Archive for: Outsourced IT

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.

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Outsourcing has recently become a new hot topic in microfinance, at least among those of us following technology trends. The general idea is that by allowing someone else to manage some or all of your technology, your time is freed up to focus on what you know best, working with clients. But is outsourcing right for everyone? Which types of organizations stand to benefit the most from outsourcing? The microfinance industry is just beginning to experiment with this concept and while a recent trip to Ecuador generated more questions than answers, we are beginning to gain some insight into these issues.

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Our friends at USAID’s microLINKS are hosting a discussion this week on the options and challenges that micorfinance institutions face when it comes to outsourcing the functions around core banking systems:

Outsourced core banking systems could increase the efficiency and capacity of microfinance institutions (MFIs). MFIs, however, have been slow in adopting the use of outsourced core banking systems. They are concerned about finding a system that works for their unique situation, fear losing control over sensitive client data, and worry about security risks. Moreover, they are not convinced outsourcing will lead to reduced costs.

Here’s the conversation.

Information technology can help microfinance institutions reduce costs, improve efficiency, and increase outreach. So why do so many MFIs either end up sinking funds into poor technology investments or simply not investing in technology at all? We’re conducting a survey to find out, and we’d like your input. The survey results will help MFIs understand their strengths and weaknesses relative to other MFIs and will identify opportunities for vendors, donors, investors, and MFIs in the microfinance technology market.
Whether you’re in a small MFI with just a few dozen clients, or a big organization, your responses will help build a picture and create greater awareness of what’s going on around information technology for the industry. To be eligible for the raffle to win up to $15,000 in free consulting services, please take part before our deadline of September 30, 2008. The survey is available both online and offline in English, French, and Spanish, and offline in Arabic. Thanks for your help.

Information technology can help microfinance institutions reduce costs, improve efficiency, and increase outreach. So why do so many MFIs either end up sinking funds into poor technology investments or simply not investing in technology at all? We’re conducting a survey to find out, and we’d like your input. The survey results will help MFIs understand their strengths and weaknesses relative to other MFIs and will identify opportunities for vendors, donors, investors, and MFIs in the microfinance technology market.

Whether you’re in a small MFI with just a few dozen clients, or a big organization, your responses will help build a picture and create greater awareness of what’s going on around information technology for the industry. To be eligible for the raffle to win up to $15,000 in free consulting services, please take part before our deadline of September 15, 2008. The survey is available both online and offline in English, French, and Spanish, and offline in Arabic. Thanks for your help.

What functions are involved in the ASP or SaaS model for microfinance IS/CBS?

We are looking into the different pieces of the value chain for delivering information and core banking systems through an application service provider (ASP) OR software as a service (SaaS) model. These functions may be performed by a microfinance institution (MFI), a national or regional microfinance association (MFI-A), a local IT service provider (ITSP), the ASP or SaaS vendor (Vendor), or another, new party.

ASP or SaaS models would seem particularly likely to fall short of customer expectations when it comes to support functions. One reason that MFIs are so dissatisfied with existing microfinance software vendors is that they provide poor quality support after the sale – and in particular that most of these vendors do not have local support providers in the countries in which their MFI customers operate. For example, a vendor from Ecuador may have customers in Peru but no on-the-ground support staff in that country.

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CGAP and its regional program CAPAF are pleased to announce that the third Technology Forum will be held in Yaoundé, Cameroon on July 1 and 2, 2008.

The Forum will bring together financial service providers and technical solutions providers for technical workshops on using new technology to increase access to financial services. In addition to the forum, the event offers an opportunity for vendors to participate in a commercial tradeshow of products and services. This year’s themes include MIS, the link between social protection and technology, and mobile banking.

The Technology Forum is free of charge and open to all those who are interested in attending. We strongly recommend that you pre-register by sending in the registration form available on http://www.capaf.org/pages/forumtechnologie_2008/Inscription.html and following the instructions.

You can also send an email to capaf@orange.sn to request the form.

Please note that the working language of the Forum is French but simultaneous interpretation in English and French will be available for the technical workshops.

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Around 45% of existing microfinance institutions still track and record their operations and accounting in excel sheets or even completely manually.  This costs a massive amount of time and resources, leaves room for error, prevents them from growing quickly, and undermines their ability to manage risk. Especially for smaller institutions the relative investment and maintenance cost is enormous compared to their size and operations.

How about completely outsourcing information systems (IS) to an external technology provider, so that the MFI can focus on its main business: handling client relationships and providing financial services?   Read the rest of this page »

Europe turns nose up at mobile banking
Mobile banking could be failing to capture the imagination of consumers, according to a
survey of 2,500 retail financial services customers across Europe. The research, conducted by TNS on behalf of Fujitsu Services, found 65 percent of respondents prefer to access banking services online. nly five percent of the sample said mobile banking is the channel of choice. Physically going to a branch is the second choice, at 53 percent. The findings differ from a UK-only survey which put face-to-face or voice interaction as the preferred method of accessing banks.

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Word today that IBM, which has been touting its foray into open source solutions, will partner with Grameen Foundation to help expand its MIFOS solution for information systems. In a joint press release, Grameen and IBM note that

…MFIs (microfinance institutions) are inhibited from extending their reach because they lack a flexible, cost-effective technology infrastructure that enables them to expand their operations to provide loans to more people and to develop new products and services. Many MFIs are still using pen and paper or simple spreadsheets to process loans. A 2004 study by the Consultative Group to Assist the Poor (CGAP) showed that just half of all MFIs around the world have automated information systems, and those that do invest in technology spend duplicative resources on custom-built systems that are extremely costly and difficult to maintain.

No doubt. We hear this all the time from MFIs – its hard, if not impossible to roll out electronic channels on the front end without improving the back end first. 

Want to know more? We’ve got lots of research…..