7

Theme- Micro-Finance & Technology

Technology: Miracle Cure for

Microfinance?

through appropriate methods, prior to

O

ver the years we have repeatedly

automating an MIS. A complete needs

heard that 'microfinance' is an

assessment is very critical and the time

area that has significant scope for use

A modular

spent on this aspect, while automating

of technology, especially with a view to

structure for the

an MIS, is well worth the effort/cost. Use

reduce transactions costs. This is

MIS, where

of appropriate techniques like PRAs

because microfinance is typically said

different elements

(Participatory Rural Appraisal) and FGDs

to have a large number of small value

are linked and

(Focal Discussion Groups) with field

and repetitive transactions. Agreed that

share information

workers and other management/

technology can play an important role

is an attractive

operational staff could provide very

in enhancing efficiency and reducing

option

valuable data. Most importantly, it

transactions cost, especially in such a

should enable matching/reconciling

setting. However, in an operational

information needs with the decision-

sense, neither has this happened at the

making hierarchy within an MFI. Among

pace and volume at which it should

other  aspects,  a  proper  needs

have happened nor has the impact of

assessment would provide detailed

technology in reducing transactions

process maps and flows on various

costs been visible. Several years of

activities - with inputs, process

struggle in attempting to fully integrate

descriptions and outputs and their

technology with microfinance has

sequential linkages. These are extremely

exposed our own naivete and we share,

valuable documents to have at the

in this brief article, seven key lessons vital

time of automating an MIS for

for effectively integrating technology

microfinance.

and

automating

management

information systems (MIS) for MFIs:

Lesson #3: Keep MIS design simple.

Lesson #1: Do not computerise until the

While automating, it is important to

microfinance model is reasonably

ensure that the MIS design is kept as

stable.

simple as possible. Among other things,

Often

times,

nascent

microfinance institutions (MFIs), which

no information must be entered in

multiple (or even two) places and also,

are experimenting with their basic and

all data going into the system must be

core processes, find themselves faced

with the never-ending task of (re)

cross-verified for utility and actual

usage. Therefore, rationalisation of

designing the MIS to perpetuity. For such

information flows, as per business

MFIs  and  eternals  pilot  testers,

automating the MIS, although not

processes and also organisation

structure/hierarchy is extremely critical.

impossible, would be a very costly

A modular structure for the MIS, where

option. This is because of the significant

down time associated with the MIS due

different elements are linked and share

information is an attractive option. It

to frequent changes to the core and

affords significant flexibility and

basic processes. Having observed this

in reality in an evolving microfinance

facilitates compartmentalisation apart

from synergistic benefits.

sector in India in the mid-late 1990s, it

seems best to guard against this as it is

Lesson #4: Build flexibility into the MIS.

not only affects the operations of the

The MIS design should also be flexible,

MFI but also impacts the vendor.

to the extent possible and feasible. The

Additionally, such frequent changes

often results in loss of motivation for

best way to address this is by having a

separate business rules module, with

those working on the MIS and also

options for alternative methods of

makes the whole exercise prone to

mistakes. However, this does not imply

interest calculation, interest rates, loan

installment repayment frequency, loan

that flexibility cannot be a part of the

term and several other aspects

MIS. Rather, it is to say that if an MFI is in

an eternal pilot testing mode with

including generating user-defined

reports. This can save significant time

regard to its basic processes, it perhaps

and effort for the institution as well as

better wait until there is a semblance of

stability, before automating its MIS

the vendor in the later years, when some

of the elements and assumptions in the

Lesson #2: There is no substitute for a

core processes may have to be

comprehensive needs assessment

changed and/or new information and