Evolution of Technology - Application in Microfinance - CAB

EVOLUTION OF TECHNOLOGY 

Application in Microfinance 

CASHE - Credit and Savings for Household Enterprise 

A CARE India Microfinance Initiative

EVOLUTION OF TECHNOLOGY APPLICATION IN MICROFINANCE 

ACKNOWLEDGEMENTS 

CASHE is the largest micro-finance 

initiative of CARE India. Launched in 

December 1999 and supported by the 

Department for International Development 

(DFID), UK, the project aims at 

significantly enhancing the incomes and 

economic security of the poor, and making 

available a wider range of microfinance 

services. This seven-year project is being 

implemented in the rural areas of Andhra 

Pradesh, Orissa and West Bengal. In 

2005 the project expanded its operations 

to the state of Madhya Pradesh. 

This study “The Way Forward: Technology 

in Microfinance” conducted by Intellecap 

makes the case for the need for 

technology in the microfinance sector to 

streamline systems. It summarizes the 

different technologies that have been 

employed in the microfinance sector both 

within and outside CASHE. It credits the 

management information systems evolved 

by CASHE as one of the few established 

and successful technologies that have 

emerged, while many others yielded mixed 

results and are not well documented or 

understood. 

CASHE takes pride in its partnership 

endeavours towards working with the poor 

and with the women supported by the 

project. 

Vipin Sharma 

Program Director 

Microfinance 

CARE India 

We are grateful to Intellecap team for 

doing the research study and writing this 

report. 

We would like to thank Best Practices 

Foundation for editing and designing the 

document and Crossway Communications 

Pvt. Ltd. for the production of this 

document. 

3 

Credit and Savings for Household Enterprise


TABLE OF CONTENTS 

1 Introduction to care and intellecap _____________________________________8 

2 Report overview ___________________________________________________9 

3 Introduction _____________________________________________________10 

4 Microfinance and technology –The present indian scenario _________________14 

5 Challenges and Key Lessons ________________________________________29 

6 Microfinance and Technology – The future scenario _______________________33 

7 Recommendations ________________________________________________46 

8 List of references _________________________________________________50 

List of Tables 

Table 1: Technology channels used by financial institutions _____________________13 

Table 2: MFI technologies and basic uses ___________________________________16 

Table 3: MIS profile of Indian MFIS ________________________________________17 

Table 4: MFI technology trials in India ______________________________________20 

Table 5: Emerging technologies in india _____________________________________36 

Table 6: Technologies and their benefits for the microfinance practitioner ___________43 

4 



EXECUTIVE SUMMARY 

Globally, microfinance has witnessed 

exponential growth and is now viewed as a 

sustainable and profitable business model 

for initiating broad economic and social 

development. This tremendous expansion 

has brought with it a number of challenges 

that the sector needs to tackle in order 

to improve service delivery and build 

capacity over the long term. Microfinance 

Institutions (MFIs) are beginning to look 

at technological solutions to make their 

operations faster, easier, and more 

transparent. 

After examining the current uses of 

technology in the microfinance sector 

generally, and in India specifically, 

the most significant finding is that 

MFIs are not widely using technology 

to improve their operations. This is 

largely due to resource constraints and 

an incomplete understanding of how 

technology can be applied by their staff 

and to their processes. Nevertheless, an 

increasing number of MFIs are beginning 

to investigate the benefits various 

technologies can provide. These trials 

are yielding mixed results and there are 

still many obstacles in the way: structural 

issues such as access to sufficient power 

and institutional issues such as information 

sharing. 

The findings below are the result of 

a detailed study of technology’s role 

in microfinance and the problems 

associated with technology adoption 

conducted by Intellecap and sponsored 

by CARE India. The study has leveraged 

some global examples, but is primarily 

focused on Indian microfinance. The 

recommendations have been made in 

order to encourage key stakeholders 

to realize technology’s promise in the 

microfinance sector. 

Summary of Report Findings: 

- There is an increasing acceptance of 

technology in the field of microfinance. 

Technology interventions were initially 

very limited, but there is an increasing 

interest in, and acceptance of, 

technology through numerous trials. 

However, widespread technology 

adoption across entire institutions is 

still very rare. 

- Technology pilots have yielded mixed 

results. The pilots currently under 

implementation by Indian microfinance 

institutions show promise, but need to 

be more broadly tested before being 

accepted as long-term solutions. 

- Documentation and sharing of 

technology pilot results has been very 

limited. MFIs generate a significant 

amount of data and information from 

their respective technology trials, 

but lack the ability and resources to 

manage and share this information 

between various stakeholders. 

- There are significant gaps in 

understanding of respective domains. 

This is true both with microfinance 

institutions and technology providers. 

As a result, there is a need for greater 

product and service customization for 

the microfinance sector. 

5 



- MFI decision makers do not 

understand technology adoption 

timelines and the expected financial 

returns. There is a great need for 

technology investment education within 

the Microfinance industry allowing MFIs 

to make better informed technology 

procurement and implementation 

decisions. 

- Management Information Systems 

(MIS) are the only clearly established 

technology need. They are also the 

only technology that has been broadly 

adopted by those MFIs with the 

resources to do so. 

Based on these key learnings from the 

study, this report makes the following 

recommendations: 

- Technology has the potential to act 

as a framework and catalyst for the 

delivery of multiple services. Credit, 

retail, micro-insurance, and other 

services may be provided through a 

single technological channel, vastly 

improving access to services. 

- Technology will allow all MFIs to set up 

a scalable and robust client database. 

The database would function as 

a client credit and grants tracking 

mechanism, and provide statistical 

information on the clients’ credit history. 

The initiative could then be up scaled 

to the district, state, and national level, 

if the viability can be proven at the local 

level. 

- Technology cost and context 

studies must be conducted prior 

to implementing trials. A thorough 

understanding of the cost, context, and 

the problems that may arise during 

pilot implementation will allow for 

better project control and increase the 

chances of the pilot’s success. 

- Systems and processes must be 

standardized to enable technology 

cost sharing. The diversity in Indian 

microfinance practices and institutional 

systems and processes demands 

an array of customized technology 

solutions. Technology cost is a 

deterrent for many MFIs, which can be 

6 



partially overcome by standardizing 

institutional systems and processes 

which would enable a group of 

institutions to use a technology such as 

an MIS on a shared cost basis; 

- MFIs must develop thorough Return 

on Technology Investment (ROTI) 

frameworks in order to evaluate 

technology purchase decisions. To 

understand the time frame that is 

required before an institution may 

start to realize tangible returns from 

a technology investment, a thorough 

ROTI analysis must take place. The 

analysis should be able to project 

cash flows that would occur solely 

on account of the technology, and 

generate Internal Rate of Return (IRR) 

of technology investments. 

- A dynamic and interactive portal for 

information exchange is greatly needed 

to facilitate information sharing. A 

platform that brings together all 

microfinance stakeholders (policy 

makers, lenders, investors, MFIs, 

NGOs, technology service providers 

and others) would be a powerful way 

to promote increased information 

exchange between all of the players. 

An interactive forum, and not just a 

reporting based architecture, has the 

potential to catalyze sector growth by 

bringing the players from the demand 

and supply side on to the same 

platform while sharing best practices 

and fostering partnerships. 

- There is a need in the industry for a 

targeted technology services provider 

who would allow MFIs to outsource 

most technology procurement 

and management responsibilities. 

Fundamentally, MFIs should focus 

on delivering towards their missions, 

extending their operations and 

diversifying their product offerings. 

The technology procurement and 

management decisions and operations 

should be handled by other parties, just 

as is currently the case in a variety of 

commercial industries 

It must also be noted that though 

technology should have a much larger 

role in the delivery of financial services to 

the poor, Indian microfinance is still in its 

early stages and many issues—regulation, 

governance, delivery models, interest 

rates—can not be solved by technology 

alone. 

7 



1 

INTRODUCTION TO 

CARE AND INTELLECAP 

1 CARE 

CARE is an international relief and 

development organization directly 

reaching out to improve the lives 

of more than 27 million people in 

over 70 countries across the globe. 

CARE’s projects in India are currently 

in the health, nutrition, prevention 

of HIV/AIDS and population, girl’s 

education, small economic activity 

development, microfinance, urban 

development, tribal empowerment, 

agriculture and natural resources and 

emergency preparedness and relief and 

rehabilitation sectors. 

CARE India engaged Intellecap to 

undertake a study that examines 

how technology is being used in the 

microfinance industry. The study 

has leveraged global examples, but 

has focused primarily on India. The 

report, composed of an analysis of 

the status quo, reasons why particular 

technologies have succeeded or failed, 

and possible 

solutions, will 

be used by 

CARE as an 

information 

tool to make 

technology 

related 

decisions for its 

partners. 

1.2 Intellecap 

Intellecap is a consulting firm that 

enables innovation, capacity building 

and investment initiatives in the 

development sector. It has undertaken 

pioneering initiatives in the field of 

finance and strategy in Microfinance 

& SME Sector. Working in direct 

design and execution as well as 

indirect strategic advisory roles, it 

seeks to bring in mainstream tools and 

techniques to create unique intellectual 

solutions for efficient and effective 

delivery of developmental inputs. 

Intellecap’s mission is to accelerate 

the growth of upcoming Microfinance 

Institutions (MFIs), micro and small 

enterprises by coordinating markets, 

people and capital, nationally and 

internationally. The company seeks to 

enable institutional capacity building 

and investments in the microfinance 

sector through innovative and focused 

initiatives such as capital advisory 

services, social venture 

capital, knowledge 

management, research 

& training, strategic 

consultancy and policy 

advocacy among others. 

As a capacity enhancer, 

Intellecap offers creative 

solutions to institutions 

to support sustainable 

economic growth. 

8 



2 

REPORT OVERVIEW 

Introduction: 

• The microfinance model 

• The relevance of technology in microfinance 

The Present State: 

• An examination of the current uses of technology 

in the microfinance sector; including the various 

technology offerings in the microfinance space 

– MIS, PoS, and Integration technologies 

• How the Indian microfinance sector is using or 

trialing various technology offerings to address 

challenges presented by the microfinance model 

The Current Challenges: 

• Key learnings from the technology study, the 

problems that have been partially addressed, and 

the challenges that still remain 

The Future State: 

• Technologies of the near future and those that 

should be developed to have a significant impact 

on microfinance 

• Possible technology solutions for Indian MFIs 

across all stakeholders 

Recommendations and Next Steps: 

• At a structural, institutional, technology 

industry, and support group levels, what can key 

stakeholders do to expedite technology adoption? 

9 



3 

INTRODUCTION 

Microfinance has been growing rapidly 

and is now viewed as a sustainable and 

profitable business model for initiating 

broad economic and social development. 

