Sirtaine (1)

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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)

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

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