With renewed interest in reaching out to financially excluded markets and the transformational role that technology is proven to be capable of playing in addressing key business themes of outreach, efficiency and risk management, it is not surprising that Information and Communications Technology (ICT) is being looked upon as a viable option to address very similar problems that have traditionally inhibited meaningful interventions in the area of microfinance. This therefore makes the subject of technology interventions in microfinance quite central to the poverty reduction and financial inclusion agenda.
As MFIs struggle to growto the next level, they are challenged with multiple hurdles. On one hand is the issue of increasing outreach through scalability. Cost efficiency and productivity play an important role in achieving this. Relationship management & customer retention, as well as product innovation are also relevant in helping the business grow. On the other hand however, the challenge is to avoid getting plagued by uncontrolled growth that can eventually become difficult to manage.This requires a high degree of process implementation & adherence, reporting structures for effective control, risk management frameworks, professional human capital and strong business model execution capabilities. ICT has a role to play in all of these!
However, given that there are tremendous economic pressures and tight spending that MFIs have to grapple with, it warrants that a critical evaluation be done of where their IT investments are focused on.This includes not just estimating spends required over the life of a system or initiative, but also an evaluation of potential business benefits, future options and relative risks. Clearly, what is important is not what the money is spent on, but what the organization is getting in return. Therefore, MFIs that focus on technology innovation to achieve sustainable scalability of their operations also need to develop internal management capabilities to not only manage IT, but IT investments as well.
The objective of leveraging ICT for microfinance delivery has to be thus geared towards actualizing specific projects that are cost effective, productivity enhancing and sustainability sensitive. Specific technology concepts that have been proven to have tremendous impact in other industries – such as modular IT architecture design, standardization approach, business continuity infrastructure, open-source software and outsourcing – therefore need to be evaluated in the microfinance context.
Known ICT concepts and approaches, when applied in the manner outlined above, establish the fact that skill-sets and approaches required by the IT industry to service other sectors, are equally applicable and relevant to the social sector in general, and microfinance in particular. This, when coupled with the sizing of the microfinance opportunity, will make a compelling business case for the IT industry. Further, it will encourage IT firms to provide impactful solutions geared towards meeting challenges and opportunities of the microfinance sector.
As MFIs struggle to growto the next level, they are challenged with multiple hurdles. On one hand is the issue of increasing outreach through scalability. Cost efficiency and productivity play an important role in achieving this. Relationship management & customer retention, as well as product innovation are also relevant in helping the business grow. On the other hand however, the challenge is to avoid getting plagued by uncontrolled growth that can eventually become difficult to manage.This requires a high degree of process implementation & adherence, reporting structures for effective control, risk management frameworks, professional human capital and strong business model execution capabilities. ICT has a role to play in all of these!
However, given that there are tremendous economic pressures and tight spending that MFIs have to grapple with, it warrants that a critical evaluation be done of where their IT investments are focused on.This includes not just estimating spends required over the life of a system or initiative, but also an evaluation of potential business benefits, future options and relative risks. Clearly, what is important is not what the money is spent on, but what the organization is getting in return. Therefore, MFIs that focus on technology innovation to achieve sustainable scalability of their operations also need to develop internal management capabilities to not only manage IT, but IT investments as well.
The objective of leveraging ICT for microfinance delivery has to be thus geared towards actualizing specific projects that are cost effective, productivity enhancing and sustainability sensitive. Specific technology concepts that have been proven to have tremendous impact in other industries – such as modular IT architecture design, standardization approach, business continuity infrastructure, open-source software and outsourcing – therefore need to be evaluated in the microfinance context.
Known ICT concepts and approaches, when applied in the manner outlined above, establish the fact that skill-sets and approaches required by the IT industry to service other sectors, are equally applicable and relevant to the social sector in general, and microfinance in particular. This, when coupled with the sizing of the microfinance opportunity, will make a compelling business case for the IT industry. Further, it will encourage IT firms to provide impactful solutions geared towards meeting challenges and opportunities of the microfinance sector.
