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              Microfinance Community

Solution Exchange for the Microfinance Community
Consolidated Reply
Query: Identifying Technology Services Needs for the Microfinance
Sector - Advice
Compiled by Sumeeta Banerji, Resource Person and Anjum Khalidi, Research Associate
12 July 2007

From Dhruv Joshi, Ekgaon Technologies Pvt. Ltd., New Delhi
Posted 25 June 2007

Dear Community members,

Ekgaon Technologies works to assess, develop and provide technology support to the microfinance sector
both for finance management, rural credit delivery and techno/management service support to widen the
reach and increase the profitability of the portfolio.

The Micro-finance sector in India has been evoking keen interest by the larger international financial
institutions and equity funds. However, the requirement of services by different categories of
institutions: bulk lenders, banks, direct lenders (MFIs, NGOs working as MFIs), etc are not yet known and
understood. Once these are known and documented support services can be developed and standardised
for the sector.

We are currently working on a study to identify the requirements for services by different types of
institutions working in the microfinance sector, such as: banks, development finance institutions, NGOs
working in the micro-credit sector, NBFCs (Non-Banking Financial Companies), insurance companies and
other types of micro-finance institutions.

To this end, your knowledge and experience would be very much appreciated and would aid in our
understanding the needs of the sector more objectively. Specifically,
 What technology solutions are needed in the micro-finance sector for accounting and auditing
    systems, IT-based operations management solutions, Management Information Systems (MIS), and
    other areas that could improve operational efficiency?
 What solutions are currently available in these areas?
 What are the major challenges faced with introducing technology solutions?

Your inputs would be very much appreciated and would aid in our understanding the needs of the sector
more objectively. This would lead to the standardisation and mainstreaming of the provision of
technology support services in the sector. All contributions from members will be acknowledged explicitly
in the research report and in any final service/service delivery framework developed by Ekgaon

Responses were received, with thanks, from

    1.  Kris Dev, Life Line to Business, Chennai
    2.  Rohit Raina, ICICI Bank, Mumbai
    3.  Baladeb Sen, Microfinance Consultant, Gurgaon (Response 1; Response 2)
    4.  Raman V. Machiraju, Elitser IT Solutions India Pvt. Ltd., Hyderabad (Response 1;
        Response 2; Response 3)
    5. R. Raghavender Anand, Mahasemam Trust, Madurai
    6. Agrawal G. K., National Bank for Agriculture and Rural Development (NABARD),
    7. Brij Mohan, Small Industries Development Bank of India (SIDBI), New Delhi
    8. Navpreet Singh, Nidaan Samaj Sevi Samaiti, Gwalior
    9. Suvarna Gandham, Manaveeya Holdings, Hyderabad
    10. Kanti Kiran, CATALYST, Mumbai
    11. Kartikay Rai, Intellecap, Mumbai

Further contributions are welcome!

Summary of Responses
Comparative Experiences
Related Resources
Responses in Full

Summary of Responses

Responding to a request from a technology service provider seeking inputs on the technology needs of
the microfinance (MF) sector, members identified solutions needed to improve the operational efficiency
of microfinance institutions (MFIs), and shared experiences and challenges faced in implementing existing
software solutions. Respondents discussed how the evolution of the sector has led to a greater demand
for standardized reporting, monitoring and other measures to support operational efficiency in the sector.
They elaborated that as MFI client outreach grows, increasingly there is a need to move from manual
reporting mechanisms, to those based on the use of available technology and other optimum IT

Discussants emphasized the importance of understanding the needs of stakeholders at various levels
of the microfinance value chain (from government and banks to MFIs and clients) before trying to design
or implement technology-based solutions. Regulators/apex institutions and governments are concerned
primarily with transparency, accountability, growth, performance, sustainability, and sharing of best
practices. Banks, donors, and investors, members noted, tend to focus on institutional transparency and
accountability, returns (financial and social), and reporting. MFIs need technology solutions to assist them
in meeting stakeholder requirements and to facilitate financing, operational efficiency, productivity,
growth and sustainability. MFI field staff require solutions to improve client identification, ensure
ubiquitous access to updated information, and reduce travel and transaction time. Clients would benefit
from solutions that facilitate easy/doorstep delivery, flexible repayments, umbrella financial services,
access to information, and a reduction in overall costs to ensure low interest rates.
To meet the needs of the various stakeholders, members suggested developing IT solutions to
improve operations, including:
 E-administration communication and tracking tool
 Database of credit information on borrowers in a certain region, made available to all new MF
   operators to avoid concurrent borrowing (especially problematic when MFIs are expanding outreach)
 E-finance tool to track income, expenses, savings and repayment of borrowers
 Database of competing MFIs on principal operating and financial parameters (useful for banks
   lending through MFIs)

Respondents also highlighted the importance of having an appropriate Management Information
System (MIS), depending on the MFI‟s mode of operations and nature of clientele. On one hand, it was
felt the system needs to be designed in cooperation with the MFI. At the same time, members elaborated
that it is often more practical to build MFI operations by first identifying the best available technology
platform, because it promotes efficiency and will likely minimize teething troubles at the start up phase.
While developing and customizing the MIS, discussants outlined several “modules”, a typical MFI would
 selecting and tracking clients/members
 organizational structure
 disbursement and repayment tracking
 accounting and finance
 administration and auditing, and
 report generation and a database consolidator (for MFIs operating in remote areas).