This tremendous growth has brought with 

it a number of challenges that the sector 

needs to tackle in order to improve service 

delivery and build capacity over the long 

term. Microfinance Institutions (MFIs) 

have increasingly looked to technological 

solutions to make their operations faster, 

easier, and more transparent. 

The first part of this report seeks to 

understand the role technology is playing 

within MFIs generally and in India 

specifically. However, the most significant 

finding is that, MFIs are generally not 

widely using technology to improve their 

operations because of resource constraints 

and an incomplete understanding of 

how technology can be applied to their 

operations. As the sector matures this 

situation is changing. An increasing 

number of MFIs are investigating the 

benefits various technologies can 

provide. Many have initiated trials, 

or pilot programs, with Management 

Information Systems (MIS), Point of Sale 

(POS) technologies such as smart cards, 

Personal Digital Assistants (PDAs), and 

rural internet kiosks. To date, the majority 

of these trials have not progressed beyond 

the experimentation phase, and very few of 

these technologies have been adopted 

broadly across the industry. 

dependent upon the organization’s size. 

New, fledgling MFIs are attempting to 

streamline systems and processes while 

larger MFIs are dealing with growth 

stabilization and governance issues. MFI 

size largely determines the organization’s 

“technology appetite” due to resource 

availability and the need to move away 

from analog systems that are cumbersome 

and error prone. As a result, the analysis 

for this report has been organized against 

the three MFI growth tiers, measured in 

terms of total outstanding portfolio. : 

• Youth MFIs– new MFIs with an 

outstanding portfolio of under Rs. 2 

crore 

• Growth MFIs– quickly expanding 

operations, have usually reached 

sustainability if not profitability, with an 

outstanding portfolio of between Rs. 2 

and 30 crore 

• Mature MFIs – well established 

and most likely regulated, with an 

outstanding portfolio greater than Rs. 

30 crore 

In order to understand how technology is 

presently being used, or at the very least 

how it is being tested by MFIs across these 

three tiers, the microfinance value chain 

was broken down into its four component 

parts: 

Figure 1: Microfinance stakeholders 

As is the case with any industry, 

technology utilization is largely 

10 



At each point the key processes were 

analyzed to understand the requisite 

process steps and information 

requirements. Generally, the 

stakeholders’ information and process 

requirements determine the technology 

used. For example, investors’ primary 

concerns include MFI transparency and 

accountability, whereas a loan officer’s 

key need is to decrease transaction time 

with the client. So while a robust MIS, 

generating thorough information and 

reports instills lender confidence, a POS 

device, such as a smart card and reader, 

has the potential to drastically reduce loan 

officers’ interaction time with clients. 

It is important to note that the government, 

through development banks and regulatory 

bodies, also has a role to play in the 

microfinance value chain. However, for the 

purposes of this report we have focused 

primarily on the other four players given 

the report’s operational focus. 

Based on initial technology trial successes 

or failures, and a detailed understanding 

of the various process steps across the 

MFI lifecycle, the second part of the report 

is focused on MFIs technology adoption 

challenges. The many obstacles in 

the road ahead can be overcome if the 

key actors in the sector work together 

and technology companies realize the 

important role they have to play in helping 

the poor access credit and capital. 

The third section of the report consists 

of a detailed analysis of how technology 

should be used in the future to make 

MFI operations more scalable, efficient, 

user friendly, and less costly. These 

recommendations are based both on 

what has worked in the field so far and 

how emerging technologies could solve 

some of the current technology adoption 

problems. 

Finally, the report concludes with 

11 

recommendations for all those involved 

with bringing the benefits of technology 

to the microfinance sector. There are 

structural issues, which must be dealt 

with at the national and state level. There 

are also a number of institutional issues 

across the three growth tiers. Additionally, 

key technology companies have not 

effectively engaged with the sector and 

there is much that can be done to open 

channels of communication between MFIs 

and technology providers. Lastly, support 

and advisory groups, such as CARE 

India, have a significant role to play in 

coordinating information and resources to 

more efficiently bring technology’s benefits 

to the microfinance sector. 

3.1 Technology in Microfinance 

Technology, innovation, and knowledge 

have become the key drivers of economic 

growth today. A broad scan, across many 

industry verticals, suggests that much of 

the economic growth of the last decade 

has been facilitated by the existence of 

strong technology platforms. The effective 

absorption and utilization of data and 

information is extremely important for 

any sector at various developmental 

stages. However, the importance of data 

management becomes more pronounced 

at the advent of the growth stage when 

an industry is expanding and diversifying 

rapidly. This is the state in which the 

Indian Microfinance industry is in today. 

As part of this growth stage, microfinance 

in India is undergoing rapid changes and 

discovering new challenges. Collecting 

money from scattered, remote clients, the 

cost of service delivery transactions in the 

“last mile”, effective information exchange 

at the institutional level, and effective 

growth management are just a few of the 

many challenges confronting MFIs. 

Yet, these challenges are not completely 

unique to the microfinance model. Indeed, 



the technologies that help increase 

efficiency and decrease cost for any 

highly distributed business model would 

be applicable to microfinance. Package 

delivery companies, such as FedEX or 

UPS, use networked, handheld scanners 

to ensure that customers can track 

packages as they move through their 

system. The same idea, generating 

information at particular highly distributed 

process points through a network of 

uniform devices, is applicable to the 

microfinance context. 

As a result, microfinance practitioners’ 

motivations to use technology interventions 

are the same as those for any other similar 

business model: technology’s ability to 

speed up the flow of information and 

capital, automate transactions, control 

and analyze data, improve customer 

experience, reduce transaction costs, and 

increase efficiency and customer outreach. 

Technology’s potential has, therefore, 

led Microfinance stakeholders to believe 

that technology can have a profound 

impact on their operations. As a result, 

technology’s promise and potential is being 

explored by both technology providers and 

microfinance institutions. 

However, this process of experimentation 

and adoption has not been without 

significant problems and challenges of its 

own. Given the particular constraints of 

the industry, many hours in the field without 

a power source, the need for positive 

identification, and the outdoor environment 

in which field representatives work, there 

are a lack of commercial products that 

are available ‘off the shelf.’ Technology 

solutions are then force-fitted to current 

operations, further increasing the chance 

of failure and only limited, if any, adoption. 

Compounding this problem is the fact that 

due to poor documentation, technological 

experiments’ failures or successes have 

not been widely disseminated. This has 

led to different MFIs experimenting with 

similar technologies and not sharing the 

results of what works and what does not. 

These challenges aside, there is still 

increased attention on the role technology 

can play in the microfinance sector. 

Therefore, a study to understand how 

technology is currently being used and 

how it has the potential to transform the 

microfinance industry is an obvious need. 

The Way Forward - Technology in Indian 

Microfinance is the output of a study 

commissioned by CARE India to map 

the microfinance landscape with respect 

to technology initiatives and identify the 

opportunities ahead. The study aims 

to assist all stakeholders, microfinance 

institutions, technology companies, and 

supporting organizations, in making 

informed decisions to bridge the gap 

and allow MFIs to harness technology’s 

powerful potential. 

Though microfinance significantly differs 

in some ways from the traditional banking 

industry, traditional banking technologies, 

when applied innovatively in developing 

countries, have played a role in reducing 

costs and increasing outreach and 

penetration, of the microfinance model. 

Management Information Systems 

(MIS), Point of Sale technologies (POS), 

Automatic Teller Machines (ATMs), 

Interactive Voice Response (IVR) 

systems and smart cards are among the 

major technologies 1 that have entered 

microfinance over the years from the 

formal financial sector. 

Across the four major stakeholder 

groups, technology can meet the process 

requirements and increase general 

information sharing, efficiency, and 

lower costs. Specifically, the cost of 

interface between the end user and the 

1 

Refer Annexure III for details on various technologies 

12 



MFI can be drastically reduced through 

decentralized and networked technologies, 

as demonstrated in Figure 2. 

Figure 2: Transaction costs for US banks 

such as ATMs, POS, Internet Banking and 

Mobile Phone Banking in serving the rural 

poor. 

These technologies are increasingly 

available in 

developing 

countries because 

of falling hardware 

costs and 

growing support 

infrastructure. 

Though broad 

infrastructural 

problems still exist 

(at one time the 

poor supply of 

for different distribution channels 2 

Technology Channel 

Number of 

Institutions 

ATM 46 

POS 35 

Internet Banking 26 

Mobile Phone 

Banking 

10 

telecommunications and electricity 

could not even support ATMs or POS 

devices) improving rural infrastructure 

has allowed an increasing number and 

diversity of technologies to achieve deeper 

penetration into developing countries and 

the microfinance institutions operating 

therein. 

Table 1: Technology channels used by 

Microfinance Institutions globally (62 

institutions surveyed by CGAP) 3 

Due to technology’s role in reducing 

costs and increasing outreach, financial 

institutions, globally, have made use of 

technology in providing microfinance 

services. In a recent CGAP survey, 62 

financial institutions across 32 countries 

reported the use of technology channels 

2 

CGAP Focus Note 32, Jan 2006 

3 

Information technology as a strategic tool for microfinance in Africa: A seminar report April 26-27, 2003, 

Nairobi, Kenya 

13 



4 

MICROFINANCE AND TECHNOLOGY – 

THE PRESENT INDIAN SCENARIO 

Figure 3: The Indian microfinance Landscape – stakeholders and their key concerns 

Figure 3 depicts the Indian microfinance 

landscape, showing the various 

stakeholders that constitute the majority of 

the lending methodologies practiced. The 

sector can be broken into stakeholders and 

exchange parameters in order to arrive at 

a comprehensive understanding of each 

14 

entity’s needs throughout the entire value 

chain. 

The figure gives a schematic 

representation of inter-stakeholder 

interactions in terms of information and 

capital, along with their key concerns. 



Information and capital are the two key 

elements that determine the performance 

and growth of the sector. Hence, a prime 

stakeholder concern at every level is to 

ensure that the flow of information and 

capital is smooth and efficient. 

4.1 The MFI Growth Continuum and 

Organizational Challenges 

MFIs at various stages of growth face 

different operational problems that require 

different solutions. Technology has 

the potential to play a significant role in 

addressing some of the issues. However, 

a full understanding of the challenges 

confronting MFIs at the various stages of 

growth is necessary before evaluating the 

merits of any particular technology. 

new organizations, youth MFIs are mostly 

concerned with streamlining systems 

and processes to attract commercial 

capital. Additionally, these institutions are 

trying to establish a strong core team of 

professionals that can hasten the breakeven 

process and drive the organization 

forward on the growth curve. 

Growth MFIs are institutions that have 

achieved financial breakeven and are now 

in the active organizational growth ramp. 

These institutions are striving to maintain 

operational self sufficiency (OSS), while 

increasing penetration and outreach. 

The issues facing growth MFIs include 

increasing loan officer efficiency and 

productivity, streamlining communication 

and information flows, and access to 

sufficient commercial capital. 

