Information Technology Innovations That Extend Rural Microfinance

Creating a breakthrough in delivering microfinance services to marginalised rural populations is one of the greatest challenges facing the microfinance industry. Best estimates indicate that 5,000 microfinance institutions worldwide–and thousands more counting credit unions and other cooperatives–serve approximately 50 million low–income individuals and their families. While the success of microfinance is well documented, there is still room for improvement to meet existing demand, especially in rural areas. Possibly 20 institutions world wide have a client base of a million or more low-income customers, yet the majority of microfinance institutions (MFIs) serve fewer than 50,000. The reasons for differences in scale vary from country to country, but there remain a number of common problems in the industry worldwide, including: Many MFIs operate in an inefficient manner because centralised information processing has not been possible. Loan decisions are generated by time-intensive processes for gathering data, performing qualitative analysis and in efforts to form groups. Risk-based product pricing has recently become available with automated information systems, but many MFIs still offer only a single, generic product for all clients. Customers transaction costs, such as for journeys to town, are often high in proportion to the amounts of money they transact. In some rural areas customers’ access to financial services is limited to once a week or every other week when a field officer or mobile unit comes to the Village Much information is still recorded on paper though the number of institutions that have automated management information systems (MIS) has increased significantly. Very few institutions link their internal systems with external systems, either directly or through data protocols.