A sound financial sector rests on timely and accurate information: microfinance institutions (MFIs) require information to monitor their business and make decisions, and supervisors rely on information to verify the soundness and stability of institutions and the market as a whole. At the foundation of this process lies the MFI’s “back office”, which can be broadly defined as the people, processes, and in some cases but not always, technology which help institutions manage their business.

A good back office system lies at the core of every successful financial institution. In many cases, however, MFIs struggle to generate accurate information and reports for themselves, funders, and supervisors.  This limits the soundness and efficiency of MFIs, reduces the government’s ability to supervise the market, and in turn, negatively impacts the expansion of access to financial services.

I was recently in Rwanda where the central bank, the Banque Nationale du Rwanda (BNR), has had difficulty retrieving accurate information from the 120+ registered MFIs. The purpose of the trip was to meet with a group of SACCOs to identify potential sources of the problem and help BNR and the Association of Microfinance Institutions in Rwanda (AMIR) explore technology options to improve the information flow from MFIs.
As a member of CGAP’s Technology Team, I primarily expected to talk to the SACCOs about their use of computers, networking, internet and electricity constraints, excel spreadsheets, potential software vendors, and other tech related details. The mission, after all, was to explore technology solutions for the MFIs in Rwanda. Instead, I spent most of the time discussing business plans, operating policies and procedures, internal audit, controls, training, collections, product development, etc.
The problems, as it turns out, lie well beyond how these SACCOs do or don’t use technology today. The question is, can the challenges identified in Rwanda – limited staff skills resulting in a general lack of adherence to policies, procedures, and controls – be resolved by installing computers and a software program? Would a simple, easy to use system help force staff to comply with stated policies and procedures? Or is it better to create a culture of compliance in a manual system prior to introducing technology?
In thinking about this question, I’m reminded of my math teachers who wouldn’t allow calculators in class so we would learn the concepts behind the theories.  Regardless of this early training, I’m totally dependent today on things like calculators and spell check. Sometimes I feel a bit vulnerable when I have to handwrite something without spell check, but in most cases in life, I have access to calculators and spell check so this dependency hasn’t rendered me too useless.
Can the same be said about MFIs and their operations? If tellers and loan officers always have a computer system to tell them how much to disburse or collect from clients, does it matter if they don’t understand the ‘why’?

-Lauren Reese