Members clarified that many existing MIS tend to include modules only for tracking disbursements and
repayments, accounting and generating reports, even though, often, additional modules are required.
They highlighted that the high costs for developing and customizing these modules, due to the unique
processes and needs of each MFI, preclude many non-profit MFIs from developing all the essential
modules. At the same time, respondents noted that for-profit MFIs with a commercial approach might
desire additional MIS systems, including: IT and network management; forecasting and demand
planning; human resources; payroll; communications and public relations; business development (product
development and alliance management); and knowledge management.

While discussing MIS requirements, participants also suggested that MFIs make optimal use of existing
technology to improve efficiency and integrate products such as biometric smart cards, Point of Sales
(POS) devices, and mobile banking into their work. Members shared two experiences developing
successful software solutions for the MF sector, while also stressing once industry requirements are
standardized and properly documented, developing reasonable solutions to suit MFI operations will not be
an issue. However, until the sector reaches that point, the challenges to MFIs integrating
technologies must be addressed. They highlighted several challenges making implementation of
software difficult including:
 High cost and time consuming process of customization
 Dependence on vendors to gather data for input into the software, as field staff lack necessary
 Inconsistency in financial practices and frequent changes in MF operations, making standardisation of
    accounting practices difficult
 Partial web-connectivity in branch locations, which then requires a database consolidator
 Lack of adequate technical resources at the MFI level, restricting proper utilization
 Insufficient infrastructure, institutional capacities and continuous training/orientation of staff from
    software solutions providers, forcing MFIs to experiment with different solutions, which increases the
    burden on small/medium MFIs grappling with basic sustainability issues
 Lack of understanding of Internal Rate of Return of technology by Indian MF and unfamiliarity with
    concept of integrating technology with business cash flows
   Technical knowledge transfer to MFI by the technology provider and domain knowledge transfer to
    the technology provider by the MFI- lacking or not happening at desired level

Accordingly, members suggested that software solution providers offer long-term mentoring to MFIs, to
allow them to internalize gradually the technology. This approach would involve greater interaction and a
better understanding each other‟s needs and constraints. Furthermore, discussants felt solution providers
need to clearly demonstrate the financial and managerial advantages of using technology-based systems,
to ensure greater ownership by all levels of MFI staff.

To address these challenges, respondents advised standardizing software requirements, conducting bulk
negotiations with software companies and providing training/capacity building for the staff of NGOs.
Furthermore, they suggested national level institutions like NABARD (National Bank for Agriculture and
Rural Development) and SIDBI (Small Industries Development Bank of India), which have an interest in
the healthy growth of the microfinance sector, take the lead in integrating technology into MF operations.

Comparative Experiences

Successful Software Solutions for MFIs (from Raman V. Machiraju, Elitser IT Solutions India Pvt.
Ltd., Hyderabad)
Since implementing, any microfinance software is often time consuming and leads to high costs, Elitser
IT Solutions India Pvt Ltd, developed standardized software solutions called „MicroFinancer‟ (standard
version and enterprise versions). These softwares successfully address the majority of MFIs‟
requirements. These solutions have been tested and used by leading MFIs in India and abroad, and In
2005 NASSCOM Foundation short-listed it as an “IT Innovation.” Read more

Challenges of Implementing Software Solutions in MF Operations (from R. Raghavender Anand,
Mahasemam Trust, Madurai)
Mahasemam Trust has introduced Oracle as the back-end and Java as the front-end solution for its NBFC
(Non-Banking Finance Company). Though using the software improved MIS accuracy, the Trust is still in
the process of addressing the challenges presented by the softwares. Customizing the software to meet
the MFI‟s needs has been time consuming and costly, and also requires broadband connectivity, high-end
computers and training of field staff. Read more

Related Resources

Recommended Organizations and Programmes

From Raman V. Machiraju, Elitser It Solutions India Pvt Ltd., Hyderabad

Elitser IT Solutions India Pvt. Ltd., Hyderabad
303, Aditya Trade Center, Door No. 7-1-618, Aditya Enclave Road, Ameerpet, Hyderabad 500038 Andhra
Pradesh; Tel.: 040-23753232/1828; Fax: 040-23757676;
        Provides technology solutions, training, management services and technical support to MFIs and
        NGOs to improve operational efficiency

Gram Uttan, Kendrapara District, Orissa
At/Po:-Pimpuri,    Via:-Rajkanika,    Kendrapara         District,    Orissa;     Tel.:    6729-276225;
        MFI has fully computerized its Management Information Systems (MIS) at the head office and
        three branch offices for better monitoring of its SHGs/JLGs
CARE CASHE (Credit and Savings for Household Enterprise) Program, New Delhi
28 Hauz Khas Village, New Delhi 110 016; Tel: 011-26510915
        Has helped to improve the MIS software of several of its MFI/NGO partners and has conducted
        research on technology solutions for MFIs, field offices are located across the country

Society for Elimination of Rural Poverty Indira Kranthi Patham (SERP-IKP), Hyderabad
4th Fl., Hermitage Office Complex, Door No. 5-10-192, Hill Fort Road, Hyderabad 500004 Andhra Pradesh;
Tel.: 040 -23298981; Fax: 040 -23211848;
        IKP, formerly Velegu (which is the Telegu name for the SERP program), has implemented
        software solutions for its MF operations in collaboration with Elitser IT Solutions India Pvt. Ltd.

