But to get to more seamlessly linked systems and standards, we need to convince the interested parties of those long-term benefits (assuming they do exist). Demonstrating success cases is one way of doing this. For MIX, we chose to adopt some technology standards (such as XBRL), after seeing success stories that we could relate to our work. The FDIC (a regulator) in the U.S. was one example that helped to convince us: http://www.xbrl.org/CaseStudies/FFEIC_XBRL_06.pdf

However, in this case, a regulator could enforce compliance with both a paper and a technology standard; the collective action problem was ‘solved’ by fiat. With microfinance institutions in over 100 countries worldwide, is such a solution possible globally? Where do the incentives live to produce ‘standards-compliant’ solutions – are these international or local? We can see in theory how standards can benefit microfinance, but it may be difficult to convince any one actor to take that first step.

1. Training
2. Business processes
3. MIS
4. STANDARDS

I believe that the only way forward for the majority of MFIs to achieve a higher level of professionalism, documented processes and compliance and investment in MIS which has a longer payback period is STANDARDISATION.

Firstly, if the MIS is standardised across many geographical areas and many types of MFI then high quality TRAINING can be delivered more easily and more cheaply – e.g. via the internet, or local systems houses learning the system with high spec teaching material and then can deliver the training locally in the local language in the same time zone – at local costs. The unit cost of producing training material is lower when the volume is higher. Because of continuous updates and staff changes, installation of MIS without regular training makes the original investment almost worthless.

Secondly, for BUSINESS PROCESSES – if there is a standard system then you can develop and maintain an online library of the most common pre-designed business processes to closely match that standard system. These standard processes can then be downloaded by any MFI that wants to customise them to suit their particular methods. In this way the MFI can be “nudged” towards best practice and transparency simply by using a system where those standards and business processes are built-in. Without expensive seminars or visiting consultants, best practice can be achieved through standardisation.

Thirdly, the burden of developing a standard solution which is easy to use and yet functional for many different types of MFI is always a juggling act: too easy may mean less functionality; too functional may mean too complicated and too difficult to operate with unskilled personnel. Getting the right balance takes time and experience but the rewards for the MFI are exponential.

STANDARDS are what it is all about as described above.

(For the MIX or for SEEP, it is not difficult to imagine how easy it would be to collect reliable, timely data from a standard system – especially if the rating agency worked closely with the vendor to highlight the required fields. The output format would also compatible with the system used by the rating agency. The same applies to more accurate collection of Social Performance data.)

And further: if we want to build links between standards, do we approach this through paper standards and / or technology standards?

1. Prudential Reports (Regulating Authorities): Prudential Norms
2. Management Reports (Management Reporting System): CAMEL (ACCION), CGAP (Waterfield 1998), IADB, MBB, MIX, MBP, PEARLS (WOCCU), SEEP (Frame), etc.
3. Financial Reports (Accounting System): GAAP, IASB, Local IAS, IFRS, CGAP Disclosure Guidelines
4. Loan Tracking Reports (Loan Tracking System): No standards

What standards do you refer to?