USE OF ICT IN MICROFINANCE Presentation by Pushpraj

USE OF ICT IN MICROFINANCE Presentation by Pushpraj Agrawal (07305011) Rupsha Banerjee (06808011)

About Microfinance q Overview of why Bangladesh is a success o o o Technology was social Built strong enforcement structures Is now building new technologies using IT for better contacts with borrowers and monitoring repayments q MF has an outreach of 48 million poor in Asia q 2005 was declared as the year of Microcredit by the UN q Has two models of lending Group Lending o Individual Lending o

Rising Importance of MF in India Banks, Insurance co. s Microfinance Institutions 18% 37% Formal Semi – Formal Employers, relatives, neighbors. friends 16% Moneylenders, pvt financiers 4% 26% Informal 1 -on-1 personal Informal mutual (Chit funds ) q Has been seen as a successful interventionist strategy in rural India q Yet to take off in a big way in urban India Data source: NCAER

Rising Importance cont… q High growth q High potential growth q India: Market size estimated at $16 -22 billion Large outreach q India: $4 million lent (1995 -96) to >$2. 8 billion (2006 -07) India: >33 million Housholds Large number of players India: >3000 MFIs Source: MSR India 2007

Main Areas of Intervention in Management of MF q Introduction of adequate risk management Tools q Reduce operational costs with automation q Deploy the above with low cost & wide access technology

Risk Management Tools Credit Scoring Streamlines the lending process and lower costs o. Reduces time and manual steps in processing each application o. Reduces number of applications needing manual review A method by which data are used to predict a particular outcome of interest. The score represents an estimate of the probability or odds of an event occurring, such as the probability of default. o Reduces training time for new credit staff o. Improve loan officer efficiency (reduce time spent on collections, which in some markets claim up to 50% of loan officers’ time) o. Increase lending volume o. Approve 10 -30% more applications keeping loss rate unchanged o Enables risk-based pricing Better quantified expected losses for different risk classes of borrowers

Role of ICT q Management Information Systems (MIS) q Mobile Computing q Branch Office Franchise model q Card Services, EFTPOS and ATM's q Internet Banking

Management Information Systems q For the Microfinance Providers (MFP) q To monitor the quality, sustainability and efficiency of its loan portfolio, q To monitor development impact, q To manage general administrative tasks . . . Grows with the institution

Present MIS . . . Grows with the institution Colour outside the lines

Loan Performer (LPF) q Has its roots at the "Uganda Women's Finance Trust" where it was initially developed as the "Trust Information System“ q Took 3 years to develop from 1995 -98 q Affordable entry price (free below 500 portfolios) q Best suited for small and medium MFIs (5, 000 – 20, 000 loan portfolios and upto 1, 000 savings portfolios) ™ Windows 2000/XP compatible ™ Minimum Requirements: 64 MB Ram, resolution, A 4 printer. 800 x 600 screen

What LPF Can do… Savings 100 Savings Products Time-Deposits General Ledger Client Handling Individual Clients Businesses Group Members All Financial Statements Budgeting Assets Sales & Purchases Export to Other Accounting Packages Foxfire Report Generator Loan Portfolio Tracking of Group Accounts Linked to Savings or Shares Printing of Loan Contracts

Some Features of LPF Strategy adopted while creation LPF Flexibility o User friendly o Can be easily customized o Affordable o Is multilingual English, o French o Spanish o

It can generate reports for both individual and group borrowers along with repayment schedules

q Automatic booking of standard transactions. q Generates Reports on : o o o o Budget Tracking Quarterly Performance Profit per Period/Surplus Cash Flow Trial Balance P&L Statements Balance Sheets

Allows for creation of your own reports which is generated through Fox. Pro

mifos: The Open Source Proposal. . . a Grameen Foundation Initiative q A freely available world-class management information system (MIS) q Provides the core functionality required by microfinance institutions. q The flexibility and scalability of the product means that we'll be o able to simultaneously standardize common processes o accommodate regional variations o scale for new innovations in the future

mifos: The Open Source Proposal . . . cont Grameen Koota - Bangalore, India Total 5 deployments: q Grameen Koota - India q ENDA - Tunisia q Jitegemea - Kenya q Fundación Honduras q IIRM - India Adelante Mifos Specialist : MFTech Project Champion: Suresh K. Krishna Project Manager: Naganand Kumar - Mifos Specialists: MFTech and IBM Number of clients: >100, 000 Number of branches: 44 Status: all branches live Implementation Status * Total Branches -- 44 * Running live in centralised server -- 27

mifos: The Open Source Proposal . . . cont IIRM (Institute for Integrated Resource Management) - Tezpur, India Project Champion: Dhattatreya Hosagrahar Project Manager: Noel Anil Mifos Specialist: Profound Infotech Number of clients: >7, 000 Number of branches: 6 Status: Deployment now underway

Mobile Banking “The large scale spread of mobile telephony has opened up new vistas for banking in the form of mobile banking and the potential in this new sphere is enormous; adequate steps to ensure safety and security in a mobile based computing / communicating environment have to, however, be made. ” RBI’s Financial Sector Technology Vision: 2008 -2010 WIZZIT (South Africa) M-Pesa (Kenya) ICICI (India)

WIZZIT study o “A bank in your pocket“ o “The easy way to pay“ o No minimum balance requirement o Variable monthly fees o Pay as you go model o Markets via WIZZ-Kids

References www. cgap. org http: //www. microfinancegateway. org/resource_centers/techn ology/iss_software/? iss_orderby=rating http: //web. worldbank. org/WBSITE/EXTERNAL/WBIPROG RAMS/FSLP/0, , content. MDK: 21368529~page. PK: 64156158~pi. P K: 64152884~the. Site. PK: 461005, 00. html http: //www. loanperformer. com/ http: //www. mifos. org/about/open-source-technology

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