Innovation in India: Microfinance and Information Systems (MIS)
by Jim Rosenberg: Tuesday, March 31, 2009
Greg Chen represents CGAP in the South Asia region. Recently he visited a new and innovative microfinance institution (MFI) that has begun operations over the last year or so.
India has 850 million people who live on less than $2 per day. There is strong government interest in expanding financial services, an active microfinance sector, and fast-evolving business and technology sectors.
When it comes to microfinance, information systems are critical to stronger internal controls (over cash flow, financial reporting, portfolio quality, etc.). You can see this in action at Equitas, a new MFI which has more than 200,000 borrowers and follows the Grameen style of group-based lending model.
Efficiency is driven by innovations which combine the use of several simple technologies at various stages of the credit process. Here are two examples:
E-Docs. Membership and loan applications are completed manually by branches but are couriered to a central processing center. The documents are then scanned and from there on out, remain paperless. Forms use a series of check boxes which can be read by scanners and coded automatically. Remaining manual entries (e.g. names) are entered by a dedicated back office processing unit.
Real Time Meeting Monitoring. Within 15 minutes of the end of a group meeting, loan officers send a text message (SMS) by cell phone with three pieces of information: meeting attendance, loan collections, and when the meeting ended. This information is picked up by Equitas’s system which then compares it with what is expected, and creates a branch-by-branch report.
In this way, in real time, Equitas can see attendance rates, collections problems, and if meetings are running late.
There is also truly tight cash management. Relying on the real time recovery data provided by SMS, a courier picks up - and deposits - closing cash balances at the end of each day into the company’s bank account. The courier also delivers fresh cash at the beginning of each business day. No cash is left in branches overnight and it is all fully banked and tallied at the end of each day.
Combined, these systems enable a more efficient operation. Overall, it means stronger internal controls. There is much less room for fraud or abuse of cash or group meetings at the field. Equitas is one example of how good MIS is essential to well-managed microfinance.
8 Comments
April 1st, 2009 at 2:09 am, Integrating MIS with Microfinance « ThinkChange India ()
[...] The complete article by Greg Chen can be found here. [...]
April 29th, 2009 at 2:36 am, BOB ()
Which company has implemented this system and which softwares are they using
May 30th, 2009 at 11:16 am, India as Source of Microfinance Innovation « SeaMo TEST: Connecting the Microfinance Community ()
[...] India as Source of Microfinance Innovation March 31, 2009 (CGAP) India has 850 million people who live on less than $2 per day. There is strong government interest in expanding financial services, an active microfinance sector, and fast-evolving business and technology sectors. When it comes to microfinance, information systems are critical to stronger internal controls (over cash flow, financial reporting, portfolio quality, etc.). You can see this in action at Equitas, a new MFI which has more than 200,000 borrowers and follows the Grameen style of group-based lending model. (full article) [...]
June 1st, 2009 at 6:08 am, lynne kay ()
how can i become involved in microfinace could you send more info about the ins and outs of microfinace.lynne kay
June 20th, 2009 at 11:58 pm, Microfinance and Information Systems (MIS) | India Microfinance ()
[...] Greg Chen represents CGAP in the South Asia region. Recently he visited a new and innovative microfinance institution (MFI) that has begun operations over the last year or so. India has 850 million people who live on less than $2 per day. There is strong government interest in expanding financial services, an active microfinance sector, and fast-evolving business and technology sectors. When it comes to microfinance, information systems are critical to stronger internal controls (over cash flow, financial reporting, portfolio quality, etc.). You can see this in action at Equitas, a new MFI which has more than 200,000 borrowers and follows the Grameen style of group-based lending model. Efficiency is driven by innovations which combine the use of several simple technologies at various stages of the credit process. Here are two examples: E-Docs. Membership and loan applications are completed manually by branches but are couriered to a central processing center. The documents are then scanned and from there on out, remain paperless. Forms use a series of check boxes which can be read by scanners and coded automatically. Remaining manual entries (e.g. names) are entered by a dedicated back office processing unit. Real Time Meeting Monitoring. Within 15 minutes of the end of a group meeting, loan officers send a text message (SMS) by cell phone with three pieces of information: meeting attendance, loan collections, and when the meeting ended. This information is picked up by Equitas’s system which then compares it with what is expected, and creates a branch-by-branch report. In this way, in real time, Equitas can see attendance rates, collections problems, and if meetings are running late. There is also truly tight cash management. Relying on the real time recovery data provided by SMS, a courier picks up – and deposits – closing cash balances at the end of each day into the company’s bank account. The courier also delivers fresh cash at the beginning of each business day. No cash is left in branches overnight and it is all fully banked and tallied at the end of each day. Combined, these systems enable a more efficient operation. Overall, it means stronger internal controls. There is much less room for fraud or abuse of cash or group meetings at the field. Equitas is one example of how good MIS is essential to well-managed microfinance. CGAP [...]
July 15th, 2009 at 12:26 pm, victor obadagbonyi ()
i would like a help on a standard template for microfinance institution branch/cash centre business performance reporting.
September 6th, 2009 at 12:17 pm, Adinarayana raju ()
its a wonderful technology driven monitoring system, it decreases the back office work load on the field staff, so they can more concentrate on the fields as a result, high achievements and portfolio will be healthy. In addition to this most effective concentration if Equitas will offer other family support services like Education,health and support in wealth, the Equitas will appear on the top the MFIs could with in a short period with a good social impact.
October 23rd, 2009 at 1:25 am, subha ()
Does this a reality in a MFI in India I dont think anyone is having that?
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