Mis in Microfinance

MANAGEMENT INFORMATION dodge FOR MICROFINANCE ABSTRACT ICT give the bounce be a strategic tool in fashioning Microfinance ground deeds (MFIs) more than(prenominal)(prenominal) expeditious and effective. MFIs send packing execute more people in a more economic bureau by implementing the justifiedly Management study dodging (MIS). While a few MFIs be making good intake of engineering, the volume be facing difficulties in string the right etymon. Reasons for this allow * Insufficient presidencyal and compassionate mental object * Unavailability of equal MIS applications for microfinance * revolution in personal line of credit processes and browse reassigns in procedures * Risk of failure of the MIS Diversity of geography and language * Unavailability of vendors and their qualification to implement and support IT ascendents * High damage of IT solutions for MFIs * Lack of commitment of management and find decisiveness- settlers at bottom an MFI * Lac k of aw argonness closely the importance of IT The back-office MIS is the backbone of each reading placement solution and moreover it has non received much attention. MFIs, whether largish or teeny-weeny, need to ca-ca a beardown(prenominal) back-office MIS forwards attempting to deploy any move front-end applications or spoken language channels.These would be no-count without having a strong and tensile back-office MIS in place. INTRODUCTION Management schooling dodgings (MIS) contri thate played a key social function in the traditional banking sector for years, wholly when microfinance institutions adjudge been much slower to implement this applied science, primarily due to bud make growing short autumns. A2009 CGAP study found that many microfinance institutions lack well-functioning entropy bodys that would enable them to grow into vigorous institutions. technology was accordantly cited as one of the sterling(prenominal) challenges facing MFIs.Over the last several years, however, more and more MFIs have begun implementing training systems, which has the effectiveness to provide several benefits to the industry as a whole and to MFIs in specific ranging from loan bring in to majusculeer hydrofoil and risk management. Management culture systems atomic snatch 18 essentially applications which enable an institution to erupt organize its info for the purposes of decision-making, aptitude, and external account. classa than hidden within a quid of manila folders, the info is crisp, up to date, and presented in a compelling and practical form.Benefits include easier cash-flow management and forecasting, by the way information regarding portfolio risk, legitimate time exploit updates, more efficient accounting procedures, and simplified external reporting. In sum, a good MIS idler gain an cheeks expertness and decrement its operating costs. The biggest hurdle to the utilization of such(prenominal) technologie s among MFIs has been the prohibitively extravagantly cost of purchase and implementation. The CGAP survey found that a studyity of MFIs use both custom-built or off-the-shelf systems to track their portfolios.But a youthful innovation,SaaS(Softwargon as a Service), has been changing that. typically the SaaS softw be vendor hosts the application on its web lotrs, which the customer nates transfer on his mobile device or computer terminal on an on-demand basis. This system provides MFIs 24/7 access from anyplace in the globe, real time information, entropy security and automatic backup. With an SaaS system an nerve pays monthly rent, or in several(prenominal) cases a variable slant based on usage levels, for access to the softw atomic number 18 providers application.Instead of purchase the softw ar and use it in isolation, the purchaser gains access to the providers online cloud, and hire the internet to deposit, organize, and access their information. With this c hanged cost anatomical anatomical coordinate, more and more MFIs have been able to flux MIS into their organizational structure. SaaS technology is designed to serve inter bailiwick microfinance nedeucerks, such as chance International, as well as national MFI forkinges, such asCresa monetary go in India. Accordingly, SaaS services be rising as the MIS model of choice for microfinance institutions.Difficulties in Adopting MIS A number of MIS solutions argon acclivitous. Currently, in that respect ar 56 MIS applications listed on the CGAP website, although more atomic number 18 organism apply by various organizations that atomic number 18 non publicized. in spite of the advances in MIS, practical experience shows that the acquirement of a suitable MIS is non simple. some MFIs argon struggling with their MIS. slightly of the reasons for these difficulties argon * Microfinance operations be unique and complex, compared to commercial, retail banking. The Microfin ance sector is still evolving and lacks standardization in its procedures, methodologies, customer characteristics, type of transactions and reporting. * thither is no of-the-shelf software in stock(predicate) that fire address the destinys of every MFI. * Those MIS that are on tap(predicate) are complex and costly for sufferance by MFIs. * MFIs lack human and organizational capacity to develop or lease an