Life Bank Foundation, Inc, Philippines
Roosevelt St. Sta. Barbara, Iloilo City 5002, Philippines; Tel.: 033-523-9348; Fax: 033 523-9348;
        Has worked with Elitser IT Solutions, a technology service provider, to implement its microfinance
        MIS software to improve operations

Financial Information Network and Operations (FINO), Mumbai (from Gaurav Agarwal)
C - 401, Business Square, Chakala, Andheri Kurla Road, Andheri (East), Mumbai 400093 Maharasthtra;
Tel.: 022-40973321, 40973466; Fax: 022-40973300;
        Builds technologies to enable Financial Institutions (FIs) to serve the “unbanked sector,” lower
        transactions costs, and increase outreach and transparency

Mahasemam Trust, Madurai (from R. Raghavender Anand)
1‚ 2‚ Lake Area‚ Mellur Road‚ Uthangudi Post‚ Near Meenakshi Mission Hospital and Research Centre‚
Madurai 625107        Tamil      Nadu;        Tel.:    452-4210601;        Fax:      452-2586353;
        Has recently introduced the software Oracle as back ended and Java as front ended in its MF
        operations to improve MIS accuracy.

Maanaveeya Holdings Oikocredit, Hyderabad (from Suvarna Gandham)
Plot 107, Prasasan Nagar, Jubilee Hills, Road No. 72 Hyderabad 50033 Andhra Pradesh; Tel.: 040-2355-
4729; Fax: 040-2355-4729;
        Organization is undertaking an MIS status assessment of its borrower MFI's and plans to promote
        the MIS solution that suits the needs of its MFI-borrowers

Recommended Tools and Technologies

MICRO FINANCER - Standard Version (2.0) and Enterprise Version (3.5) (from Raman. V.
Machiraju, Elitser IT Solutions India Pvt. Ltd., Hyderabad)
Supplied by Elitser IT Solutions India Pvt. Ltd., Hyderabad
        Elitser has developed financial accounting and MIS software that can integrate with any external
        hardware, seeks to facilitate multiple operations within MFIs through a single software solution

The Mifos Initiative (from Kanti Kiran, CATALYST, Mumbai)
Supplied by Grameen Foundation Technology Center, Seattle, WA, USA; Tel.: 1-206-325-6690; Email:
        Open source information management system that allows MFIs to select locally based support
        services to assist with customization of the software
Recommended Documentation

Issues of Extending MIS Software to Community Based Financial Institutions (from Raman V.
Machiraju, Elitser IT Solutions India Pvt. Ltd., Hyderabad)
By H. Ramesh and P. Madhavi; CARE India, CASHE Program; August 2005 (Size: 48 KB)
        Report narrates CARE‟s experience extending MIS solutions to its partner NGOs under its CASHE
        program, including recommendations and challenges faced during implementation

MIS and Information Needs (from Agrawal G. K., NABARD, Mumbai)
By B. Suran and Ramakrishna; National Bank for Agriculture and Rural Development and GTZ; July 2005 (Size: 248KB)
        Presentation covers good practices, challenges and methods of addressing the MIS needs of
        entities working with SHGs through technology applications like e-munshi and smart cards

From Kris Dev, Life Line to Business, Chennai and Kartikay Rai, Intellecap, Mumbai

FINO Adopts Gemalto Smartcards to Accelerate Micro-Banking Deployment in India
PR Newswire, Press Release; June 25, 2007
        Note on how Gemalto and FINO will be deploying smartcard technology with biometric
        authentication, which can possibly facilitate remittance services

Smart Card System: Information and Communication Technology (ICT) plus Finance Model
for Rural Poor
By S. Gupta; Microfinance Gateway; June 2002 (Size: 19KB)
    Covers the strength of ICT in micro finance lending and highlights a computer based transaction-
    recording system introduced by BASIX in February 2002 called BASIXPOT

Reducing Micro-Credit Costs through Information Technology: The Case of SKS
Grameen Connections Newsletter, Grameen Foundation; April 2001
        Note on how SKS, based on its experience using smart cards and other technologies, found that
        MFIs can reach operational sustainability in two-thirds of the time it typically takes

Client History Checking Database, SANABEL (from Baladeb Sen, Microfinance Consultant, Gurgaon)
By A. Klfeh; Microfinance Gateway; 2003 (Size: 328 KB)
        Presentation discusses the constraints in sharing client database among MFIs as well as the
        successful approach used by a project to provide possible technological solutions

Opportunities and Challenges in India: Crafting the MF/IT Paradigm-The Indian Experience
(from Brij Mohan, SIDBI, New Delhi)
By Janaki Turaga, Social Development Specialist; Information for Development Magazine; 2004
        Article highlights the contributions of SIDBI‟s investments in integrating IT solutions into MF
        operations and also discusses the various MFIs in India using technology to improve operations

Microfinance in India – A State of the Sector Report 2006 (from Navpreet Singh, Nidaan Samaj
Sevi Samaiti, Gwalior)
By Prabhu Ghate; CARE, Ford Foundation and the Swiss Agency for Development and Cooperation (SDC);
2006 (Size: 2.86 MB)
        Report includes information on commercial bank activities in promoting new technology
        applications (page 117) in the microfinance sector

From Sumeeta Banerji, Resource Person

Mobile Phones for Microfinance
CGAP (Consultative Group to Assist the Poor) Brief; April 2006
Click here to read PDF (Size: 48 KB)
        Article discusses how mobile phones can be used for financial services to make micro payments
        (m-commerce), exchange electronic money (e-money) and as a banking channel.

