Also I would love to prepare case studies of successfl ones. If any of you have any please forward them to me.
thanks

What I personally think is that there is clear gap between the MFIs and service providers: 1) MFIs may not fully understand technology and its implications; 2)service providers are not so keen on developing software applications for MFIs–it is either stripped-down version of commercial banking software or upgrades of homegrown ones. If you ask me to put these two in order, bridging gap should happen from the service providers. In other words, it is service providers that need to come up with software solutions that is developed particularly for MFIs; understand specific needs of the clients; and work organically from start to after-sales service period. We argue, however, such service providers do not exist. This is where CGAP, GF and other relevant org.s come in to play: they should pitch in to start off a spin-off (of bigger service provider) or develop a program that would eventually produce service providers that work exclusively with the MFIs.

Are MFIs able to understand internally (and communicate to a board of directors) the benefit of moving towards operating with more standardized processes?

I think that in order for an MFI to be incentivized to accept the greater standardization (and cost benefits) that come with a cloud solution, they must have the skills and the data to create a valid return on investment analysis to be able to properly analyze this assumption and to weigh the pros and cons of moving to standardized processes. Operating with a standardized model is often seen as compromising their competitive edge in the market and could be seen as a possible threat to growth. Being able to accept standardization means also being able to understand the impact on the business model, the projected growth and, more importantly, what this means in costs and revenues projections. I think the MFIs should work closely with investors and donors on these questions and projections/ROI exercises.

Regarding the different approaches to reach an initial consensus about what are the technology standards that the microfinance industry should look in a back-end solution, I agree with Jiten’s three step process. I would probably add an additional step for understanding the cost benefit of using a customized solution vs. a standardized one. That is what is the additional cost/benefit that a MFI gains from customizing a software vs. adapting its existing processes to the technology application. The reason for adding this step is that MFIs might be more willing to use a standardized solution is they are presented with the financial benefits associated with it.

Maria’s suggestion about a case study approach to bring some light to this issue is interesting. I would take it a step forward by ensuring that the findings of the cases studies provide operational approaches that can prove beneficial to both vendors and MFIs. Using Jiten’s suggesting for process mapping, one of the deliverables (besides a set of standardized business requirements and processes) could be a case study that presents a roadmap for vendors to develop a functional rich and highly configurable back-end system.

Xavier asks some pointed question and here are my humble views:
– the basic framework of the ideal information system should come from the experiences and knowledge gained by the microfinance sector, and technology vendors must then fit into the glove provided by MFIs, and offer minor alternatives where necessary.

– benefits of information systems begin to materialize several years after implementation, hence, investors looking for quick returns may be reluctant to provide additional capital to build internal controls and other systems for MFIs. Perhaps donors (who typically make long term commitments) should be targeted for funds instead.

– There may not be substantial evidence in favor of SaaS solutions, but it seems like a viable option, considering the relatively lower cost of implementation (suitable for small scale MFIs), and it offers great flexibility as well. On paper, it looks good, and only time will tell if it lives up to its promise.

With regards to your first point, on who could lead … one needs to pick a narrow band of MFIs to begin with, e.g. tier 3 MFIs (i.e. those with approx 18,000 to 25,000 accounts and not yet sustainable) and split them into geographic groupings, and to include interested software and technology service vendors, and to then have donors and investors fund such an undertaking thru CGAP to do the following:
1. Perform operational Processing mapping exercise – Map the MFI’s operational processes at a sufficient level of detail (without such an undertaking asking MFIs to list their requirements and to expect them to agree would be an exercise in futility), and to document these processes;
2. To then ask MFIs to list any additional requirements

3. To cross-reference findings from each region, and to document similarities as well as differences

This would significantly further progress for the sector, and having such a document would also greatly aid software vendors and like in offering the right set of capabilities. Why? Because they would have a firmer basis, knowing that these common set of requirements touch a good portion of the microfinance market, giving them an added incentive if they needed it.

As for challenges with a SaaS offering, i.e. regulatory or infrastructure … my response would be that the regulatory challenges are present regardless of the approach, and a SaaS vendor, like any software vendor, must do its homework before entering the marketplace to ensure its long term sustainability.

With respect to infrastructure challenges, again there are solutions to making it work, with the use of a local server, WAN optimization devices, etc … Again this challenge exists in some instances regardless of the path an MFI takes, i.e. licensing or SaaS or Managed services. The key point here is that the MFI must work with an experienced team / technology service vendor to proactively plan and manage for such situations.

Given the vagaries of where MFIs operate, demands certain core capabilities from the software and technology service providers, e.g. a robust offline capability.

As for successful examples of MFIs using SaaS, I only know of FINO in India who works with a number of MFIs and others offering such a model. The key here is not SaaS but the flexibility and robustness of the core banking software / architecture, which is what makes drives the viability of SaaS.