Mature MFIs are large 

and have achieved 

growth stability and 

their primary concern is 

growth management. 

These MFIs are 

experimenting with 

new products, lending 

models, geographies, 

and innovative financing 

and capitalization 

strategies, to increase 

their client base. 

4.2 Understanding 

Technology in the 

Indian Microfinance 

Context 

Figure 4: The MFI Challenge Matrix 

above presents the main operational 

challenges MFIs face at different stages 

of growth, Tiers I, II, and III. 

The majority of Youth MFIs are in the start 

up phase, trying to build the organization 

while achieving financial break-even. As 

The MFI Challenge Matrix describes 

the problems that Indian MFIs are 

facing. Presently there are a number of 

technologies, which can help MFIs address 

their key concerns. These technologies 

are introduced and discussed in this 

section. 

15 



Technologies can be classified on the 

basis of their functionality and the time of 

entry into the organization. Thus, they can 

be segregated into the following segments: 

Figure 5: MFI technologies across the 

number of players and the evolution of 

the technology 

important to note that according to this 

definition, the only “technology” required 

is good penmanship and the ability to 

move documents quickly. Though a 

paper-based MIS can be effectively used, 

the advantages of digitalization are so 

numerous that any paper-based system 

should only be used as a last-resort 

back up. With an increase in scaling up 

activities, managers across microfinance 

institutions are becoming increasingly 

aware of the acute need to improve their 

information systems. An institution’s 

ability to track the status of its finances, 

particularly its portfolio, in a timely and 

accurate manner, is a crucial need for any 

growing organization. 

Technology 

Information System 

Technologies (MIS) 

POS Technologies 

Time of Entry Into the 

Institution 

First form of technology in any 

organization 

Second level of intervention 

after information systems, 

provides additional functionality 

Primary Functionality 

Data and information 

recording and reporting 

Increasing operational 

efficiency, maximizing 

outreach, reducing costs 

Integration 

Technologies 

Introduced in large 

organizations that are on a 

growth plateau and usually 

leverage POS technologies 

Table 2: MFI technologies and basic uses 

4.3 Management Information 

Systems (MIS) 

According to the Association of Community 

Development Finance Institutions (Sa- 

Dhan) a Management Information 

System (MIS) “captures data, processes 

it and provides relevant information for 

control, analysis and decision-making at 

the operational and strategic level in a 

cost-efficient and timely manner.” 4 It is 

Integrating organizational 

processes and systems 

through shared platforms: 

MIS, POS, and networking 

technologies 

Intellecap conducted a primary study of the 

MIS used by MFIs in India. 30 institutions 

responded. Table 3 classifies MFIs 

according to the tiers that depend on their 

portfolio size, and presents a consolidated 

MIS profile of these institutions. It also 

presents the current issues that the 

management faces and the future plans of 

the institutions with regard to information 

systems. 

4 

Existing Legal and Regulatory Framework for the Microfinance Organizations in India: Challenges and 

Implications Sa-Dhan, 2006 

16 



Size MIS IT team Average 

Cost of MIS 

Tier I 

Tier II 

Tier III 

Well developed, sturdy 

automated, computer 

based MIS systems that 

meets all requirements. 

MIS systems have been 

designed/co-developed 

by in house IT team 

Automated/ semiautomated 

systems 

(Excel and Access 

based). MIS systems 

mostly developed 

in-house. Does not 

completely meet the 

requirements 

Manual / rudimentary 

paper based MIS 

systems 

Dedicated IT 

teams, usually 

2-4 people in size 

to manage the 

development and 

maintenance of the 

MIS on a regular 

basis 

Small IT team, 

at times IT 

resource shared 

among different 

organizations 

Future Plan 

10 to 15 lakh Upgrading MIS 

systems to 

enable superior 

technologies, 

connecting 

branches, 

internet 

connectivity 

2 lakh - 3 

lakh 

Stabilizing 

MIS systems 

to meet 

organizational 

growth 

requirements 

No IT team 0 – 2 lakh To identify 

vendors for 

suitable MIS 

systems 

Table 3: MIS profile of Indian MFIs 

Information Systems are at the core of an 

MFI, and any growth- oriented organization 

should have a robust, dynamic, and an 

upgradeable MIS. MIS also acts as the 

basic technology building block providing 

the foundation for technologies that enter 

later into the organization. 

A MIS includes all the systems that an 

institution uses to generate the information 

that guides management decisions and 

actions. It can be either paper-based or 

computer-based. The latter has the option 

of being web-enabled, less error prone, 

replicable, and accessible by any webenabled 

device. 

A microfinance institution generally has 

two main systems: the accounting system, 

- centered on the chart of accounts and the 

general ledger, and the portfolio tracking 

system, covering the performance of 

accounts for each financial product offered 

Box 4.1: Why is an MIS important? 

An MIS (especially an electronic or 

automated one) is important to all 

four parts of the microfinance value 

chain 

• Investors require the institution to 

have a standardized MIS in place 

so that they may access and track 

performance. 

• Management requires periodic 

analysis and reports to make 

informed strategy decisions. 

• Loan Officers benefits because the 

MIS increases processing speed, 

generates useful reports, and 

enhances overall efficiency and 

productivity. 

• Clients also benefit due to 

the readily access to their 

relevant personal information 

if the transactions are regularly 

incorporated into the MIS database. 

17 



by the institution. Some institutions also 

maintain a third system, for gathering 

data on client impact, often at the behest 

of donors. MFIs may also have other 

information management needs, such as 

human resource management. However, 

financials and client activities generate the 

heaviest volume of data for processing. 

Figure 6 shows the relationship between 

the accounting system and the portfolio 

serve their growing client base. It can help 

managers organize the work of the entire 

organization by allowing them to monitor 

the institution’s health through a set of 

well-chosen metrics, and by informing 

critical operational and strategic decisions. 

As with any technology, the MIS should 

be designed and installed with an eye on 

the future. An MIS and its offerings could 

be perfectly suited for an institution at a 

given size, but may fail to keep up with its 

growth. 

system, together with other elements 

that affect the MIS 5 . The accounting 

system is influenced primarily by the 

chart of accounts. The portfolio system 

is influenced by policies and procedures 

and by methodology. Data is processed 

into information, which is then presented 

in financial statements and management 

reports. Influencing the form and content of 

these reports are the indicators chosen by 

the institution to monitor performance. 

A good information system can 

revolutionize field staff work, allowing 

them to better monitor their portfolio and 

Figure 6: Information flow inside an MIS 

Additionally, technology options change 

so quickly that a system must be flexible 

enough to incorporate the latest tools. 

However, acquiring and implementing 

the ideal MIS is not an easy task for 

microfinance institutions due to the need 

for extensive customization. Almost all 

organizations contacted during the course 

of this study felt that procuring a MIS 

that truly meets their needs costs them 

much more in terms of time, money, and 

management attention than anticipated. 

5 

Management Information Systems for Microfinance Institutions: A Handbook- Charles Waterfield and Nick 

Ramsing 

18 



Figure 7: An example MIS user interface 

(courtesy of SKS Microfinance) 

Institutions’ MIS requirements vary with 

geography, legal structure, and client 

numbers. The MIS’ types of databases 

and reports are often governed by the 

investors’ and lenders’ accountability and 

transparency requirements and demands. 

As the sector has evolved over the years, 

the available MIS have also progressed in 

terms of customization and scalability. 

4.4 Point of Sale/Service 

technologies 

The previous section establishes MIS as 

the basic technology building block for an 

MFI. The MIS platform also provides the 

supporting infrastructure for Point of Sale 

or Service (POS) technologies. A POS in 

the microfinance context is the point where 

financial services are exchanged between 

the client and the financial institution. 

POS technologies, such as palmtops, 

personal digital assistants (PDAs), smart 

cards, biometrics, and mobile banks, 

facilitate the delivery of diverse client 

services by making information exchanges 

faster, easier, and more reliable. 

Palm Pilots or Personal Digital Assistants 

(PDAs) have been a popular option due 

19 

to their relative small 

size and increasing 

computing power over 

time. Loan Officers use 

PDAs to capture and 

analyze data, assist 

in planning his or her 

collection schedules, 

portfolio tracking and 

loan application forms 

filling, centre audits, 

loan approvals and 

transparent data entry. 

PDAs are also used 

by MFIs as a tool to 

have standardized credit 

methodology, increase data accuracy, and 

ease of access in the field. 

Often in conjunction with PDAs, smart 

cards have been used by many institutions 

and have met with varying degrees of 

success. A smart card is similar to a 

credit card in size, but it contains an 

embedded microprocessor. The smart 

card’s microprocessor provides a form of 

connectivity and allows devices to read 

and write into the smart card’s memory. 

This technology is ideal for high volume 

transactions, such as credit cards and 

government issued identification cards; but 

the basic infrastructure does not yet exist 

to handle the smart card technology in 

rural India at a large scale. 

Another technology that is increasing 

access to capital is modified ATMs. 

In Bolivia, the MFI PRODEM has 

incorporated biometrics and interactive 

voice recognition into its ATMs, eliminating 

the need for the user to know how to read 

and write. The Tenet group at IIT Chennai 

has also developed a biometrics enabled, 

low cost ATM that has robust features 

suitable for rural applications. 

These technologies may also exist in an 

integrated manner. POS applications such 

as a smart card may also be leveraged 

to incorporate other technologies such as 



automated teller machines, personal digital 

assistants, or mobile phones. However 

such integration requires reliable power 

and communications infrastructure. 

Table 4 lists technological interventions 

carried out by MFIs, NGOs, and Banks 

in India 6 . One of the first initiatives was 

piloted in Swayam Krishi Sangam (SKS) 

in 2000. Many of these interventions used 

a combination of handhelds, PDAs, and 

smart cards. 

From a statistical perspective, of ten 

POS technology experiments carried out 

from 2000-2003 only three resulted in 

successful completions, and none used 

the smart card-PDA technology. 

4.5 Integration Technologies 

Mature microfinance institutions 

are primarily grappling with growth 

management issues, in addition to 

organizational concerns such as controlling 

costs and improving productivity. 

Generally, these institutions will have 

already incorporated technology with 

business processes in the form of MIS 

and, to some extent, POS technologies. 

These MFIs will also have found the 

balance between an optimum level of 

technology infrastructure and institutional 

capacity, enabling them to handle more 

advanced technologies to further improve 

operational performance. 

Table 4: MFI technology trials in India 

Integration technologies build upon an 

institution’s existing infrastructure and 

aim to provide networking solutions and 

a common integrated platform. ICICI’s 

core banking software solution is one 

6 

The list of technologies is based on the findings from the primary and secondary research. The list is 

exhaustive as far as trying to incorporate all technologies based on the available resources and information 

disclosed. It is possible that some interventions do not feature on this list due to the MFI’s limited information 

disclosure. 

