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Sa-Dhan Patrika

Volume 7,

Issue 1, September 2006

Information Technology Solutions, A Growth

Driver for MicroFinance Institutions: An Overview

Introduction

X Vector: The most popular applications

in the microfinance field are

T

he microFinance sector in India

1)

SHG Monitors: Such applications

started in the mid-'80s but the

are required to capture the data

application of information technology

of member-SHGs from the regular

(IT) in microfinance operations is barely

meetings where all transactions

a decade old. When BASIX started its

such

as

savings,

loan

operations in 1996, it could not find any

disbursements and repayments

appropriate technology package and

take place. The non-government

started

in-house

application

organisations (NGOs) promoting

development. Almost at the same time

these SHGs require this to track

CARE, in collaboration with PRADAN,

savings and loans at the individual

started development of self-help group

levels.  The  software  keeps

(SHG) monitoring software. Similarly,

accounts  of  all  the  SHGs

Cashpore developed software for

separately, without mixing them

Grameen methodology in the late '90s.

up. Each SHG is a different entity

By 2000, these packages had become

and

each

has

its

own

operational in some places.

management and accounts. But

all SHG accounts have to be

Though there were not many IT solutions

managed by a single software.

providers till the late '90s in the

There  are  many  software

microfinance  segment,  it  was

packages  available  in  this

increasingly clear that microfinance

application ­ McFinancier from

operations  required  specialised

Sarada Computer, SafalFin 2 from

software packages. In early 2000, some

Safal Solutions, FAMIS plus from

small software companies took the

BASIX/Sadguru, Subh Labh from

initiative to develop packages for the

Cooption, etc.

sector.  By 2005, the requirement

attracted the attention of big players

There are many variations in the

such as IT major Infosys and ICICI, India's

user-interface (UI) but all have

largest private sector bank, who

attempted to provide member-

entered the field to develop generic

level analysis on savings, loans and

packages. Like in any other industry, in

repayments. In addition, new

the microfinance sector also, Smith's

modules are being added with

invisible hand worked, and today more

features that monitor activities such

and more vendors are entering the field.

as bank linkage and dividend

distribution to members.

IT application is today acknowledged

as one of the key drivers for the growth

2)

Tracking  of  loans  given  by

of microfinance operations. Two classic

microfinance institutions (MFIs) to

examples of IT-driven growth are SKS

individuals, SHGs or joint liability

and BASIX. Both adopted software as

groups (JLGs): Such applications

the key driver and both achieved a

Two classic

are for MFIs who lend money to the

growth rate of 100 per cent over the last

examples of IT-

individual, SHG or JLG. This is the

10 years.

driven growth are

most popular application at this

SKS and BASIX.

moment. There are eight-10

Application of IT for Microfinance

software packages in the market

which address this requirement.

The spectrum of IT applications for

These can be broadly divided into

microfinance operations is quite wide.

three models ­ individual loan, loan

To understand the entire landscape, it

to SHG and loan to JLG, following

is necessary to study it from two-

the Grameen method. There are

dimensions ­ X-vector i.e. Applications

lots of differences in UI. However,

and Y-vector i.e. Operational Area.

the loan analysis is the same in all

the cases since there is no