This document discusses enhancing outreach of microfinance through the role of technology. It argues that technology can help microfinance institutions (MFIs) improve efficiency and sustainability by better processing and analyzing the large amounts of data generated through economic activities. While MFIs have started using technology like mobile phones and the internet, there are still challenges to implementing technology fully, such as illiteracy, lack of infrastructure, and high costs. The document suggests that localized training programs, improved infrastructure, and customizable low-cost software can help MFIs overcome these challenges and allow technology to increase their reach and impact.

1. Enhancing outreach of Micro Finance – Role of Technology
Paper to be presented in National Conference on "Micro Finance: Growth Engine for Rural
Economy“. Organized by Canara College, Mangalore on 29th-30thth January 2016.
Author
Vinay Krishna N Krishnamurthy
Lecturer MSNM Besant Institute of PG studies IIyear student
Dept of MBA MSNM Besant Institute of PG Studies
Mangalore Mangalore
Email :nvinaykrishna@live.com Email :krishna.murthyj@yahoo.com
Contact :9964266413. Contact: 8123995021.

2. Abstract
Microfinance is now viewed as a profitable business model which is capable of starting large
scale economic growth and social development in areas which have remained untouched by
formal banking sector. With the expansion in Micro Finance Institutions, there are a number of
challenges which need to be addressed in order to improve efficiency- the solutions is
Technology. Technology is one of the key drivers of economic growth as seen in various sectors
today it has not only helped business to grow at rapid rate but also in making them efficient and
sustainable. One of the major product of technology today is Data, a lot data is generated while
carrying out day today economic activity how this information is processed analyzed interpreted
and stored is what makes a difference of success and failure.
Microfinance providers have taken a serious note as more and more rural areas and semi urban
areas are beginning to make well informed decisions regarding what to buy and what not to buy
based on use of mobile phones and internet, In India as of now there are 100 crore mobile phone
users according to TRAI, and of them nearly 31crore people use mobile internet and this number
is increasing with smartphone and internet penetration even in the rural market. The various
initiatives taken by Prime Minister Mr. Narendra Modi, like Digital India which will help in
improving the digital infrastructure of the country, Pradhan Mantri Jan Dhan Yojana is national
mission for financial inclusion for all the citizens of India who so far where not provided banking
services, Pradhan Mantri Mudra Yojana which will help in refinancing of micro units. All this
activities has led to increase in number of transactions carried out by the people both in urban as
well rural India. As a result technology is being explored by Micro Finance Institutions (MFI) to
improve their potential and impact of their operations.
Keywords: Micro finance, Micro Finance Institutions, Explored, Technology.
INTRODUCTION
A county where 83 crore out of 129 crore of its population is still in rural area the importance of
a healthy Micro Finance institutions in such a country is of outmost importance. Technology is
one of the big piece in the puzzle of improvement in rural economy. Increase in the literacy
levels have not been up to the mark but Technological advances have helped a lot in the rural
areas when it comes to information and knowledge sharing either by way of increasing
mobility, communication between various stake holders of the society. Increasing number of
MFIs are providing various services to their customers for funding their ideas or requirements.
A large number of surveys have been carried out by institutes both from India as well abroad
have found out that resource constraint and a lack of understanding of how technology can be
used as major reason for non-implementation of technology in MFIs.
The proper implementation of traditional banking technologies efficiently and innovatively can
lead to reduction in costs and increasing the reach of microfinance model. Currently in India, there

3. is increase in use of technology but so far it has been restricted only to Management information
systems (MIS) there is lack of sharing the same information across other MFI’s.
Microfinance Institutions (MFIs) in India majorly exist in the form of NGOs companies registered
under section 25 of Non-banking financial companies, commercial banks, Regional rural banks
and cooperative societies. Banks have been using the help of Self –Help Group (SHG) to provide
credit to group credit seekers.
OBJECTIVES OF THE STUDY
The objective of the study mainly focus on the impact of technological utilization in
microfinance sector in India.
a) To signify the role and impact of MIS in providing financial services to end users of
MFIs.
b) To understand role of new financial services provided by traditional banks to empower
rural people through MFI’s.
c) To understand the constraints and hurdles in the implementation of technology.
d) Viability of Technology implementation in increasing efficiency.
METHODOLOGY OF THE STUDY
The present study is done on recent changes in Micro finance institutions and the technology
impact on the MFIs in India. The necessary data is gathered from the secondary sources like
Magazines, journals, published and unpublished articles, and websites.
ROLE OF FINANCIAL PRODUCTS AND SERVICES PROVIDED BY BANKS
THROUGH MICRO FINANCE INSTITUTES.
1) Card based delivery
The banks have been providing various banking services through credit cards and debit
cards from several years which have been very successful in urban areas since their start.
The use of this cards have increased several folds because of its ease of use and increase
in one’s efficiency to save time. With increase in ATM networks and Point of sale
terminals banks are able to reduce transactions costs. Banks have approached MFI’s in
order to provide the same services to rural people masses who are not approaching Banks
by providing cards with additional or differentiated services like Kisan card.
2) Phone Banking and Mobile banking
Phone banking and mobile banking have been functioning well since there has been
increase in mobile connectivity and increasing mobile and internet penetration in rural
areas the MFI’s are employed in order to train and educate the masses on how to use the
services provided by banks in order to increase the transactions with the banks, As well
appoint agents for cash collection and disbursement of cash at village level through the
help of hand held devices. The phone banking channel functions through interactive