20 



form of integration technology that brings 

all partner MFIs under one information 

system umbrella, leading to cost sharing 

and facilitating process standardization. 

Another core banking solution, eMerge, 

from TEMENOS, is a flexible, clientfocused 

7 , modular solution that allows 

its users to easily scale up. Integration 

technologies can “bind” organizations, 

geographical areas, and processes 

together to increase their collective impact 

by standardizing systems and protocols 

across a large user base. This, in turn, 

drives down costs for the end user. 

Figure 8 shows interventions of the three 

levels of technologies along the MFI 

growth continuum with specific examples. 

4.6 The Indian Microfinance 

Technology Experience 

The current section takes a look at some 

of the technological interventions in Indian 

MFIs over the years and the issues they 

have tried to address. The experiments 

discussed below cover the complete 

technology spectrum from MIS solutions to 

connectivity technologies. 

4.6.1 Financial Accounting and 

Management Information System 

(FAMIS) – BASIX 

FAMIS was developed in 1997 by BASIX’s 

software partner, Sathguru Management 

Consultants. BASIX was manually 

Figure 8: The Technology Evolution Map 

7 

The TEMENOS eMerge provides financial services solutions for MFIs through its client information application 

allowing them to categorise clients by a wide range of demographic characteristics as opposed to just 

by accounts. 

21 



capturing and maintaining information 

and data on paper, making the process 

painstaking and prone to errors. 

FAMIS was built on a Visual Basic /FoxPro 

/MS-DOS platform and future, revised 

versions added features to make the 

software more stable and robust. 

FAMIS was designed to meet BASIX’s 

functional demands and therefore 

has portfolio management, financial 

accounting, savings, and insurance 

accounting features among others. (See 

Figure 9) 

After the in-house testing, BASIX 

supplied FAMIS, along with training and 

customization support, to other MFIs. 

Due to different customization needs for 

different organizations, several versions 

of FAMIS were developed and were 

finally integrated into FAMIS PLUS, which 

currently serves about 50 MFIs at 110 

installations. 

Figure 9: The FAMISPLUS line of products 

4.6.2 Smart Cards – Swayam Krishi 

Sangam (SKS) Microfinance 

SKS microfinance provides credit and 

other services to over 1.4 lakh poor rural 

women in South India, and plans on 

growing into a for-profit, cost-efficient 

provider of basic financial services to 

22 

poor women in rural areas of India’s 100 

poorest districts. 

In a year long project completed in May 

2002, SKS Microfinance coupled smart 

cards with personal digital assistants 

(PDAs). By using smart cards, SKS 

aimed to save loan officers time at client 

center meetings, reduce human error, 

and increase the speed with which 

the institution could obtain data for 

management reporting and monitoring. 

SKS also envisioned creating a technology 

infrastructure through which flexible 

services such as emergency loans, credit 

scoring, real-time application processing, 

and automated cash access could be 

delivered. 

After using the smart card and PDA 

combination in two client centers for one 

year, SKS achieved greater accuracy 

in recording transactions and delivering 

more efficient data to the central MIS 

without experiencing technical problems. 

However, the key benefit of higher loan 

officer productivity was not as significant 

as expected. Since over the years the 

loan officers had become more efficient 

at manually processing transactions while 

conducting 

center 

meetings, the 

incremental 

benefits 

provided by 

the PDA and 

smart card 

system had 

less of an 

impact. 

Although 

loan officers 

and clients 

had readily 

adopted the 

technology, 

SKS decided 

Figure 10: The SKS 

Smart Card 



against further implementation in the light 

of the high cost of the project (up front cost 

of development had exceeded $125,000 

and each smart card cost US$ 3.40) and 

the limited benefit for loan officers. 

4.6.3 BASIXPOT (Sudama Project) 

- BASIX 

Having established a strong presence 

with the moderately poor, BASIX wanted 

to target the extreme poor in Andhra 

Pradesh in a commercial manner. As a 

result, BASIX had to reduce its average 

loan size (approximately Rs. 10,000) and 

per transaction costs. This constraint was 

compounded by BASIX existing process 

for delivering financial products, door-todoor 

delivery, which is a time intensive and 

costly exercise. 

Keeping these constraints in mind, 

BASIX came up with the Sudama project 

in February 2000: providing small and 

easily accessible commercial loans with 

low interest payments to the poorest of 

the poor in the remotest areas of Andhra 

Pradesh. The loan sizes varied from Rs. 

500 – 1000, and were to be repaid over a 

period of 14 to 28 weeks. The project was 

launched at three places in the Anantapur 

district of Andhra Pradesh. 

BASIX used the channel of BASIXPOT 

(BASIX Point of Transaction) Agents, 

who were mostly PCO booth operators, 

to act as their loan servicing agents on a 

commission basis. The booth operators 

were trained as BASIXPOT Agents (BPAs) 

and were provided with smart cards and 

computers with a modem and a smart 

card reader. The smart card, with the client 

details, acted as an identification card and 

an electronic loan book, and transactions 

were transferred to the head office through 

the dial-up connection by the BPA. BASIX 

paid a monthly commission to the BPA 

ranging from 

Rs. 500 – Rs. 1500 depending on the 

volumes and the nature of transactions. 

The project outreach of 437 customers 

witnessed 87% timely repayments, 

establishing the credit worthiness of the 

poorest of the poor. The agents earned 

Rs. 900 per month on an average, proving 

an attractive proposition for the village 

entrepreneur. 

4.6.4 SafalFin – Safal Solutions 

Safal (System Automation in Finance and 

Livelihood) Solutions is an IT solutions 

company based in Hyderabad, which 

builds customized applications that 

can be loaded on small devices and 

develops Information and Communication 

Technology (ICT) strategies for small 

enterprises. 

SafalFin is an integrated software package 

with two solutions – an MIS package for 

monitoring MFI loans and insurance (both 

individual and group models), and another 

module for tracking internal credit and 

deposits at the SHG level. SafalFin uses 

MS Access and Paradox databases, with 

the front end being developed in Visual 

Basic and Delphi. The system can support 

English and one regional language. 

4.6.5 HCL Beepos – CASHPOR Micro 

Credit 8 

CASHPOR Micro Credit (CMC) was 

grappling with growth management 

and loan offer efficiency issues when 

it launched the HCL Beepos project in 

December 2005. The MFI had already 

had a negative technology implementation 

experience with the Simputer project, and 

as a result the pilot was only launched 

in the Chaubepur village of the Ghazipur 

8 

Source: Cashpor Micro Credit, Varanasi (Uttar Pradesh) 

23 



district of Uttar Pradesh. The hardware 

included a wireless handheld device 

(the MAESTRO) 9 with an inbuilt thermal 

printer, a PC communication cable for 

downloading and uploading data onto 

the PC, and a battery re-charger. The 

field officers were provided with the 

project equipment and used the device 

to record transactions in the field, provide 

each client with individual receipts, and 

upload the day’s data from the handheld 

to the computer in the branch office. The 

hardware cost was Rs. 15,500, and the 

software was provided free of cost by 

HCL Technologies. The MAESTRO has a 

battery backup 

of about 16 

hours, which 

helps the field 

officer to stay in 

the field for an 

extended period 

of a few days. 

The device has 

been performing 

satisfactorily 

and no 

malfunctioning 

has been 

reported. Field 

Officers have 

saved the time 

that used to be 

spent on manual 

data entry and 

“…the device has 

helped me save a 

lot of time that used 

to go to manual 

data entry. Now, I 

can just connect 

it to the computer 

and upload the 

day’s transactions 

data in no time. The 

clients are also very 

happy to receive 

an individual 

transaction slip 

which was not the 

case earlier…” 

Ms. Rani –CMC 

Field Officer in 

Chaubepur 

have widely utilized the device in the field 

with clients. CMC is planning to introduce 

the Maestro at additional centers in the 

next few months. 

4.6.6 CorDECT (Wireless 

Access System – n-logue 

Communications 10 

n-logue communications (incubated by 

the TeneT group of IIT Madras) set up 

operations in 2001 with the intent of 

bringing the internet to villages. n-logue 

is currently operational in 32 districts in 

India, across 6 states, covering over 2000 

villages. 

CorDECT is an advanced Wireless Access 

System, designed with the rural socioeconomic 

profile of India in mind. It has 

been developed by Midas Communication 

Technologies and IIT Madras, in 

association with Analog Devices, USA. 

The CorDect technology provides wireless 

access solutions with integrated voice and 

internet services, allowing simultaneous 

toll-quality 11 voice and 35 / 70 kbps internet 

access to wireless subscribers. The 

technology supports 10 kms of line-of-sight 

connectivity with a provision to increase 

this to 25 kms by using repeaters. 

n-logue’s operational plans involve setting 

up village internet kiosks – through village 

entrepreneurs - and providing a number of 

service offerings. n-logue has developed 

several services, such as computer 

education, photography, e-governance, 

e-learning, e-agriculture, and video 

conferencing, that provide benefits to rural 

areas while also contributing to the kiosks’ 

sustainability, which is marketed under the 

brand name ‘Chiraag’. Besides the Wall 

Set that receives the CorDECT signal, 

the kiosks receive the complete hardware 

package and the application suite with 

multiple service offerings. 

9 

http://www.hclbeepos.co.in/home.htm 

10 

http://www.n-logue.com 

11 

Toll Quality Voice: An indicator of voice transmission quality as defined by the standard P. 800 of the International 

Telecommunications Union. It is a subjective rating involving testing volunteers who listen to the 

transmitted voice and give ratings on a scale of 1-5. The Mean Opinion Score (MOS) is then calculated and 

an MOS of 4 is considered to be toll quality. (Source: http://www.voipplanet.com) 

24 



The cost per kiosk works out around Rs. 

50,000—providing telephone, internet, 

multimedia PC with digital-camera, printer 

and power back-up for PC, with some 

special facilities such as multi-party video 

conferencing software. Preliminary 

financial analysis shows that a kiosk would 

need to generate revenues of Rs. 3,500 

per month to break even. 

As discussed throughout the report, these 

varied experiences with diverse types of 

technologies are also dependent upon the 

institutions position on the growth curve. 

The following three in-depth case studies 

show how technology has been used by all 

three tiers. 

4.7 Detailed Case Studies by Tier 

Box 4.2: Youth MFI case- Swayam 

Shikshan Prayog (SSP) 

Region 

Loan 

Disbursed 

Outreach 

Classification 

Maharashtra and 

Gujarat 

2.7 Crores 

2777 SHGs, 

39,806 women 

(926 groups 

accessing 

microfinance) 

Youth MFI 

Organization Background 

Since 1998, SSP has spread across 

eight districts in Maharashtra 

and two districts in Gujarat. In 

Latur, Osmanabad, Solapur and 

Nanded districts, the movement 

for empowerment now includes a 

membership of over 40,000 women. 