Using Technology to Build Inclusive Financial Systems
CGAP (Consultative Group to Assist the Poor) Brief; April 2006
Click here to read PDF (Size: 44 KB)
        Brief elaborates on how innovative use of information and communications technologies can be
        employed to improve operations of MFIs and commercial banks interested in serving the poor

Funding Microfinance Technology
CGAP (Consultative Group to Assist the Poor) Donor Brief No. 23; April 2005
Click here to read
        Shares information on existing technologies used by MFIs, how these technologies benefit
        microfinance providers and ways donors can support MFIs integrating technology into processes

Technology Investments: 10 key questions
CGAP (Consultative Group to Assist the Poor) IT Innovation Series
Click here to read
        Article details the key questions directors and management of a financial institution should
        consider when deciding what and when to start using “technology” in their work

From Anjum Khalidi, Research Associate

Meeting the Challenge - The Impact of Changing Technology on MFIs
By R. Ketley and B. Duminy; MicroSave Briefing Note #21 (Size: 192 KB)
        Article discusses how using technology can reduce the transaction costs of MFIs and includes
        recommendations for MFIs to help them develop an appropriate technology integration strategy

Information 4 Development e-Magazine
Information for Development Magazine; January 2004
        Includes articles on new technologies, information technology for the MF sector, the Computer
        Munshi concept and MIS conceptions in microfinance

ACCION PortaCredit: Increasing MFI Efficiency with Technology
By S. Barton and C. del Busto; InSight Newsletter No. 9; May 2004 (Size: 248 KB)
        Paper presents the software PortaCredit, discusses training MF staff on implementation, and
        creating the necessary IT infrastructure and buy-in from high level management to use it
Management Information Systems (MIS) for Microfinance
By A. Ahmad; Banking With The Poor (BWTP); 2003
Click here to read size (Size: 124 KB)
       Paper argues that information and communication technology (ICT) can be a strategic tool in
       making microfinance institutions (MFIs) more efficient and effective

How Cellphone Technology Can Mobilise Microfinance
By S. Lonie; Microfinance Gateway; November 2005
Click here to read PDF (Size: 467 KB)
       Article discusses advantages of mobile phone technology for MF operations; features experiences
       of Vodafone and M-Pesa and lists challenges for MFIs to use these type of technologies

Microfinance Technology Fair
USAID Seminar, Chemonics International; April 25, 2007
       Presentations made by sector leaders covering the role of technology in the MF sector, existing
       technologies being implemented as well as related challenges and benefits

Recommended Portals and Information Bases

Life-Line to Business (from Kris Dev, Life Line to Business, Chennai)
       Covers various developments in information and community technology for MFIs and NGOs in

Microfinance Gateway Technology Resources (from Kartikay Rai, Intellecap, Mumbai)
       Includes a variety of resources on Point of Sales (POS) systems and successful case studies as an
       new innovative technology to improve delivery of microfinance services

From Anjum Khalidi, Research Associate

Consultative Group to Assist the Poor (CGAP) Technology Center
       Site offers information and resources on developments, products/services and invites partnership
       opportunities; program also seeks to incubate sustainable technology approaches by MFIs

Grameen Foundation Technology Center
       Shares information on the various projects and products piloted by Grameen Foundation across
       the globe, including several MIS software and other technology solutions

Microfinance Gateway Resources on Existing Software
       Portal contains several reviews of existing softwares being used in the sector focusing on issues
       of cost, implementation and functionality

Related Consolidated Replies

Models for Operational Efficiency of MFIs, from Abubucker, Accenture, Bangalore
(Experiences) (Size: 184 KB) Issued 9 May 2007
       Shares various institutional models for MFIs and discusses the issue of sustainability, efficient
       Loan Officer to Group ratio as well as ways of using technology to reduce costs
Responses in Full

Kris Dev, Life Line to Business, Chennai

The technology solutions needed in the micro-finance sector for accounting and auditing systems, IT-
based operations management solutions, Management Information Systems (MIS), and other areas that
could improve operational efficiency, in my opinion are as follows:

1. Members unique identification tool using Biometric Smart Card
2. An e-Administration Communication and tracking tool
3. An e-Finance Tool to track the income, expense, savings and repayment

An attempt has been made to develop some of these tools already. For more information, please visit or contact undersigned for more details offline.

Rohit Raina, ICICI Bank, Mumbai

I am keen to address the third point of your query. I share this advice based on my experience
incubating MFIs in Madhya Pradesh and Rajasthan.

Generally startup MFIs begin with manual processes, and product design suiting to local needs and MFI
comfort level (trial and error perfecting it). But when MFIs grow, they feel the need for technology
support. At this point they try to fit technology into the old developed manual systems. It is extremely
difficult this way. Management Information Systems (MIS) software does not give support, rather it gives
errors and problems with trouble shooting and then one must wait for the software vendor to provide
support. The technology forces you to modify the process. It‟s painful at this stage.

Rather, I have found that it‟s more practical to build MFI functions by first identifying the best available
tech platform. It‟s faster to setup and gives high level of efficiency and minimal teething trouble during
startup. This is especially with regards to Financial Accounting (FA) and MIS automation in the case of

Baladeb Sen, Microfinance Consultant, Gurgaon (response 1)

In addition to the areas suggested by Kris Dev, the following issues deserve special mention:

1. To avoid the growing incidence of concurrent borrowing likely to have a negative impact on the
portfolio quality of the lending MFIs, the IT sector can focus on a private/state sponsored data base of
credit information to be made available to all new operators in the MF sector.

2. A Database of competing MFIs on all their principal operating and financial parameters for use by the
Banking system who are ready to extend financial support.

