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  • Unit Desas: 3600 rural branches of BRI – 16 million depositors - 1984 CrediAmigo: 164 branches – 100,000 clients BancoSol: 33 agencies – 650,000 clients
  • Unit Desas: 3600 rural branches of BRI CrediAmigo: 164 branches BancoSol: 33 agencies
  • Unit Desas: 3600 rural branches of BRI CrediAmigo: 164 branches BancoSol: 33 agencies
  • Parabolic antena
  • Parabolic antena

Sirtaine (1) Sirtaine (1) Presentation Transcript

  • The use of IT in microfinance Finance Forum The World Bank
  • Thesis
    • The use of IT can help at two crucial levels in the microfinance process, including to reach out to the poorest, or those in remote areas,
    • but severe obstacles require creative solutions
  • Agenda
    • How can IT help in the microfinance process?
    • What obstacles make this difficult?
    • What kind of creative solutions can be found?
    • What can the Bank do ?
  • IT can help at two levels: (i) in assessing loans, and (ii) in reaching out to clients
    • In assessing loans : IT-based credit scoring or other credit assessment models are key to:
      • Ensure a good quality of loans
      • Increase productivity
    • In reaching out to clients : IT can help expand programs in a profitable way, even:
      • In the absence of a pre-existing branch network
      • In rural and remote areas
  • Outreach has traditionally been built through branches
    • Nearly all microfinance programs rely on branches
    • Programs with large outreach have medium to large networks
    • Those which focus on large cities, have medium size networks
        • BancoSol in Bolivia (33 branches / 650,000 clients)
    • Those with a presence in rural areas have very large networks, which either:
      • Relied on a pre-existing extended branch network
        • Unit Desas in Indonesia (3500 village units / 2.5 million borrowers)
        • SHG program in India (networks of 40 banks / 2 million borrowers)
      • Benefited from large subsidies to finance a wide scale branch expansion in rural areas
        • Grameen Bank in Bangladesh (1160 branches / 2.4 million borrowers)
  • Large rural programs, relying on large networks, have received heavy subsidies First soft loan First bond issue Grameen Bank Source : Grameen Bank
  • Reliance on branch networks constraints growth, in particular in remote areas
    • In many countries, many programs remain small as increasing outreach via branches would not be profitable
    • Rural and remote areas have often been left unattended, even by microfinance institutions !
    • Hence, IT can help build up outreach profitably, especially in smaller city centers and remoter areas
  • IT could facilitate the profitable expansion of microfinance programs Source : TowerGroup, 2000
  • Agenda
    • How can IT help in the microfinance process?
    • What obstacles make this difficult?
    • What kind of creative solutions can be found?
    • What can the Bank do ?
  • Low connectivity is the main obstacle … Source: Telecommunication Union Data Base
  • … even for fixed and cellular phones … Source: Telecommunication Union Data Base
  • … even more so for the poor Source : Central Bank of Brazil
  • Other obstacles play a more limited role
    • Costs of IT services (device, subscription, calls)
      • In Brazil, monthly subscription charges for cellular phones can be up to 10% of the minimum salary
    • Security issues (internet, cell phones)
    • Education
    • Cost of money transport to remote areas
      • Breakeven point for ATMs reached at about 4,000 daily transactions
  • Agenda
    • How can IT help in the microfinance process?
    • What obstacles make this difficult?
    • What kind of creative solutions can be found?
    • What can the Bank do ?
  • Creative solutions have started to emerge in various countries
    • Make use of public infrastructure:
      • The post office network (India)
    • Create own IT infrastructure at cheap cost:
      • Internet-based e.g. PopBank machines in grocery stores (Brazil)
      • Satellite-based e.g. Caixa’s correspondent banker network (Brazil)
      • Cellular-based e.g. TEBA Bank (South Africa)
  • Using public infrastructure
    • India Post
      • Idea : allow microfinance providers to access new clients via the post office network
      • Advantages : costs to reach out lower segments are reduced
        • Existing network with large rural presence
        • Existing client data base with saving information
        • Potential competition among various providers
        • Limited cash transport requirements
  • Creating own internet-based IT infrastructure
    • Pop Bank
      • Idea : install internet-linked terminals in “panaderias”
      • Advantages : costs to reach out lower segments are reduced
        • Internet-based technology
        • Limited cash transport requirements by using grocer’s liquidities
        • Automatic link with a commercial bank’s back office capabilities
        • Potential presence at heart of 25,000 villages
        • Other potential sources of income
        • Attractive machine
  • Creating own satellite-based IT infrastructure
    • Caixa
      • Idea : install satellite-linked machines in grocery stores
      • Advantages : costs to reach out lower segments are reduced
        • Limited cash transport requirements by using grocer’s liquidities
        • Automatic link with the commercial bank’s back office capabilities
        • Cheap device and card (debit)
        • Simple to use
  • Creating own cellular-based IT infrastructure
    • Teba Bank
      • Idea : install wireless terminals in “Spazza” shops
      • Advantages : costs to reach out lower segments are reduced
        • Limited cash transport requirements by using grocer’s liquidities
        • Automatic link with the commercial bank’s back office capabilities
        • Cheap device and card (debit)
        • Agreement with telecom company
        • Simple to use
  • Agenda
    • How can IT help in the microfinance process?
    • What obstacles make this difficult?
    • What kind of creative solutions can be found?
    • What can the Bank do ?
  • The Bank can help
    • Build up the required IT infrastructure
    • Increase competition in the telecom sector
    • Ensure that the regulation of small microfinance providers does not prevent creativity (ex: private partnerships)
    • Encourage and support creative solutions
      • IFC
      • Government incentives