Based on its experience in promoting 

eight federations and forming SHGs 

across six districts, SSP promotes 

Community Based Enterprises (CBE) 

and undertakes Business Development 

Services (BDS). Going forward, SSP 

plans to form a microfinance institution 

(MFI)-Sakhi Samudaya Kosh (SSK) 

- with commercial objectives to scale up 

its microfinance programme. 

Technology Profile 

Currently, a Microsoft Access based 

“Tally” Accounting system is in place 

at the district offices and federation 

offices to capture the data and generate 

only accounting reports. However, the 

current system does not capture active 

portfolio information and all transactions 

that take place are at the SHG level. 

The system is unable to indicate the 

overall delinquency at the member level 

and the demand collection statements 

do not segregate the pre-payments and 

part payments. Therefore, the system, 

in its current form, is not delivering the 

kind of capabilities required. 

SSP needs MIS software that can: 

• Manage and track portfolios more 

effectively 

• Manage accounts that are 

integrated with the portfolio tracking 

system 

• Capture and maintain client 

information 

• Capture impact indicators to 

measure the performance of the 

organization 

It is currently in the process of 

introducing an Excel based portfolio 

25 



tracking system to set up an information 

acquisition base before upgrading to an 

electronic MIS. 

Technology Adoption Challenges 

SSP believes that it should procure an 

MIS system ‘off the shelf’ and customize 

it to its requirements. However, it is 

facing the following challenges in this 

context: 

• Lack of knowledge about 

technology providers and their 

product offerings; 

• Lack of technology understanding in 

terms of the most optimal software 

and hardware specifications that 

match their needs; 

• Lack of a team dedicated to 

manage the MIS implementation 

project, although there is an 

immediate need for an MIS, as SSP 

is in the process of setting up SSK; 

• High need for training and 

handholding support since the 

staff have never been exposed to 

computers 

• Technology provider has insufficient 

bandwidth to adequately meet the 

training requirements 

Box 4.3: Growth MFI case- CASHPOR 

Micro Credit (CMC) 

Region 

Loan 

Outstanding 

Outreach 

Classification 

Uttar Pradesh 

and Bihar 

27 Crore 

68,000 clients 

Growth MFI 


The CASHPOR group was promoted 

in eastern UP, India in 1996, by the 

CASHPOR Network Asia, with the 

vision of bringing about a significant 

reduction in poverty in the poorest 

part of India through the provision of 

sustainable microfinance services to 

women living below poverty line (BPL). 

Currently, they provide microfinance 

services through CASHPOR Micro 

Credit (CMC). Providing micro credit 

services to poor women in rural 

areas of eastern Uttar Pradesh and 

Bihar, CMC’s operations are currently 

managed through 41 branches/units 

spread over 9 districts. It has an 

outstanding portfolio of Rs 27 Million, 

with 4.19% Portfolio at Risk (PAR), 

and has an outreach of 87,626 active 

women borrowers, managed by more 

than 500 field officers. 


By the end of March 

2004, CMC was growing 

at the rate of 66 % and 

was in its active growth 

phase. To this point, it 

had been operating on 

manual systems, and felt 

the need to experiment 

with the use of Simputer to automate 

its credit processes. It launched the 

Simputer pilot project in the Chandauli 

district of Uttar Pradesh in March 2004, 

with the ABN AMRO bank supporting 

the project cost. The total hardware cost 

was Rs 50,000 and the software costs 

amounted to Rs 1, 50,000. 


Due to unforeseen problems, the 

Simputer trial ended in failure in 

January, 2005. The major reason for 

this failure was the weak battery backup 

of the Simputer. Once fully charged, the 

battery lasted only for 3 hours. At the 

start of the week, the field staff were 

given transaction details to be carried 

out for the whole week. However, 

due to the poor battery back up, the 

Simputer invariably lost the battery 

power in two days and the field staff 

26 



were left with no option but to carry out 

the rest of the transactions manually. 

There were also serious recurring 

software problems in the Simputer 

software. It was very difficult to do the 

initial calibration of the Simputer and it 

had to be taken to Bangalore for any 

problem resolution and repairs. After 

having used it for a few months, the 

CMC IT team concluded that there were 

serious, inherent OS problems in the 

Simputer and it was getting prohibitively 

expensive to call in the developers to fix 

them. The project was terminated. 

While the failure of the Simputer had 

left CMC’s problems unanswered, the 

organization continued on its growth 

trajectory, with higher transaction 

volumes and accentuating problems. 

The MFI was constantly on the look 

out for a POS technology that saved 

transaction time and improved data 

and process integrity. The Beepos 

project was launched at CMC on 

2nd December 2005. It was an 

HCL developed handheld called the 

MAESTRO. It is a small handheld 

hybrid payment terminal supporting 

a full range of payment methods, for 

various other applications that include 

using the MAESTRO as an on the spot 

billing machine for bus ticketing, parking 

ticket dispensing, electricity billing 

system and bill collection system. 

Currently this technology is still in its 

pilot stages and is running without any 

problems. 

Box 4.4: Mature MFI case - BASIX 

Region Throughout India 

Loan 

127 Crores 

Outstanding 

Outreach 89,953 

Classification Mature MFI 


BASIX is a new generation livelihood 

promotion institution established in 

1996, working with over 190,000 poor 

households in 44 districts and eight 

states across India. As of March 2006, 

the Basix group companies have 

disbursed more than Rs 520 Crore, 

and have more than 2.4 lakh active 

borrowers. 


• First MIS: Windows based FAMIS, 

1997, co-developed with Sathguru 

Consultants; currently being 

used in 50 MFIs/NGOs across 

India. Owing to complexities in 

operations with rapid growth, the 

software underwent continuous 

upgrades. The latest version is 

very customizable and is called 

FAMIS PLUS. Keynote: The FoxPro 

database is not sturdy for large 

MFI operations and handling huge 

amounts of data. Hence it had to be 

abandoned when operations grew. 

• Second MIS: Oracle based 

DELPHIX, piloted for the first 

time in 2002, co-developed by 

Sathguru Consultants. After 3 years 

of piloting, testing and modifying, 

DELPHIX replaced FAMIS PLUS in 

all BSFL units by 2005. Currently 

BASIX uses DELPHIX in all its 

lending operations. New features 

are being added to DELPHIX for 

the other services provided by 

BSFL, including life insurance, and 

agricultural and business services. 

Keynote: It is a highly robust 

system, based on a rugged and 

proven platform. 

• Portfolio Manager: As the 

organization witnessed rapid 

growth in 2001, it felt the need for 

the introducing a POS device to 

improve productivity by enabling 

agents to handle larger number 

27 



of customers and reducing 

travel-related stress fuel costs. 

The attempt was to use handheld 

devices to reduce the time 

and effort involved in recording 

transactions. Two devices were 

trialed – Psion and Osiris. Both 

were hand-held units, essentially 

like PDAs or palmtops. This project 

met with great success for over two 

years, during which 18 field staff 

used these terminals to record over 

50,000 transactions, worth about Rs 

2.2 Crore 


The device developed hardware issues 

after 2 years in the field. It could not 

be repaired as it was manufactured 

abroad. The other problems were 

low battery life, and the need to carry 

an external printer was cumbersome 

and bulky. Learning from the PM 

failure BASIX is currently developing 

an indigenous product designed and 

developed in India. This means costs 

are kept low and servicing would be 

cheaper and easier. The hand-held unit, 

from Edgar Interactive Pvt Ltd, can be 

connected to a PC through the serial 

port. Data is entered into the device 

from the PC through the serial port. 

After every transaction, agents can print 

out the receipt for the customer. All the 

transactions can be entered into the 

MIS simply by connecting the device to 

the server, rather than through manual 

entry, thus further saving time, reducing 

fraud, reducing the effort required, and 

increasing the accuracy. 

28 



CHALLENGES AND KEY LESSONS 

5 

Figure 11: Technology – Success and 

Failure 

Based on how technology has been 

trialed or adopted throughout the Indian 

microfinance sector, the following section 

summarizes the challenges facing MFIs in 

their effective use of technology to improve 

their processes. 

5.1 The Limited Role of Technology 

Beyond Mature MFIs 

In Figure 11, the technological 

interventions have been placed on the 

timescale against institution size. There 

were very few technology experiments in 

Indian microfinance until 2002, most of 

which were failures. However, the number 

of pilots has increased steadily since 2004, 

29 

due in part to multiple technology players 

entering the microfinance space. 

Not only has the number of pilots 

increased, but the success rate has also 

increased. It appears that as microfinance 

institutions continue to experiment, 

they develop a better understanding of 

technology, and are then better prepared 

to handle problems that may arise in 

subsequent pilots. Most of the MFIs on 

the map lie on the Mature MFI plane, 

suggesting that sufficient resources 

are a prerequisite for the successful 

implementation of a technology trial. 

This is not surprising, considering that 

Mature MFIs’ institutional capacities in 

terms of human resources, technology 

infrastructure, and availability of funds is 

much greater. 



Growth MFIs and Youth MFIs have 

not made the same progress towards 

technology trials and adoption. The lack 

of adequate infrastructure and institutional 

capacities required for technology pilots 

are the root causes along with the fact 

that Growth and youth MFIs are grappling 

with more basic issues such as achieving 

financial break-even (Youth MFI) and 

sustaining operational self sufficiency 

(Growth MFI). As a result, technology has 

not been their primary concern. 

The map also shows that PDAs and 

handhelds have been the most trialed 

technologies, suggesting that MFIs 

perceive organizational benefits from POS 

technologies. The microfinance model— 

many small transactions spread out over a 

geographically diverse client base—lends 

itself to POS technologies. These PDA 

experiments have carried on despite initial 

failures, suggesting that these setbacks 

have not become a barrier to technology 

adoption. 

documentation may be occurring, the lack 

of information sharing at the institutional 

level has made it difficult for institutions to 

benefit from the collective lessons learned. 

This information gap is exacerbated 

by the fact that despite the increasing 

number of technology experiments 

in microfinance, there is still a vast 

information divide between institutions 

and technology service providers. 

One of the key requirements for any 

technology to succeed is its relevance to 

the local context and robust features that 

correspond to the needs of the user and 

operate within the prevailing constraints. 

Technology providers generally lack sound 

knowledge of microfinance processes, 

institutional forms, and the sector’s needs 

and challenges. This information gap is a 

clear handicap for a technology provider 

trying to design solutions to address MFI’s 

problems and challenges. 

Box 5.1: The CASHPOR Simputer 

Project 

The CASHPOR Micro Credit (CMC) 

Simputer project was cancelled 

because the Simputer lacked sufficient 

battery backup to be carried in the 

field for long durations as most of 

the villages lacked electricity and the 

Simputer could not be recharged in 

the field. Another drawback was that 

the cost of troubleshooting was very 

high as the devices had to be flown 

to Bangalore every time there was a 

problem. 