3. Area-specific target of potential MF customers for ready use by the MFIs initiating any outreach
expansion plan.

Raman V. Machiraju, Elitser IT Solutions India Pvt. Ltd., Hyderabad (response 1)
I am pleased to note this query on the technology issues for MFIs and it is an appropriate stage to
encourage all sizes of MFIs to appreciate the necessity of accepting technology as a part of their MF
operations. Elitser IT Solutions India Pvt. Ltd. formerly known as Java Softech Pvt. Ltd based at
Hyderabad has been a pioneer in providing software solutions for MFIs in India, Indonesia and
Philippines. We for the past 7 yrs experienced different MFIs and tried our best to provide software
solutions to suit the requirements of MFI operations in India and abroad and we continue our endeavor in
meeting the needs of MFIs even today. From our experience we found that:

1. MFIs are not consistent in their financial practices and are prone to frequent changes in their
operations; as a result, standardisation of accounting practices has become an issue.

2. Adopting technology and decision making is slow and time taking

3. Lack of adequate technical resources at the MFI level has defeated the successful utility of the
solutions provided

4. MFIs‟ dependence on a few trusted manpower to undertake entire operations has led to different
fraudulent practices and in turn has led to blaming software solutions

5. Lack of support and continuous training and orientation from software solutions providers has forced
MFIs to experiment with different solutions over a period of time

6. Lack of domain expertise has led to the development of mediocre solutions by a few small solutions
providers in the country

7. Funding agencies and banks have never taken responsibility in the past to insist or demand for
standard accounting practices or suitable Management Information Systems (MIS) for better functioning
of MFIs. This has in fact led to slower growth of the sector to bring out transparency and standards in the

8. Some MFIs started as NGOs with the objective of Non Profit entities and later on became profit making
or business entities to generate business for Banks or MFIs. This brings out a somewhat confused status
of MFIs. They tend to ride both horses of profit-making and development activities simultaneously. Maybe
there should be more clarity on the objectives of MFIs.

9. Even today big MFIs and their CEOs do not take full responsibility or demand a value for the
investment they make for the IT solutions, and depend more on their staff to judge the software
solutions, which may often be biased or incomplete

10. Once the industry requirements are standardized and properly documented, developing reasonable
solutions to suit MFI operations is not at all an issue.

Keeping in view the growing needs of MFIs and to meet the demands of any size or model of MFIs such
as SHG, Federations/MACTS/ Grameen/JLG (Joint-Liability Group) or Individual lending with complete
flexibility, and to match any funding agency-wise requirements, Elitser IT solutions has recently launched
two products namely „MICRO FINANCER - Standard Version‟ and „MICRO FINANCER Enterprise Versions‟
which are integrated financial accounting & MIS software solutions with an option to integrate any
external hardware (such as handhelds / PDAs (Personal Digital Assistant) / Biometric based solutions) to
facilitate multiple operations of MFIs with a single software solution.
These solutions are completely tested and have been utilised by some of the leading MFIs in the country
and abroad. Moreover, NASSCOM Foundation has recognised and shortlisted our solution as an IT
innovation for the year 2005.

We are in the process of bringing out a comprehensive Web based „Micro Financer‟ solution which will be
an enterprise resource planning product (ERP) package to take care of all the operational requirements of
MFIs. It will be an end-to-end solution for the MFIs. Interested members can contact the undersigned for
more information on this.

ELITSER IT solutions India is committed to MF industry and we are ready to deliver the reliable solutions
to meet the requirements of the MFIs. However, I wish to see the same commitment from the CEOs or
funding agencies to adopt technology and encourage the utility of the solutions they buy.

Baladeb Sen, Microfinance Consultant, Gurgaon (response 2)

Mr. Machiraju's expectations from the NGO promoters are little too high pitched, in my opinion, if we
have a closer look at the evolution of the microfinance sector.

We all know that the pioneers in this sector have been struggling hard against all types of opposition and
vested interests thwarting their efforts to alleviate poverty and empower the poor-socially, politically and
financially. The sector has evolved very fast and is ready to take off with sustained growth. Over the last
15-20 years, the sector has grown by leaps and bounds by sheer dedication of hundreds of committed
people, and largely without the support of high technology. Given this background, the deficiencies as
mentioned by Machiraju need to be well-understood and not deprecated if any long term meaningful and
productive IT solutions are to be propagated for the sector.

It is a fact that a majority of the MFIs are concerned, for right reasons, with the development objective,
while a growing number of MFIs are making their presence felt as hard core financial service providers
and livelihood/enterprise development financiers. While the former are now gradually including
microfinance in their agenda, the latter group (such as Non Banking Finance Companies or NBFCs) is
emerging as purely commercial for-profit entities. The divide is deep and genuine.

Having said all this, one cannot deny the great necessity of the use of available technology and the
optimum IT solutions for the whole range of financial issues/areas facing the sector. The MFIs, for their
long term sustainability and outreach, have to decide fast. On the other hand, the IT solution providers,
through the good offices of NASSCOM, have to take up the role of building adequate awareness among
the promoters of the MFIs, educating and informing them, with suitably developed advocacy materials for
them, on the range of technology solutions available that could be developed and tailor-made. It may be
recalled that the well-developed and highly professionalized Indian banking sector (excluding the foreign
banks) and their management with impeccable professional records took nearly 20 years to reap the
benefits (cost reduction, efficiency and better service) of modern technology. Even then we are at least
25 years behind the advanced economies including China. It is very encouraging that our IT people have
at last, discovered a promising new market within the country and our best IT brains are active on it.

