The document discusses the role of technology in transforming the microfinance sector in India, highlighting issues related to customer information systems and management. It proposes solutions such as mobile computing and branch office franchise models to enhance data accuracy and reduce transaction costs. The conclusion emphasizes that leveraging technology is essential for microfinance to support inclusive growth and address information asymmetry.

1. ICT in Microfinance
Course:MFABP
Indian Institute of Plantation Management, Bangalore
Presented by: Bidhu Bhushan Binit(11PGDM08)

2. Contents
 Transformation of Indian financial(banking) sector
 Typical Information flow and genesis of Problem
 Potential Answer
 Technology
-levels of implementation
-facilitating infrastructure
 DCCB, Bidar case
 Conclusion

3. Transformation through Technology
Technolog
y aided
channels
Convenient service
Service to clients at a fraction of the
costs incurred earlier
More reach

4. Information flow and genesis of problem
Bank
group agent MFI head
office
• Information
storage
• Data
analysis
• Decision
making
• Cash
logistics
Multiple recording & multiple data hand-offs
Information inconsistency
Tough to synchronize information between Decline in quality of
centres,branch and head office customer information
Errors due to multiple data handoffs

5. Potential Answer
Technology can address the fundamental issue
constraining the growth of the microfinance sector,
i.e Customer information systems and management.

6. Levels of implementation
Central System Field level
 Main computing  Standardized
platform for the multiple information collection
channels  Transmission to central
 Handling huge amount location
of customer data  Eliminating multiple
 Simultaneous analysis hand offs
 Tracking and monitoring  Agent:- as a
of a customer across decentralized branch,
multiple channels able to perform head
office function

8. Back-Office Management Information
System (MIS)
 The most fundamental ICT application is back-
office MIS.
 Sophisticated MIS is prerequisite for MFIs to
monitor the quality, sustainability, and efficiency
of its loan portfolio, to monitor development
impact, and manage general administrative
tasks.
 MFIs also track the non-financial information. So,
they need modified off-the-self software package
for these requirements.

9. Mobile Computing
 The back-office MIS helps the MFIs to monitor its
loan portfolio, this functionality is undermined if
the data analysed by the MIS is not up-to-date or
contains errors.
 Through mobile computing systems the Loan
officer have a palmtop computer, so that the
financial transaction can be recorded directly into
the MIS.
 It has significant implication with respect to data
accuracy and integrity, there by enhancing “client
confidence”.

10. The Branch Office Franchise Model
 MFIs have an overwhelming pressure to reduce
transaction costs and increase profit margins.
 Through branch office franchise model, the MFI
links with third-party merchants in remote areas.
 The rural telecentre networks are particularly
suited to serving as retail outlets for MFIs.

11. Card Service, EFTPOS and ATMs
 There are many similarities between consumer
credit cards and microcredit services. Both tries
to reduce high cost associated with small
transaction lending.
 Introduction of card-based services require the
roll-out of either EFTPOS functionality with third-
party merchants and/or ATMs.
 Card- based microfinance offers even more
opportunities like allowing clients who have
proven creditworthiness over time should given
access to additional products and services.

12. Internet Banking
 Gives client real-time information about their
account, and the ability to transfer funds between
accounts.
 It is an efficient tool to reduce the work of tellers
and therefore reduce the labor costs.
 Rural tele-centre networks can help in
implementing Internet Banking for MFIs.

13. Remittances: Microfinance Outreach to
International Labour Migrants
 MFIs through technological innovation, product
design can tap this market by extending outreach to
these migrant workers and their families at home.
 For example Sri Lanka’s Hatton National Bank,
whose “HNB Easy Remittance” help Sri Lankan
migrant workers to remit funds directly to HNB
accounts.

14. Facilitating Infrastructure
Unique Identifier
 Helps to create a repository of customer information.
 Availability of basic demographic data.
 Can be used to track customer behavior across multiple
relationship.
 Eg.-Smart cards in developed countries

15. Credit information Bureau
 Creation of mechanism allowing sharing of
information where documented sources of
information are not available.
 To track repayment history for efficient client
screening process.

16. Helping Access capital
 Microfinance assets will become transparent.
 Information system will help attract private capital
from individuals and venture capitalists.

17. DCCB Bidar Case
 District Central Cooperative Bank, Bidar has 171 PACS.
Average accounts a PACS handles is 800-1000. All the
books are maintained by CEO of PACS manually
 PACS delivers Kisan Credit Card loan, SHG and BDP
loans. It also provides fertilizers and grocery items like
wheat, sugar and K oil.
 All the problems of manually maintained accounts – time
spent in correcting, reports not ready on time etc

18. …DCCB Bidar Case
Balance sheet
P&L
Down load data Trail Balance
When needed Ledger
On dial up line SafalPACS Vouchers
@ DCCB
Branch
All financial transactions
SafalPACS
@ PACS

19. ….DCCB Bidar Case
 SafalPACS is a package where there are two sets of
software – one installed on iStation a hand held device
and the second is intalled on a PC located in the Bank
branch of DCCB.
 Day to day transactions are entered online on iStation
and monthly balance sheet, P&L, Stock book are printed
in the PACS
 For SHG, Digitized Demand information (DIDI) sheet is
printed and updated at PACS level
 Depending on transactions, data is transferred on dial up
line to DCCB branch PC.

20. ….DCCB Bidar Case
 Advantages of SafalPACS
 Affordable solutions for automation at PACS level
 Low power and low maintenance requirement and low
bandwidth, Hence one need not wait for long
 Advantage of automation – timely reports, elimination of
human error

21. Conclusion
 Some says “it can’t be done in microfinance,
electronic banking for poor will not work”.
 20 years ago when microfinance was in its
infancy many said “poor can’t repay, the poor will
not repay, the poor can’t save.

22. ….conclusion
 Inclusive growth has been marked as a necessary
way of development, not just by India but by UN
also. Microfinance is really giving a helping hand to
poor and unbanked segment. The problem of
information asymmetry facing by microfinance can
be addressed today by using technology.
 It has to work. Otherwise will be at a continuing
disadvantage with current economies and
enterprises.

23. Thank You !
References
:microfinance in India(edited by K.G.Kamkar)
:Safal Solutions pvt.ltd
:the case of correspondent banking in Brazil by Diniz,Pozzebon,Jayo,Araujo.