5.2 Information Asymmetry 

The sector presently lacks a ready 

reference source containing a compilation 

and analysis of past and ongoing 

technology trials. Though results 

30 

Figure 12: The MFI – Technology Provider 

Confluence 

5.3 Financial Benefits of Technology 

Technology’s financial benefit is still 

not well understood by microfinance 

institutions. Neither the institution nor 

the provider can claim to have an 

understanding of its true costs and the 

timeframe in which these costs will 

be recovered within the microfinance 

context. Cost–benefit analyses have been 

conducted (for example, SKS carried out 

a detailed cost-benefit analysis for their 

use of smart cards), but the concept has 



not been widely adopted considering 

the number of interventions and the 

importance of the concept of return on 

technology investment. The Internal Rate 

of Return (IRR) of technology is not a wellknown 

concept in Indian microfinance, and 

institutions are generally not conversant 

with the concept of integrating technology 

with business cash flows. 

5.4 Management Perception 

technology. 

Management’s perception of technology 

is perhaps the most critical factor in 

determining the institution’s technology 

appetite. Management that sees a 

clear role for technology in facilitating 

institutional growth is more likely to 

endorse technology than those that are 

unsure how technology can be applied to 

their institution. 

“Technology 

Appetite” of an MFI 

may be defined 

as the institution’s 

readiness to accept 

and vigorously 

promote technology 

as a capacitating 

tool for operations, 

management and 

processes, with a 

clear understanding 

of the risks 

involved.” 

The majority of 

technology projects 

carried out by 

MFIs are funded 

externally—by 

banks, multilateral 

agencies, and 

other investors, so 

though there may 

be certain progress 

reports demanded 

by the organization 

underwriting the 

technology, MFIs 

are often resource 

constrained 

Box 5.2: Experiences with 

Technology 

SKS microfinance India 

launched the smart card 

project with a clear perceived 

benefit of improving loan officer 

productivity, but after the pilot 

was complete, the project was 

called off as the management 

felt that it did not significantly 

improve loan officer efficiency. 

CMC Varanasi experienced 

failure in the Simputer project 

and was apprehensive of trying 

out the next PDA pilot involving 

HCL Beepos technology. In the 

Simputer project, PDAs were 

provided to three field officers, 

but after its failure, CMC decided 

to provide the PDA to just one 

field officer for the second pilot 

and observe its performance. 

However, the Beepos pilot is a 

success and the MFI is gearing 

up to increase the use of PDA in 

their operations. 

and unable to stretch their capacities to 

ensure project success. The perceived 

need and utility of technology varies 

among institutions and is a factor of their 

size, institutional history, management 

perception, and past experiences with 

5.5 MIS – The Only 

Clearly Established 

Technology Demand 

MFIs, when starting 

operations, have struggled 

with the basic issues of 

recording transactions and 

generating internal and 

external reports. These 

processes have been made 

easier by the presence of 

sound MIS systems. MIS 

is also the first technology 

that an MFI would consider 

and an absolute necessity 

for any organization that has 

growth and sustainability 

plans. For a small MFI with 

limited staff resources, an 

MIS does not only bring 

about data integrity and 

institutional transparency, but 

it also generates significant 

time savings. These time 

savings can be immensely 

helpful towards realizing 

growth targets since the 

staff then have more time for 

client group formation and 

servicing. Larger MFIs find 

it useful to have a robust MIS with flexible 

features to assist them in managing 

growth, continuing product portfolio 

diversification, and attracting additional 

capital. 

31 



To date, MIS is still the only technology 

that most MFIs are willing to invest 

in. POS and integration technologies 

have been trialed by Mature MFIs, but 

even these larger MFIs have not widely 

implemented these technologies. 

5.6 Perception of Rural Client’s 

Ability to Use Technology 

One of the key indications that could be 

drawn from the various technology projects 

in Indian microfinance is that the average 

rural client is more technology savvy than 

is normally perceived. The SKS smart card 

project, BASIX Sudama project, Cashpor 

Simputer and Beepos project, and the 

SEWA bank initiatives all required rural 

clients to use ICT components such as 

smart cards, handheld computing devices, 

PCs, and cameras. The experiences in 

all of these ventures have established that 

with proper initiation and training, the rural 

client will embrace technology and help the 

rural services providers in achieving their 

goals. 

32 



6 

MICROFINANCE AND TECHNOLOGY – 

THE FUTURE SCENARIO 

This section attempts to map some 

learnings of the study – technologies 

and their features - with the microfinance 

process flows, and suggests technology 

solutions for the microfinance practitioners 

to address some of their problems. 

The process of financial delivery to the 

rural client involves information and 

capital flows across various stakeholders 

in the microfinance value chain. As the 

microfinance process begins, the flow of 

information and capital starts at the capital 

provider (lending institution or investor) 

level and ends at the microfinance client. 

The flow then reverses and subsequently 

continues as the client makes loan 

repayments and the MFI disburses new 

loans. 

6.1 Emerging Technologies and 

Their Uses 

6.1.1 The Gramateller (Rural ATM) 

- Tenet Group, IIT Chennai and 

ICICI Bank 12 

The Tenet group, 

in collaboration 

with IIT Chennai 

and ICICI Bank, 

has designed a 

robust and low cost 

ATM called the 

Gramateller (Village 

Teller). The ATM 

has been designed 

keeping in mind the 

particular needs and applications of a rural 

setting. The idea behind the Gramateller is 

to increase financial institutions’ outreach 

and penetration throughout rural areas. At 

the same time, the features and functions 

of the ATM also render it useful for semiurban 

applications. The Gramateller will 

use the existing connectivity in rural areas 

to enable a 

bank to extend its services to the poor in 

an efficient and cost effective manner. 

The Gramateller is a robust, low-cost (the 

Gramateller is expected to be about onetenth 

the price of a conventional ATM), low 

maintenance unit with a number of special 

features. It is capable of dispensing cash 

and accepting deposits like a regular ATM, 

but includes a special built-in feature, 

which allows it to handle soiled and 

crumpled currency. The ATM also uses 

smart card based identification (with a PIN) 

and finger print biometrics authentication. 

It has a secure chest with an e-lock that 

can be actuated only by a remote bank 

server. The Gramateller also has a 4-6 

hour battery back up in order to deal with 

power outages that are common in rural 

areas. 

As per the initial plans, the ATM would 

make use of an existing network of Internet 

Access Kiosks (maintained by n-logue 

Communications, Chennai) to service 

clients in villages. The kiosk operators 

would be trained in troubleshooting and 

would help the rural clients to access the 

ATMs. 

12 

www.vortexengg.com and meeting with Vortex Engg. and demonstration at IIT Chennai 

33 



The ATM is robustly designed to 

accommodate any rough handling that 

might occur in a village. Though the ATM 

can function by using just one of the two 

authentication features—smart card or 

biometrics—the initial design requires both 

to start a transaction. The ATM is also 

capable of dispensing both new and used 

notes of small denominations and the ATM 

would have the ability to offer non-cash 

transactions, micro-deposits, credit, and 

other services suiting rural clients. All this 

would be made available using a variety of 

technical features, many of which are not 

currently available even in conventional 

ATMs in urban India. 

6.1.2 Mobile Rural Banking - Microsoft 

Creating a reliable infrastructure is the 

primary need for efficient delivery of 

financial services to the rural client. The 

provision of services can either start after 

the establishment of the network or it can 

be a parallel exercise. Microsoft’s Mobile 

Rural Banking is a futuristic step in the 

latter direction. 

Microsoft is currently partnering with a 

host of institutions providing different 

components of the mobile banking solution 

to take financial services to remote 

locations of rural India and create a Rural 

Information Infrastructure (RII). The Mobile 

Rural Banking project is an outsourcing 

based, multi service delivery system 

(MSDS) model, which rides on CDMA 

wireless access connectivity. 

track rural clients credit history. The other 

service offering involves enabling online 

transactions through mobile ATMs that 

would be wirelessly connected to a banks 

central network. The pilot is currently on in 

Honawar, Karnataka. 

6.1.3 WiMax – Intel, Motorola and 

Others 

Similar to WiFi networks that have 

proliferated in homes, offices, and social 

spaces, WiMAX (World Interoperability 

for Microwave Access) is a family of 

technologies based on a global wireless 

standard. WiMax promises to deliver 

ubiquitous high-throughput broadband 

wireless services at a low cost. 13 One base 

station will be able to provide a circular 

area up to 20 km across with high-speed 

broadband access. 

WiMax would allow MFIs to provide field 

staff with networked PDAs that are “always 

connected” and, as a result, always 

capable of displaying the most recent 

client information and data. Additionally, 

other remote devices, such as rural ATMs 

would also be able to build in connectivity 

redundancy, so that if wired networks are 

not accessible the machine would switch 

The Microsoft partners include Tata 

Consultancy Services, HP, Reliance 

Infocomm, AC-Nielsen, State Bank of India 

and Syndicate Bank. 

The initiative aims to create an integrated 

multi-entity database system (IMDS), 

which financial institutions can use to 

13 

http://www.intel.com/netcomms/technologies/wimax/index.htm 

34 



over to WiMax. Lastly, WiMax should drive 

down the cost of handset connectivity, 

perhaps allowing more of the rural poor 

population to access networked devices 

(as is currently the case in the Grameen 

Phone model) to gain access to account 

information or to compare one MFIs 

interest rates against another’s. 

Wireless broadband and other connectivity 

technologies have the potential to create 

a framework for the supply of a number 

of other services such as e- governance, 

e-learning, e-health, and e-education 

to name a few. A robust connectivity 

framework can foster a rapid bridging 

of the digital divide and facilitate the 

formation of common platforms, such as 

internet kiosks, for providing numerous 

services to the rural population. There 

have been multiple initiatives in this 

direction such as E-Seva, Gyandoot, and 

E-Chaupal. 

6.1.4 Customized Technology 

Solutions – FINO 

As is the case for any business outside 

of the technology industry, their core 

competency is not technology procurement 

and management. The boom in business 

process outsourcing and technology 

solution consulting from firms like 

Accenture and IBM Global Solutions, 

points to the fact that companies are 

willing to leave their technology to others 

while they focus on their business’ key 

operations. 

Similarly, FINO, a venture funded by 

ICICI Bank, has been established to 

provide “high-quality data capture, 

management, and analysis tools at a 

significantly reduced cost” 14 so that MFIs 

can remain focused on their mission of 

expanding access to financial services. 

Specifically, FINO will deploy and manage 

a comprehensive technology-enabled 

Figure 135 – A typical schematic of a 

networked Point of Service technology 

using either GPRS or WiMax connectivity 

technology 

data backbone that will allow MFIs to 

effectively use data management systems, 

smart card interfaces and ATM/ Point of 

Transaction (POT) technologies. 