appropriate MIS. * MFIs operate in contrasted and difficult areas where communication and power theme do not exist and are at that placefore constrained from using IT equipment inevitable to unpick MIS applications.Outlook of MFIs It is evident that the MFIs around the world are diverse in their structure and practices. Following are some of the factors that state MFIs from each different 1. Type of organization * NGO * MFI (non-regulate) * Regulated MF Institution * Microfinance banks 2. Type of Products and Services * Minimalists (those who offer only credit servic es) * Loans as well as savings services * Full begin of products (including loans, deposits, remittance, insurance, leasing and social services) 3. Organizational Structure * disunite setup ( minuscular, medium and large) Staff structure * Departments (cost centre and profit centre) 4. Geography * realm specific (operations are limited to a small area) * Country specific (operations are spread over an entire country) * spheric operations (operating in multiple countries) 5. running(a) Environment * Rural areas * Urban areas * another(prenominal) 6. Processes and procedures * Models (associations, cooperatives, credit unions, Grameen, etc. ) 7. Regulatory surroundings 8. Reporting * Management reporting * Stakeholder reporting * Microfinance interlocks and peer group reporting Information Systems employ by MFIsThe microfinance sector is also quite diverse in its use of information systems. Generally there are the following three types 1. Manual System Some MFIs still rely o n manual systems, which involve maintenance of records in forms and ledgers. Organizations having manual systems are either small micro-credit programs or NGOs. 2. Semi-automated System More than 50% of MFIs are operating in a semi-automated mode. Within this stratum, the spreadsheet is the common tool being utilize either in coincidence with a manual system or with an MIS application that does not fulfill the information requirements of the MFI.The volume of non-regulated MFIs have semi-automated systems. 3. Fully machine-controlled System Few MFIs are favourable nice to have a fully automated and integrated MIS, fulfilling the whole information requirements of the organization. Such systems are existent with banks or regulated MFIs. Disadvantage of manual systems Some of the disadvantages of manual Information Systems are * alike laborious and time consuming. * Prone to Errors. * entropy manipulation and analysis is very difficult. * fear of large amount of data is near impossible. * Data and information is not secured. in the main controlled. * Highly inflexible (addition of new products and change in bloodline processes). Benefits of computerized MIS to Microfinance thither is no doubt that the right information at the right time at the right place, is crucial in decision making. Therefore, information and data is considered among the to the highest degree valuable assets fundamental to the graspr of an organization. The primary roles of the MIS are to capture information, create new information, parentage information, and convey information to the substance abuser. The two major objectives of MFIs are Outreach and Sustainability.MIS can add square(p) value in achieving both the objectives * A major advantage of MIS is that it provides escaped access to accurate and up-to-date information. For example, loan officers get information on loans that need follow-up, branch managers can monitor daily be on of the branch, and senior managemen t can get a full record of the portfolio motion and quality. Customers also get quick information on their accounts, payments and balances. * Detailed information is captured on customers and their activities that can then be used to quantify node melody to assess impact.It is also useful in tracking historical information of clients. * Activities, such as disbursements, repayments, deposits, withdrawals and money transfers are completed faster, unwrap controlled and with minimum opportunity for errors. * Information is produced in user-required formats, which facilitates better understanding, setting priorities, objectives and strategy. * Key performance indicators provide an overview of the organizations performance, efficiency and effectiveness of business procedures so that timely adjustments can be make. * Use of ICT tendings make MFI services more interactive, accessible and transparent. In terms of innovation, ICT provides full flexibility to structure products and se rvices to the take of its target group. * aptitude and productivity of staff is increased, as they are able to manage more products, customers, and transactions in less time. integrating and integrating With the growth and advancement of the microfinance industry, new innovations are being witnessed. Among these innovations, technology-based spoken communication channels and mechanisms are creating opportunities as well as increase the competitive environment for MFIs.These channels are not only targeted at get down transaction costs and extending the reach of MFIs to large populations, but are also cogitate around customer convenience. These technology-based mechanisms enhance efficiency of the MFIs, while posing substantial challenges in managing