant implication with respect to data accuracy and integrity, there by enhancing “client confidence”.
The Branch Office Franchise Model
MFIs have an overwhelming pressure to reduce transaction costs and increase profit margins.
Through branch office franchise model, the MFI links with third-party merchants in remote areas.
The rural telecentre networks are particularly suited to serving as retail outlets for MFIs.
Card Service, EFTPOS and ATMs
There are many similarities between consumer credit cards and microcredit services. Both tries to reduce high cost associated with small transaction lending.
Introduction of card-based services require the roll-out of either EFTPOS functionality with third-party merchants and/or ATMs.
Card- based microfinance offers even more opportunities like allowing clients who have proven creditworthiness over time should given access to additional products and services.
Internet Banking Gives client real-time information about
their account, and the ability to transfer funds between accounts.
It is an efficient tool to reduce the work of tellers and therefore reduce the labor costs.
Rural tele-centre networks can help in implementing Internet Banking for MFIs.
Remittances: Microfinance Outreach to International Labour Migrants MFIs through technological innovation,
product design can tap this market by extending outreach to these migrant workers and their families at home.
For example Sri Lanka’s Hatton National Bank, whose “HNB Easy Remittance” help Sri Lankan migrant workers to remit funds directly to HNB accounts.
Facilitating Infrastructure
Unique Identifier Helps to create a repository of customer
information. Availability of basic demographic data. Can be used to track customer behavior across
multiple relationship. Eg.-Smart cards in developed countries
Credit information Bureau
Creation of mechanism allowing sharing of information where documented sources of information are not available.
To track repayment history for efficient client screening process.
Helping Access capital
Microfinance assets will become transparent.
Information system will help attract private capital from individuals and venture capitalists.
DCCB Bidar Case District Central Cooperative Bank, Bidar has 171
PACS. Average accounts a PACS handles is 800-1000. All the books are maintained by CEO of PACS manually
PACS delivers Kisan Credit Card loan, SHG and BDP loans. It also provides fertilizers and grocery items like wheat, sugar and K oil.
All the problems of manually maintained accounts – time spent in correcting, reports not ready on time etc
…DCCB Bidar Case
All financial transactions
Down load dataWhen needed On dial up line SafalPACS
@ DCCB Branch
Balance sheetP<rail BalanceLedgerVouchers
SafalPACS@ PACS
….DCCB Bidar Case SafalPACS is a package where there are two sets
of software – one installed on iStation a hand held device and the second is intalled on a PC located in the Bank branch of DCCB.
Day to day transactions are entered online on iStation and monthly balance sheet, P&L, Stock book are printed in the PACS
For SHG, Digitized Demand information (DIDI) sheet is printed and updated at PACS level
Depending on transactions, data is transferred on dial up line to DCCB branch PC.
….DCCB Bidar Case Advantages of SafalPACS
Affordable solutions for automation at PACS level Low power and low maintenance requirement and
low bandwidth, Hence one need not wait for long Advantage of automation – timely reports,
elimination of human error
Conclusion
Some says “it can’t be done in microfinance, electronic banking for poor will not work”.
20 years ago when microfinance was in its infancy many said “poor can’t repay, the poor will not repay, the poor can’t save.
….conclusion Inclusive growth has been marked as a
necessary way of development, not just by India but by UN also. Microfinance is really giving a helping hand to poor and unbanked segment. The problem of information asymmetry facing by microfinance can be addressed today by using technology.
It has to work. Otherwise will be at a continuing disadvantage with current economies and enterprises.
Thank You !References:microfinance in India(edited by K.G.Kamkar):Safal Solutions pvt.ltd:the case of correspondent banking in Brazil by
Diniz,Pozzebon,Jayo,Araujo.