14 

www.fino.co.in 

35 



Table 5 lists the emerging technologies 

that offer solutions, with focus on the 

needs of rural India. Major players such 

as Microsoft, AMD, Phillips, ICICI bank 

and others have identified potential 

opportunities, and have decided to foray 

into microfinance with their respective 

technology offerings. 

Solutions, such as AMD’s Personal 

Internet Communicator, Temenos, and 

eMerge, are trying to shift the burden of 

high costs of technology from the end of 

the delivery chain to higher up where costs 

could be reduced due to sharing amongst 

users. The Core Banking Software from 

ICICI bank is one of the most promising 

emerging technologies in India, which tries 

to do the same. 

needed technology offerings that would 

significantly help MFIs use technology 

to increase capacity and foster a more 

standardized and competitive microfinance 

industry. 

6.2.1 Interactive Microfinance Portal 

New, mainstream players are quickly 

entering the microfinance sector; ranging 

from technology monoliths such as 

Microsoft, Motorola, and AMD to private 

investors. For the newcomers and 

veterans alike, timely access to accurate 

information is one of the key determining 

factors to ensuring maximum participation 

in the sector. 

The Mix Market portal 15 provides key 

Table 5: Emerging technologies in India 

Moreover, innovations and models, such 

as Any Branch Banking, signal a shift 

of focus from the Field Officer using the 

technology to back-end infrastructure 

consolidation and integration. 

6.2 Needed Technologies 

Though emerging technologies will help fill 

current technology gaps, there are a few 

information of MFIs worldwide. A 

web portal like Mix Market, promoting 

information sharing across all interested 

parties, is needed for Indian MFIs in the 

technology domain. During the primary 

survey, participants emphasized that 

an organization looking for any kind 

of technology is often unsure about 

the various products and services in 

the market. An online resource, listing 

technology service providers and their 

product and service offerings, will bridge 

15 

http://www.mixmarket.org 

36 



this information gap. A microfinance 

technology portal, providing exhaustive 

information on Indian microfinance 

institutions and technology services 

providers, would be an invaluable tool to 

help expedite technology adoption. 

In a fully developed form, this web portal 

could transform into a dynamic, interactive 

platform allowing all stakeholders to 

come together. The portal could provide 

all the relevant information about the 

stakeholders: policy makers, lenders, 

equity investors, microfinance institutions, 

and technology service providers amongst 

others. Such resources currently exist 16 , 

but these resources need to evolve from 

a reporting based architecture to a more 

dynamic and interactive form that would 

facilitate the exchange of ideas and 

experiences. Such a venture has the 

potential to facilitate faster interactions 

between stakeholders 

and catalyze partnership 

growth. For example, a 

bank looking to diversify 

its portfolio by adding 

MFI clients would use 

such a portal to access 

immediate and accurate 

information on Indian 

MFIs’ past and current 

performance. 

6.2.2 Technology 

Framework 

for Multiple 

Services 

Delivery 

Technologies, such as smart cards, have 

the potential to create a uniform base that 

can cut across various microfinance client 

service delivery channels. A smart card 

can act as a common platform for various 

service providers, storing clients’ relevant 

personal and financial information. This 

system would present multiple benefits 

to the service providers as well as to the 

clients. Service providers would use a 

standardized smart card as the unique 

client interface and identification tool and 

would then drive down the technologies 

per unit costs and potentially even 

share the associated costs. The clients 

would, in turn, be able to access multiple 

services using the same card. Periphery 

hardware, such as smart card readers 

would also become more affordable as 

standardization leads to economies of 

scale. 

Initiatives such as ITC’s E-chaupal 

have demonstrated that providing need 

driven services can make such initiatives 

sustainable and scalable. However, given 

the size of the Indian rural market, there is 

a need for many such initiatives. 

Figure 146: Various service providers 

converging on the smart card client 

6.2.3 Microfinance Client Database 

There is a clear need for client information 

management and sharing in Indian 

microfinance. The large amount of data 

being generated at the ground level by an 

16 

http://www.microfinancegateway.org/ 

37 



increasing number of clients requires a 

mechanism that would capture, analyze, 

process and present the data to the entire 

sector. 

A microfinance client database with in-built 

statistical features provides the following 

advantages: 

- Provides a robust mechanism to 

capture information at every level 

to ensure records tracking at the 

individual client level 

- Analyze and present records in an 

easily accessible manner 

- Create a technology linked platform 

that reduces the cost of data capture 

and leads to quick information transfer 

- Can be developed as a sustainable 

business model 

Most importantly, a microfinance client 

database can function as a credit history 

tracking mechanism, a system and service 

that do not currently exist. This data base 

would also provide useful information 

products to clients such as individual 

credit scores. The system would also have 

extensive benefits for individual members: 

SHGs, lending financial institution, 

microfinance practitioners, Government 

bodies, apex bodies, and for new entrants 

in the rural sector such as insurance 

companies, credit card companies, and 

FMCG companies. 

Figure 157: Schematic for the flow of data in the Microfinance Client Database 

38 



Copious amounts of information are being 

generated with the rapid increase in the 

number of microfinance clients, however, 

the current information collection systems 

and methodologies are scattered, and do 

not necessarily generate information that is 

accurate, credible, and meets stakeholder 

requirements. It is crucial that MFIs have 

clients’ complete personal details and 

develop a clear understanding of their 

credit behavior. 

6.2.4 The Future State: Technology & 

Microfinance Exchange Points 

This section maps the MFI microfinance 

process across the 

various value chain 

exchange points 17 , 

the challenges 

faced by different 

stakeholders at 

each exchange 

point, and the 

technology options 

available to MFIs 

to address some of 

these stakeholder 

challenges 18 . The 

section begins 

with a discussion 

of some emerging 

technologies that 

have the potential to significantly improve 

MFI service delivery. 

The technologies Indian MFIs have 

trialed, the emerging technologies about 

to be tested in the field and the needed 

technologies that are yet to be developed 

have the potential to significantly increase 

MFIs’ scale and scope while lowering per 

transaction costs. However, one of the 

critical problems has been ensuring that 

the right technology is used at the right 

point in the microfinance value chain. This 

section makes recommendations as to 

how technology should be used at each 

of the three exchange points: investors 

interfacing with MFIs, MFIs’ exchanges 

with branch offices and loan officers, 

and finally, loan officers’ interactions with 

clients. At each exchange point, each 

groups’ needs are met with technologies 

that will make operations easier, faster, 

more transparent, and less costly. 

6.2.5 Capital Providers & MFIs 

Figure 168: Needs between investors 

and lenders and MFIs and the facilitating 

technology solutions 

Capital providers’ need to assess 

institutional performance ensures 

institutional transparency, maintain 

accountability and reduce their 

risks. Financial Institutions and other 

investors try to assimilate and analyze 

17 

Exchange Point: Interaction/transaction involving either information or capital between Lenders/Investors, 

MFIs, Loan Officers and Clients. 

18 

Note: the challenges mentioned in this section are for the transactions occurring at that particular exchange 

point. The stakeholder may have other needs that are independent of the flow occurring at that particular 

exchange point. 

39 



information to hedge against risks and 

ensure institutional transparency and 

accountability of the 

MFIs. This is done by 

putting forward a demand 

for a rigorous reporting 

mechanism that facilitates 

the measurement of 

organizational performance 

and efficient tracking of the 

status of their investments. 

In order to accomplish these 

tasks capital providers must 

have access to current data 

and information that allows 

them to measure a MFIs 

performance against these 

defined metrics. 

MIS is a strong tool for the MFI to address 

investors concerns. MFIs must have a 

robust MIS in place, which is capable of 

generating up-to-date, customized reports 

profiling their financial performance. 

These reports should be highly automated 

and require minimal MFI effort, as a MFI’s 

limited resources must be dedicated to its 

core operations. 

Web portals are an important tool for 

information dissemination and sharing 

between capital providers and MFIs. From 

a capital provider’s point of view, a portal 

may act as a database of institutions 

providing information on their products, 

services, past performance and other 

criteria, while assisting them in deciding 

upon strategic partnerships and investment 

decisions. Portals such as The Mix Market 

are MFI information aggregators that 

provide potential investors with much of 

the information that they need to make 

investment decisions. From an MFI’s 

perspective, a portal can also provide a 

comprehensive list of social investment 

organizations and funds that may be 

interested in providing capital to their 

institution. 

6.2.6 MFIs & Loan Officers 

Figure 19: Needs between MFIs and 

their Loan Officers and the facilitating 


The outreach work of the MFI is 

conducted by the Loan Officers (LO). 

The business model is highly distributed 

with many points of presence across 

varied geographies. The efficiency 

and profitability of each transaction is 

effectively in the hands of each loan 

officer. As a result, loan officer productivity 

is a key factor in the sustainability or 

profitability of any MFI. 

Loan officer interactions typically involve 

the collection of information about that 

day’s or week’s transactions to be made 

in the field. Once these transactions are 

completed the transaction data must be 

updated in the MIS. The Loan Officer 

may also be required to prepare periodic 

(weekly/monthly/others) portfolio reports. 

A MIS provides Loan Officers with readily 

accessible digitized information on clients, 

portfolios and balances. This information 

helps Loan Officers prepare their 

collections and disbursements schedule. 

The loan approval processes can also 

be standardized with an MIS, making the 

40 



loan appraisal 

process faster 

and more 

efficient. Finally, 

MIS allows 

Loan Officers to 

prepare periodic 

portfolio reports 

with a minimal 

amount of effort 

and time. 

Networked POS 

technologies 

such as PDAs 

can reduce 

the time spent 

by loan officers at the branches and the 

amount of paperwork, as the information 

that has to be provided can be wirelessly 

transferred from a MIS-enabled computer 

to the PDA. This process is not only faster, 

but also greatly reduces human error 

due to minimal data input requirements. 

This type of technology solution can have 

long term implications for MFIs: saving 

time by allowing the Loan Officer to 

reach more clients, reducing costs due to 

paper processes and the time required to 

conduct data input activities. 

6.2.7 Loan Officers & Clients 

Today, a Loan Officer’s typical day 

starts by going to the branch to collect 

the details of loan disbursements to be 

made – during the day, or at times, for 

the entire week. He or she carries heavy 

documents and multiple ledgers while 

conducting client transactions across a 

number of villages. A significant amount 

of time goes into recording the transaction 

details by hand in the appropriate ledger 

and then transferring this information to 

the branch office at the end of the day or 

the end of the week. In addition to these 

responsibilities, loan officers must also 

schedule group formations and carry out 

self help group formation meetings. 

41 

Figure 20: Needs between Loan Officers 

and Clients and the applicable technology 

solutions 

Tomorrow, loan officers should spend 

minimal time traveling between the branch 

office and clients. Networked POS 

technologies should allow for wireless 

information transfers that will maximize 

the amount of time loan officers spend 

in the field serving clients as opposed to 

conducting data entry or traveling between 

client sites and the branch office. 

