George Conard is the Executive Director, Technology for Microfinance, at Grameen Foundation. The Foundation’s Mifos Initiative delivers open source technology and business services for microfinance institutions worldwide.

Back-office management information systems (MIS) are a critical enabler of the growth and effectiveness of microfinance. To realize the full value of the technology, however, MFIs must look beyond the software and consider human and business process factors. Further, the value of the technology investment will be multiplied dramatically as the core MIS is integrated into other internal and external technology systems.

Accelerating the growth and impact of microfinance through technology is not, fundamentally, an IT issue. It’s a business issue. Achieving that goal requires business analysis paired with effective technology approaches. Rather than looking for a piece of software, MFIs should look for complete solutions – covering people, process, and technology – that integrate their technology strategy and their business strategy in a way that generates outsized returns.

There are four components that an MFI should look for when seeking out technology solutions:

1. IT Strategy: technology should be viewed as a core part of the MFI’s business plan, and the MFI needs to map out its business and social goals and develop an IT strategy that will enable them to achieve those goals. An IT strategy can guide investment in technology to facilitate long-term results.
2. Business process optimization: implementing an IT strategy that does not align with an MFI’s business processes will waste time, energy, and money; similarly, extensive customization (or custom software development) to make an MIS system fit existing processes is also often a wasteful approach. Instead, MFIs and their vendors should work together to map out business processes and realign those processes to optimize the introduction of new technology.
3. People optimization: staffing is one of the biggest overall concerns of MFIs today, and IT is no exception. MFIs often train IT staff only to see them leave for greener pastures, and over-rely on IT staff to the exclusion of training others in the organization. Integrating training, communication, and management will result in long term adoption of technology investments.
4. Systems integration: the systems and information needs of a microfinance institution’s clients, management, and staff are complex and increase as the MFI grows in reach and product breadth. MFIs will need to integrate core MIS with accounting, HR management, and business intelligence as well as with external networks (such as ATM or mobile payments networks). Integrating the core MIS – along with people and processes – with other systems will act as a further multiplier on effectiveness.

MFIs should look for technology partners – vendors and others – who work with them to deliver a complete solution rather than just a piece of software. By working with the vendor to add ongoing measurement of results and return on investment (ROI), MFIs will help to ensure that they receive the greatest value from technology.

We know that technology has the potential to accelerate the growth and impact of microfinance. Looking beyond software at a complete set of people, processes, and technology will enable MFIs to achieve that potential far more quickly.

-George Conard

CGAP and the Grameen Foundation, with support from the Mastercard Foundation, recently co-organized a workshop to discuss what needs to happen to make appropriate back-office systems (including people and processes as well as technology) more broadly adopted by MFIs.

Join us on December 8-9, 2009 for a virtual conference on the CGAP Technology Blog to discuss four themes which emerged from the recent workshop.