4. voice response system, but is limited to balance enquires and fund transfer of small
amounts, while mobile banking provides a wide variety of services and has potential it
requires the users to have mobile handsets with internet as well a stricter security
measures make it difficult for all the users to use this service.
3) Payment and settlement system
With increasing innovation in the technological field as well in banking products and
services have led to development of various payment and settlement systems. With
introduction of MICR code has increased the efficiency by reducing time involved in
processing cheque. National Electronic clearing services, Electronic fund transfer system,
RTGS have been introduced in all the core banking enabled banks throughout India
which has helped to increase the transactions carried out by MFI’s and its customers.
4) Loan Financing and repayment structuring
Banks have been pushing for higher loan financing through MFI’s because of their reach
and as well per the directions of RBI. With proper training from Banks and use of
appropriate software a MFI can develop a repayment structure as per individual
customer’s requirement without converting to a NPA.
5) Alternative banking products and services
Banks today provide various other products other than the traditional services of deposits
and loans, today Banks sell insurance, mutual funds and other productive services whose
benefit and information is passed to MFIs who can develop adopt and deploy services to
their customers.
MANAGEMENT INFORMATION SYSTEM AND INFORMATION AND
COMMUNICATION TECHNOLOGY IN MICRO FINANCE ACTIVITES.
A well programed and developed MIS and efficient use of ICT’s will help the MFI’s in
gathering, storing, tracking, and retrieving the information of all its customers whenever it
requires. A properly managed information system will help the MFI’s to know about how much
loan can be given to a person, how to structure a repayment schedule for that individual.
Majority of these activities have now been automated with the help of proper combination of
hardware’s and software’s. MIS should be able to help the organization to bring about
transparency, efficiency, lower the cost, improve reporting and allow the MFI s to make an
informed decisions regarding its client.
With increasing financial products available in the market Banks can use MFIs as Business
correspondent in increasing its reach to the masses in the rural area and thus help in increasing
the financial inclusion of the poor. The MFI’s can also tap into global markets to enhance the
economic returns for their activities.

5. PROBLEMS FACED BY MFI’S ON IMPLEMENTATION OF TECHNOLOGY.
Introduction of technology has its own problems at the rural level and MFI’s have to overcome
this problems in order to make the implementation of technology hassle-free.
1) Illiteracy or undereducated
Most of the customers in rural areas are either illiterate or they just have basic education,
lack of understanding of how to interact with the technology is very important for its
success. If proper training, educational programs and a system which is user friendly can
make a huge difference. Several companies have been developing technologies which are
user friendly, highly localized and can be operated without hassle.
2) Implementation of technological infrastructure
The areas where MFI’s operate do not have adequate electricity, the population they
serve are spread over a very large area and delivering of financial services under Business
Correspondent of Banks are quite difficult and costly if not implemented correctly.
3) Lack of proper infrastructure
Be it roads electricity, communication network or trained workers without proper
infrastructure implementation of technology in a new area is quite difficult and can lead
to failure if proper training and innovation is not involved in providing services.
4) Cost of MIS and ICT package
The packages are normally developed by large organization with significant financial
support and are proprietary software which means to implement the same technology the
MFIs might require to spend a substantial amount in licensing fees. This prevents
accessibility to small organizations who cannot afford or change according to their
requirement.
SUGGESTIONS
1. The MFI’s must develop localized and friendly training programs which will educate the
rural people about the benefits of financial services and technology implementation in
rural areas.
2. The government has to implement additional programs and measures in order to improve
the existing infrastructure to overcome the problems of mobility and connectivity.
3. The Banks and government must develop customizable software’s which will help MFI’s
in increasing their reach to the respective customers without having to worry about cost
of developing one.

6. CONCLUSION
Technology has the potential to act as a catalyst for the delivery of multiple of unique banking
services, like credit retail, micro insurance and various other services which can be provided by a
single technological channel and improve access to services. Technology will allow MFIs to set
up operations with robust database with client credit information, credit history, loan grating and
repayment structure. A thorough pilot study will help in understanding of cost, context and the
problems that may arise during implementation and allow for better project control and increase
the success of the MFI’s. Finally with proper Information sharing between MFIs can help in
knowing the reason of success or failures of trails and increase the rate of success.

7. References
1. Consultative Group to Assist the Poor (CGAP) Report on IT Innovation Series
2. Evolution of technology in Microfinance by CARE.
3. http://www.iitk.ac.in/ime/MBA_IITK/avantgarde/?p=475
4. Role of technology in Microfinace sector in India M.Sravani Research scholar Krishna
University
5. Financial inclusion
http://www.academia.edu/8227520/Financial_Inclusion_in_India_Challenges_and_Opportunities
6. MicroFinance – Current Status and Growing Concerns in India-Biz Arena
7. http://www.thehindu.com/business/Economy/mobile-banking-users-to-double-in-four-years-
study/article7522015.ece