The MFIs, barring the financially sound NBFCs, are always hard put to get the market best while
recruiting people-more so as they cannot afford to offer salaries as per the mainstream industry.
However over time, merit will flow into the market as competition and market forces start playing

A few suggestions for the solution providers:
1. They may through their own association, arrange for closer interaction with the MFIs for an open
dialogue with their representatives, to under stand each other for evolving a series of measures ensuring
that the appropriate mix of IT solutions is made available to individual MFIs based on the latter's needs.
There may be some initial problems due to lack of professionalism on the part of the MFIs as also relative
absence of an appropriate mind set of the solution providers to understand the inadequacies/infirmities
typical of a maturing financial market. These are not insurmountable.

2. Absence of standards in finance, accounting, audit etc. is no fault of the sector. Only after the sector
has received global recognition have the Indian financial authorities felt the need for an inclusive financial
system and a comprehensive legislation is now in the offing for the MFI sector. We all expect that the
coming months will see the establishment of a regulatory authority with which the MFIs will gradually
switch over to standard systems which is very much needed for efficient IT solutions. IT specialists may
need to be a little flexible as MFIs slowly adapt to industry standards.

3. There is nothing wrong if the key promoters entrust the IT package to some trusted staff for
implementation as this element of human nature is behind all financial transactions duly backed by
certain checks and controls. Incidence of frauds and financial irregularities are universal and can happen
in the most regimented financial system. The top management of all the banks/ financial institutions are
all non-IT people and yet they do not find any problem in accepting and implementing the best IT
solutions for their operations.

4. The solution providers do have to compulsorily accept a long term mentoring responsibility towards the
MFIs' gradual internalisation of technology as a driving force instead of something to be swallowed as a
bitter pill-either dictated by market competition, the regulator or the fund-giver.

5. The solution providers have to very clearly demonstrate the economic/financial/managerial advantages
of the offered solutions and how precisely they will give the targeted competitive advantages to the MFIs
as against their past systems. The onus clearly lies with the providers who are basically catering to a
nascent market, but offering bright financial prospects in the next few years

R. Raghavender Anand, Mahasemam Trust, Madurai

I introduce myself as the COO for an MFI located in South India. We have now started implementing IT
solutions for our NBFC. The implementation has just started and I wish to share my experiences on the
same. The software uses Oracle as back ended and Java as front ended and is one of the excellent
software used by Indian and Foreign Banks. The following are my observations:

1) Implementing software for a MFI is more difficult than writing the software for it.

2) The software which we have procured is priced very high which not many MFIs could afford to buy
(we are in the process of seeking loan assistance from a Bank for the same.)

3) Customising the software for our needs is once again time consuming and proving to be costly.

4) In addition to the software, at the MFI level we need to have broad band connectivity at all our
branches apart from high end computers and all the field staff need to be trained on how to operate the

5) We also need to buy the POS (Point of Sale) terminal and the Core Banking Solution (CBS) for us to
use the software
6) Further, the software is dependent on vendors to capture the data (our experience has been that our
own staff may not do the correct job hence it is being outsourced)

7) The implementation is going at a snails pace as we are dependent at this point of time on so many
outside vendors and increasing the pace is becoming difficult.

8) The immediate benefit which I foresee for my MFI is that the MIS (Management Information Systems)
will be a hundred percent correct. However the cost of software far exceeds the benefit and this is my
personal opinion not necessarily of my organization. I shall share my experience on a continuous basis
with the members of the MFI community.

Agrawal G. K., National Bank for Agriculture and Rural Development (NABARD), Mumbai

The problems/issues raised by Shri Anand are others are likely to be faced by other MFI/NGOs and need
to be addressed and resolved before negotiating any software with any software company. NGOs may
not have the expertise to deal with and negotiate with software companies, identify their requirements
and implement the software. The solution would lie in standardisation of the software requirements, bulk
negotiation with software companies and training/ capacity building of NGOs. It would be more
appropriate if NGOs/MFIs/Federations and /or national level institutions like NABARD/SIDBI that have
interest in the healthy growth of the microfinance sector take a lead in the matter.

Brij Mohan, Small Industries Development Bank of India (SIDBI), New Delhi

Very well said. SIDBI did try to play the parenting role for a good Management Information Systems
(MIS) standard software about 7 years back but it was perhaps much ahead of time. There should be one
more attempt now for a satisfactory standard software under the leadership of NABARD/SIDBI. Likewise
the two national institutions should jointly take a lead in setting up of a credit bureau.

Raman. V. Machiraju, Elitser IT Solutions India Pvt. Ltd., Hyderabad (response 2)

I understand your concerns regarding the implementation issues of the said software solution at your
esteemed organisation. From our experience we found implementation of any Micro Finance Software
solution often experiences this kind of delay and leads to high cost on account of multiple reasons. In
order to minimise these issues and to provide quicker solutions for MFIs, we at Elitser IT solutions India
Pvt Ltd, have successfully standardised the software solutions „MicroFinancer‟ standard version and
enterprise versions, which by and large address 90% of the MFIs requirements and any minor
customisations can be taken up without much delay, as we are completely dedicated to the development
of solutions for MFIs.

Our products, if accepted as is, will take hardly two to three weeks for implementation. These two
solutions can be conveniently implemented at the operational office level and a web
based wrapper solution can be provided for any type of MIS (Management Information Systems)
consolidations at the central office levels.

We provide dedicated teams for taking up any implementation work and so far we have successfully
completed projects such as Life Bank At Philippines, SERP-IKP (Society for Elimination of Rural Poverty -
pilot project, Gramuttan, CARE partners (Credit and Savings for Household Enterprises - CASHE project
partners) in AP and others to name a few.
We wish to partner with any national level organisation such as NABARD / SIDBI / ACCESS to bring out a
good reliable software solution for the benefit of MFIs across the country. As mentioned in my earlier
mail, a serious commitment needs to be there from MFIs and solutions providers to bring out the best. At
least now its not too late for taking forward this dialogue and benefit all.