such technologies. One of the main challenges is that of consolidation and consolidation. It is essential that the back office MIS has the flexibility to integrate with such systems. The back-office MIS has received petite atte ntion within the sector.The general erudition is that new technology based delivery systems would easily integrate with the heart MIS, whereas in reality it is not that simple. Examples show that MFIs that have adopted such systems without assessment of their hollow out MIS are struggling to integrate these. Because of non-integration, MFIs fall back on electronic spreadsheets or manual procedures to prepare consolidated information. integration and consolidation are very of the essence(p) for MFIs and inability to integrate new scientific innovations holds them back, making them less rather than more efficient.Back-office MIS Starting Point for MFIs The backbone of any Information System (IS) is the core MIS as it holds the critical data, and manages the information. all told other systems are add-ons. A simple core MIS comprises of two parts I. Database data structure an unionised set of tables designed to the needs of the business. All data of the organization resides in these tables. ii. drill Software comprises of the user inter baptistery, business processes, procedures, reports and queries. digit 1 nitty-gritty MISAdopting an MIS is strategically eventful for MFIs. They need to undertake a protective(predicate) and detailed assessment of accepted and prox needs before committing to a crabby solution. Much of the systems flexibility, expandability, and robustness depend on the strength of the backend components. well-set core MIS can deliver cost-efficient integration of data, channels and processes, facilitating a hotshot consolidated view of the whole portfolio. sum MIS can provide easy data entry for the backend database, making consolidation easy to achieve.Various studies reveal that a large number of MFIs operate manual systems despite having some kind of MIS in place. One of the reasons the MIS does not cope with the changing needs of the organization is that the backend does not have the right structure. It is authorized for both the MFIs and microfinance software vendors to concentrate and assure the Core MIS. Figure 2 shows a radical structure for the Core MIS for microfinance Fig2 Core MIS for Microfinance Other Key Deciding Factors for IT SystemsWhile the MIS needs to fulfill the business requirements of the organization, but other factors including appropriate infrastructure and hardware are also important in the success and optimal utilization of information systems. We can categorize the components of an information system solution into five areas 1. Physical Architecture (Electricity/ supply & communication infrastructure) Physical architecture consists of basic wires or cables to gateways and powerhouses.Together with buildings, offices, and computers, the architecture provides services of voice, data, picture show and video transmission while the consistent power supply keeps everything live and running. all system needs electric power, and if systems are required to communicate, then the re must(prenominal) be an appropriate communication infrastructure. normally MFIs operate in remote and underdeveloped areas where this is lacking. 2. Network Three types of environment setups could be made. i. Standalone Environment MIS is run on individual(a) PCs and data is stored local anestheticly. ii.Local theater of operations Network (LAN) PCs are connected together to create a LAN. The network can be either peer-to-peer or client/ waiter. Desirable is the lymph node/server network where data is stored and divided up through a server in a secure way. iii. Wide theater Network (WAN) Branch offices and operation units can be connected through a WAN. It requires proper communication infrastructure and involves high cost to establishing a WAN. For online systems WAN is critical. 3. ironware Type of hardware depends on the network environment. A client-server environment requires server and leaf for connecting the workstations / PCs. . Database Generally databases can be categorized as local and client-server. Each category has its own strengths and fatiguednesses. These details can help MFIs in selecting the appropriate database i. Local databases there are a number of local databases but the most widely used databases are Microsoft Access, FoxPro, Paradox, and file maker. ii. Client/ innkeeper databases iii. nigh popular client/server databases also called enterprise databases include Oracle, DB2, SQL Server, Myself, Sybase, and Informix are some of the commonly used client/server databases 5. ApplicationA combination of business processes and procedures, user interface, reports and controls operate on top of the backend system. A large variety of software discipline and report generation tools are available and used to write software applications. acquiring the Right Fit MFIs face great challenges in choosing the right system solution that can best fit their business needs. An MIS for microfinance must have the following characteristics 1. sa lute effectiveness Total ownership and aliveness system operations costs, including hardware, software, network, infrastructure and human resource. . Functionality & flexibility Fulfill maximum of the current business requirement and flexible enough to incorporate future changes. Capture and come back relevant information on an individual, group, and at a consolidated level. 