Navpreet Singh, Nidaan Samaj Sevi Samaiti, Gwalior

I think that banks which have tie-ups with MFIs should be encouraged to provide and develop software
for the MFI that they have been working with for a significant period of time. The technology should be
uniform and user friendly as well.

Suvarna Gandham, Manaveeya Holdings, Hyderabad

Maanaveeya/Oikocredit is contemplating undertaking the MIS (Management Information Systems) status
assessment of our borrower MFI's and after assessing, we wish to support (if we can afford) the right
MIS solution to the MFI-borrowers that have similar requirements. We are in the preliminary stage of this
work. We do not want to duplicate the efforts already made by others.

Kanti Kiran, CATALYST, Mumbai

I have tried to put down some points in relation to the first question “What technology solutions are
needed in the micro-finance sector for accounting and auditing systems, IT-based operations
management solutions, Management Information Systems (MIS), and other areas that could improve
operational efficiency?”

An MFI‟s requirements for an MIS depend on the mode of operations and the nature of clientele the MFI
is handling. Sometimes the systems of an MFI could also be influenced by the entities involved in funding
the MFI for its operations. From an ideal technical perspective, an MIS must be designed in conjunction
with an MFI or a model MFI that is going to use the MIS. It is very difficult and painstaking to develop a
generic MIS for the MFI sector as such, however the possibility is not ruled out.

An MIS for a typical MFI (small scale) could have the following modules (A module is a component of the
 A module for selecting the clientele
 Organization structure module / HR module
 Client / Member tracking module
 Disbursement and Repayment tracking module
 Accounting Module
 Finance Module
 Audit Module
 Admin Module
 Mission statement tracking module
 Report generator

A database consolidator that would consolidate the databases as and when required must also
supplement the MIS for an MFI operating in remote areas. In case an MFI has connectivity in all the
locations of its branches and if the MFI is willing to invest in technology, then provision of online updating
of a central database could be possible. If an MFI is partly operating in locations with connectivity and
partly with no connectivity, then the software must provide for consolidation of databases manually and
online. However, for the time being at least till the infrastructure (electricity and communication) is
developed in villages, MFIs may find it difficult to work with stand-alone solutions, leaving web-enabled
solutions aside. Software that could be easily migrated from a stand-alone solution to a web-based
application could be an answer, but whether it will be cost-effective for the MFI is another issue of
concern. The above-mentioned requirements are just the basic requirements for any MFI (with the
exception of probably the Mission statement tracking module).

A large number of existing software (with due regards to software development companies) tend to just
provide the following modules:
 Disbursement and Repayment tracking module
 Accounting Module
 Report generator

However all the other modules mentioned above are useful for the MFI. It is not the fault of the software
company or the MFI for non-inclusion of the rest of the modules in the software but the cost that is
involved in the development. For example almost each MFI has its own processes each of which needs to
be mapped to the MIS. Hence it makes it a more time consuming process and further increases the costs.

In addition to this, (except the accounting module and all other modules) would need customisation to
map the processes of the MFI to the software, which would again result in increased costs. The only way
to get around this is to develop a generic product and distribute the cost of development across MFIs,
which may not be again a feasible option for software development companies (again with due regards
to software development companies) unless they probably have a "service oriented vision" (Its not that
MFIs wont pay, but that the cash flows will be over an extended period of time). The empirical evidence
could be seen in the number of MFIs that have customized the open source software, MIFOS, belonging
to that of Grameen Foundation. Though cost may not be a factor in this case, customisation and efforts
for customisation could be an issue for some (primarily due to difference in processes of the MFI and the
processes to which the MIFOS software is mapped and please note that grants and loans are available for
customisation, but the effort involved in the process is also hectic).

The above were the requirements for a simple not-for-profit NGO-MFI. However for other entities like for-
profit MFIs some other modules like the ones mentioned below will probably be needed again depending
on the modus operandi and the clientele of the MFI.

Some of the additional modules that will probably be required are:
 IT and network management system
 Forecasting and demand planning system (Like a BI system)
 HR and payroll system
 Communications and PR systems
 Business development systems (product development and alliance management system)
 Knowledge management system
 Also the system must probably look to integrate with probable future technologies like biometrics,
   mobile banking, smart cards etc.

Raman V. Machiraju, Elitser IT Solutions India Pvt. Ltd., Hyderabad (response 3)

Thanks for the elaborate inputs on the topic. As mentioned in my earlier mails, we have consistently been
putting forth our best efforts with a vision to provide best possible solutions for the micro finance
industry. With our wide experience for the past 7 years, we have gathered good inputs from our
esteemed clients and incorporated by and large most of the modules you had highlighted below.

We would love to work with any MFI / organisation to provide the other additional modules as mentioned
by you and bring out a complete end to end solution for the benefit of MF industry. Moreover we have
consciously priced our products / solutions to meet the requirements, taking into consideration the MFI‟s

I would welcome and invite you or others to visit our office and have a demo of our software solutions so
as to appreciate the efforts that have gone into bringing about standardisation to the extent possible.
And we are open to newer ideas to introduce in our web based MF-Enterprise Resource Package (ERP)
solution which is likely to be introduced this year.

Kartikay Rai, Intellecap, Mumbai

The Indian Microfinance industry is undergoing rapid changes and discovering new challenges. Collecting
money from scattered, remote clients, the cost of service delivery transactions in the “last mile”, effective
information exchange at the institutional level, and effective growth management are just a few of the
many challenges confronting MFIs and other stakeholders in the sector.

Last year, Intellecap conducted a sector-wide technology study for CARE India which attempted to map
the various technological interventions- aimed at tackling some of the sector challenges- across the
microfinance horizon, and also across an MFI life-cycle, analyze the hindrances faced in effective
technology implementation and report success and failure stories along with the reasons behind them. I
will make use of some of the learnings made during the study to answer the queries raised by you.

As rightly pointed out by you, it is important to first understand the needs of the stakeholders at various
levels in the microfinance value chain, before trying to design or implement technology based solutions
for them. Listed below are the key concerns/needs of at different levels; there would also be others, but
the ones listed are the most critical.

Regulators/Apex Institutions/Government – Key Concerns (Sectoral Level): Transparency,
Accountability, Growth, Performance, Sustainability and promotion and sharing of best practices.

Banks/Donors/Investors – Key Concerns: Institutional transparency & accountability, Returns
(financial & social) and Reporting

Microfinance Institutions – Key Concerns: Financing, Operational Efficiency, Productivity, Growth &

Field Staff – Key Concerns: Client identification, ubiquitous access to updated information, reduced
travel & transaction time

Clients – Key Concerns: Low interest rates, Easy/doorstep delivery, Flexibility in repayments, Umbrella
financial services and Access to information

1. Technology Solutions Needed:

Mr. Kanti Kiran has accurately listed down the various modules that should go into the making of an
effective MIS. Enough has already been said and is known about the need for an MIS to be customizable
so that it may be appropriately tuned to the local needs and accurately mapped with the MFI‟s processes.
A critical point to be kept in mind by the MIS application and service providers is that the MIS should be
designed and installed with an eye on the future. An MIS and its offerings could be perfectly suited for
an institution at a given size, but may fail to keep up with its growth. Additionally, technology options
change so quickly that a system must be flexible enough to incorporate the latest tools.
Going ahead, there is a clear need for client information management and sharing. The large amount of
data being generated at the ground level by an increasing number of clients requires a mechanism that
would capture, analyze, process and present the data to the entire sector.

A key feature of the MIS should be a microfinance client database with in-built statistical features that
can provide the following:
     A robust mechanism to capture information at every level to ensure records tracking of
        individual clients
     Analyze and present records in an easily accessible manner
     Create a technology linked platform that reduces the cost of data capture and leads to quick
        information transfer
     Can be developed as a sustainable business model

2. Solutions currently available:

The MIS solutions being currently used by different MFIs vary with organizational size as follows:

Tier III (Small & Start-up MFIs): Manual / rudimentary paper based MIS systems with no IT team or

Tier II (Medium sized MFIs): Automated/ semi-automated systems (Excel and Access based). MIS
systems mostly developed in-house and do not completely meet the requirements. Usually have a small
IT team; at times IT resources are shared among different organizations

Tier I (Large, mature MFIs): Well developed, sturdy MIS systems that meet all requirements; mostly
designed/co-developed by an in house IT team with dedicated IT staff to take care of troubleshooting

Besides the MIS, the other technologies gaining ground are the Point of Sale (POS) technologies such as
palmtops, personal digital assistants (PDAs) and biometrics enabled smart cards that facilitate the
delivery of diverse client services by making information exchanges faster, easier, and more reliable.
Personal Digital Assistants (PDAs) are a popular option due to their relative small size and increasing
computing power over time. Loan Officers are using PDAs to capture and analyze data, fill loan
application forms, plan their disbursement & collection schedules, track portfolio, audit centers, and
manage data in a transparent& accurate fashion.

3. Challenges in introducing technology solutions:

(i) Acquiring and implementing the ideal MIS is not an easy task for microfinance institutions due to the
need for extensive customization. Almost all organizations contacted during the course of our study felt
that procuring a MIS that truly meets their needs costs them much more in terms of time, money, and
management attention than anticipated. (As also mentioned by Mr. R. Raghavendra earlier)

(i)The lack of adequate infrastructure and institutional capacities required for implementing technology
solutions, along with the fact that small and medium sized MFIs are grappling with more basic issues
such as achieving break-even and sustaining operational self sufficiency. As a result, technology has not
been their primary concern.

(ii)Technology‟s financial benefit is still not well understood by microfinance institutions (Mr Baladeb Sen
touched upon this). Neither the institution nor the provider can claim to have an understanding of its true
costs (man-power and other resources, along with the direct costs) and the timeframe in which these
costs will be recovered within the microfinance context. Cost–benefit analyses have been conducted (for
example, SKS carried out a detailed cost-benefit analysis for their use of smart cards), but the concept
has not been widely adopted considering the number of interventions and the importance of the concept
of return on technology investment. The IRR (Internal Rate of Return) of technology is not a well known
concept in Indian microfinance, and institutions are generally not conversant with the concept of
integrating technology with business cash flows.

(iii) Despite the increasing number of technology experiments in microfinance, there is still a vast
information divide between institutions and technology service providers. One of the key requirements for
any technology to succeed is its relevance to the local context and robust features that correspond to the
needs of the user and operate within the prevailing constraints. Technical knowledge transfer to the MFI
by the technology provider and domain knowledge transfer to the technology provider by the MFI is
either lacking or is not happening to the desired level.

                        Many thanks to all who contributed to this query!

If you have further information to share on this topic, please send it to Solution Exchange for the
Microfinance Community in India at with the subject heading “Re: [se-
mf] Query: Identifying Technology Services Needs for the Microfinance Sector- Advice. Additional Reply”

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