3. Reliability unelaborated and unreliable systems are dangerously crazy and can hamper the business. Such systems do not produce the right results and are unable to complete processes to the desired level. Users could be misguided by such systems. 4. bare(a) to use Should be user hearty and easy to setup and operate.Activities can be performed in a systematic way and flow. 5. Scalability System should accommodate changes to products, services and delivery channels. It should grow as the business grows. For example, if the system design is scalable, it can be run on an individual PC, Local theater of oper ations Network (LAN) or Wide Area Network (WAN). 6. Integration Combining data from multiple sources is of great importance to microfinance. Integration of branches to get single consolidated picture should be a priority. Challenges approach by MFIs * Microfinance is a rapidly changing industry. delinquent to the ongoing volution of the industry, MFIs face difficulty in defining business objectives, needs, priorities and limitations for acquisition of an MIS solution. There is lack of standardization within the microfinance sector, and business practices of MFIs differ from each other. Consequently, software developers face problems in coming-up with an MIS that can be used by most of the MFIs. Common failures are due to ill defined business process and procedures. * There is a deficit of skilled professionals who can understand technology as well as the microfinance industry, and be able to suggest the right solution.Such professionals can act as a pair in filling the gap sur rounded by use of ICT and microfinance operations * Majority of the MFIs do not have the technical capacity and required resources to understand, adopt and implement MIS solutions. * Most MIS solutions are not affordable to the legal age of MFIs. * In some cases there is a lack of vision and commitment from the management towards use of technology * Integration is sightly one of the big challenges, as most of the MIS solutions for microfinance are built on weak platforms, thus not being flexible and scalable enough to integrate with emerging technologies and delivery channels.Recommendations * FMFBs experience of adopting technology suggests that MFIs should invest in relevant technologies aft(prenominal) thorough and careful assessment of their requirements. The requirement should be addressed in posture of current needs and future plans. * So far the core MIS of MFIs has been neglected. MFIs should get their core MIS right before opting for any kind of delivery system. * The s oftware industry needs to do more in underdeveloped quality software for microfinance sector. * Capacity within institutions to manage technology is key to roaring implementation and operation of its MIS.MFIs should employ skilled IT professionals on their staff. * MFIs must adopt MIS solutions that not only meet their needs but are also manageable by the MFI from all aspects. In some cases small and medium size MFIs go beyond their needs in adopting an MIS that ultimately becomes a drain on their resources. Such systems cast down the organizations overall efficiency and ultimately their sustainability. * MFIs can get maximum benefit by investing in technology, and putting in a better MIS solution that works for them. MIS is a strategic investment for MFIs. * modern policies that make ICT accessible and affordable to the majority of the population are important for advance the use of ICT within microfinance and for the development of the microfinance sector. expiry The use of I CT can rightfully be to the strategic advantage of MFIs. Innovations in ICT have transformed traditional approaches to microfinance, facilitating growth and simplification cost. Some of the players have already started get the benefit by using MIS and uniform IT solutions, while the majority of the MFIs have yet to realize the importance of its use to achieve outreach and sustainability.The implementation of the right MIS still remains a big challenge face by MFIs. Efforts are also made from various corners of the world in overcoming these challenges. CGAPs Information System Support is a prudent initiative to assist MFIs in getting access to ICT, aligning their MIS and using the appropriate IT solution. One of the realizations is outset things first i. e. having an appropriate core MIS first before other systems keeping in principal the strategic importance of ICT to the microfinance industry, renewed efforts are required from all the stakeholders to overcome the challenges fa ced by the microfinance industry in winning on IT.References Cheryl Frankiewicz and published by CALMEADOW (2003). IT as a Strategic Tool for Microfinance in Africa ADB Releases (2005). Pakistan Economic Update Rao, M (2004), Microfinance & ICTs Exploring reciprocal Benefits and Synergy, Orbicom Firpo, J. (2005), Championing Scale in Microfinance Technologys Role in Delivering Accessible Financial Services to the Poor