Point of Sale technologies (PDAs and 

smart cards) simply help to reduce the loan 

officer’s work load, allowing the loan officer 

to spend more time meeting with clients 

or establishing new client groups. One of 

the main advantages of a POS technology 

such as a PDA is that it cuts down on the 

paper work load. A PDA can be used to 

store client information, disbursement and 

collection schedules, tracking portfolios, 

centre auditing, loan approvals, and 

transparent data entry. Similarly, client 

information stored on a smart card enables 

faster and more accurate transactions. 

POS technologies not only facilitate 

smooth and efficient MFI processes, 



device with a smart card 

reader to get an updated 

view of their transaction 

history, provided the client 

is sufficiently literate to 

understand the output. 

Lastly, clients who are 

not literate can access 

automated Interactive 

Voice Response (IVR) 

systems by phone to get 

an up to date status of their 

transaction history. IVR 

technology is yet to find 

a solid foothold in Indian 

microfinance. However, IVR 

technologies have been 

implemented with success 

in some MFIs globally. 

(Refer to Annexure III). 

The MFI Challenge Matrix 

introduced at the beginning 

of the report classifies MFIs 

according to their position 

on the growth curve 

and the corresponding 

challenges. An analysis 

of the microfinance 

technologies has been 

mapped against MFI 

challenges and presents 

a Technology Solutions 

Matrix, shown in figure 22. 

Figure 21: The Loan Officer Activity Cycle 

can be much more efficient when the 

correct technologies are applied 

they also make information access easier 

for clients. Clients can gather information 

about their loan during any of their 

transactions in a number of ways. First, all 

interactions with loan officers provide an 

opportunity for information transfer (as is 

currently the case) as all transaction data 

will be stored on both the smart card and 

the PDA. Second, clients can access any 

42 

Depending on the MFI’s 

size, and its corresponding needs, 

the institution should explore different 

technology solutions. While a Youth MFI 

should aim to move from a paper to a 

digital MIS, which suits its organizational 

requirements and facilitates information 

and process streamlining, a Growth MFI 

should explore POS technologies to 

improve loan officer efficiency. Mature 

MFIs should explore technology options at 

the sector level as they have a thorough 

understanding of the processes and 

institutional capacities to 



Stakeholder Technology Benefits 

MFI 

Portals 

/Internet 

MIS 

Smart Cards 

• Information on potential partners (lenders and 

investors) 

• Information sharing with various stakeholders 

• Faster Information sharing within the organization– 

between the branch offices and the HO 

• More efficient Portfolio tracking and loan 

monitoring 

• Standardization of systems and processes 

increases 

investor confidence 

• Standardized information across all clients 

POS 

Technologies 

• Increased productivity, efficiency and accuracy of 

the 

field staff 

• Significantly reduced paper work and transparent 

record 

keeping 

• Real time data collection and processing 

• More time for group formation, products 

promotions and 

campaigns 

• Faster and accurate credit approval process 

Table 6: Technologies and their benefits for the microfinance practitioner 

explore various technologies that would 

facilitate information sharing between 

institutions and catalyze sector growth. 

43 



6.3 The Technology Solutions Matrix 

Figure 22: Technology Matrix for MFIs – Challenges, Key Concerns, and role of 

technology 

44 



6.4 Technology’s Transformative Promise 

Figure 23: The Potential of Technology – Microfinance 2010 

45 



7 

RECOMMENDATIONS 

7.1 Structural: Creating an 

Environment Where Technology 

Can Be Used Effectively 

In order for technology to have a place 

within microfinance generally, and in India 

specifically, basic infrastructure must 

be in place. Though alternate energy 

discrepancies across the four regional 

zones (East, West, North, South) in terms 

of the level of poverty, MFI concentration, 

infrastructure (electricity and tele-density), 

and literacy. As a result, the contextual 

needs and challenges will vary significantly 

across these zones. 

A majority of MFIs and 

technology service providers 

are located in the south. A 

southern technology provider 

may not know particular eastern 

or northern features. This 

unfamiliarity may prove to be 

detrimental during product 

design and implementation. 

For example, a PDA, if 

introduced in rural east or north 

India which have very poor 

electricity supply, would require 

substantial battery back up to 

be effectively used in the field. 

technologies, such as 

solar power or hand crank 

mechanisms, have been 

deployed in developing 

countries to overcome 

energy constraints, access 

to a relatively constant 

supply of electricity remains 

a necessity for technology 

to be effectively and widely 

applied to the microfinance 

sector. 

In India, there are 

significant structural 

46 



Similarly, the Eastern part of the country 

has relatively low tele-connectivity. There 

is an immediate need and opportunity 

for service providers such as Motorola to 

enter the region and provide connectivity 

solutions. Additionally, the central and 

state governments should encourage 

connectivity investment by giving 

preferential contracts to suppliers who 

are willing to help work with MFIs to 

bring connectivity technologies to their 

operations. 

Technology providers should keep 

these structural disparities in mind when 

designing and introducing technology 

based services and solutions. Indeed, 

before any technology solution is put in 

place a detailed, ground-level, needs 

assessment study and cost-benefit 

analysis should take place to ensure 

that the requisite environment is there to 

support the technology being used. 

The Indian government, through SIDBI 

and NABARD, also has a role to play in 

providing technology specific loans and 

grants to MFIs. In order for microfinance 

to rapidly serve the hundreds of millions of 

people in poverty, support for technologies 

that help increase efficiency and outreach 

should be provided. These grants should 

also have attached performance goals, 

such as detailed information gathering and 

reporting, as technologies such as MIS 

and POS make these activities possible. 

7.2 Institutional: MFIs must work 

together to collectively invest 

in, and reap the rewards from, 

technology 

The lack of technology information sharing 

between MFIs is one of the greatest 

hindrances to widespread technology 

adoption and one of the problems that 

is most easily solved. A technology 

information portal, as described earlier in 

the report would help MFIs when making 

47 

technology procurement decisions by 

allowing MFIs to learn from one another’s 

successes and failures. 

Though a portal is important, its 

usefulness is determined by the number 

of technology trials that are conducted 

and the results that are shared with the 

Indian MFI community. The trials that have 

taken place so far are a step in the right 

direction, but much more can and should 

be done. Specifically, more trials need to 

take place at the Growth and Youth MFI 

levels, as technology can be effectively 

leveraged to help achieve financial breakeven 

and rapidly scale up operations. 

However, technology cost is a clear barrier 

for most of the institutions. This can be 

addressed by forming a microfinance 

technology standards organization. 

Standards create economies of scale, 

which lower component costs and make 

technology more accessible. In addition to 

standard, MFIs must invest in training their 

key decision makers to better understand 

the concept of Return on Technology 

Investment (ROTI). 

There are no case studies available in 

the Indian context that give an indication 

of the time frame for expected returns on 

technology investments. The benefits 

are more “perceived” than “proved”, 

and though there may be soft benefits, 

in terms of time saved and increase in 

transparency, there is no practice in place 

to measure these benefits in a quantitative 

manner. As a result, there is an evident 

need for thorough studies to integrate 

finance and technology and to bring about 

more clarity on the returns on technology 

investments. 

MFIs attitude towards technology should 

be one of optimistic embrace. Technology 

has a crucial role to play in building 

capacity and MIS and POS technologies 

can provide organizational transparency, 



accountability, and improve operational 

efficiency, while integration technologies 

facilitate information sharing across all 

stakeholders. These technologies have 

the potential to vastly streamline the flow 

of information and capital. 

7.3 Technology Industry - 

Technology providers should 

view the microfinance sector as 

a viable vertical requiring end-toend 


Microfinance processes do produce 

significant challenges in terms of 

information capture, data analysis, and 

networking multiple points of presence. 

However, the processes are not unlike 

many other industries such as door to 

door selling, and package delivery. The 

difference is that microfinance has until 

very recently not been seen as a viable 

market for technology products and 

services. 

The most promising indication that this 

trend is changing, is the establishment of 

FINO, a technology solutions company 

catering to the Indian microfinance 

community. FINO understands that MFIs 

should be most concerned with delivering 

financial inclusion services to the poor. 

And while technology has a large role to 

play in accomplishing this mission, MFIs 

have neither the human nor financial 

resources to dedicate teams of people 

to managing technology. FINO’s role 

is to offer their services to help MFIs 

procure and manage technology including 

service concepts such as Service Level 

Agreements (SLA), so that effective uptime 

can be contracted out to and managed by 

an outside firm. 

However, FINO should not be alone. In 

India in particular, the technology solutions 

know how is significant and some of 

the business process outsourcing and 

technology consulting skills made famous 

by Infosys and Wipro should spill over into 

the microfinance sector. These Indian 

outsourcing giants should also be joined by 

Asian Original Equipment Manufacturing 

(OEM) players, who build entire products 

or component parts which are used in 

the final “brand-name” products sold by 

other companies. These companies 

would likely be willing to provide the same 

quality products, such as POS devices, at 

significantly lower prices. 

These companies have much more to 

gain from engaging with MFIs than good 

corporate social responsibility reputations, 

as the microfinance model will force these 

companies to think of solutions with unique 

constraints such as extended battery-life 

and multiple data entry languages, as 

well as significant levels of customization 

which will likely strengthen their more 

conventional product and service offerings. 

7.4 Support Organizations - 

Resource and Information 

Coordination Across All 

Stake Holders Will Facilitate 

Technology Adoption 

Most of the CARE partners are Youth MFIs 

or NGOs that do not have a standardized 

MIS in place. Their staff’s knowledge 

and understanding of technology is also 

limited 19 . Hence, institutional needs are 

not being properly communicated to the 

MIS vendors, resulting in a long installation 

and gestation period for the MIS, which 

has direct cost implications. The partners 

also have different institutional practices, 

which demand customizable technology 

products. 

19 

During the meeting with CARE Andhra Pradesh, the fact that most of the partners are struggling to find a 

suitable MIS for their institution was discussed. The handholding stage, after the MIS is initially installed, is 

very long and there is usually quite costly and frequent troubleshooting required. 

48 



Technology training programmes for 

the partner MFIs would enable them to 

better understand what to expect from 

technology, and reduce handholding and 

troubleshooting costs. 

Some of the questions covered during the 

training could include: 

- What are the institutional issues that 

have potential technology solutions? 

- What are the technologies that can 

address those issues? 

• How? 

- What would it take to implement the 

technology? 

• Cost 

• Infrastructure 

• Human Resource 

• Time 

- What is the technology gestation 

period after its implementation? 

- How would the staff use the 

technology? 

- What are the possible issues that 

could come up after technology 

implementation? 

- What would be the troubleshooting 

costs and time? 

- How can technology change the way 

the institution is operating today? 

These questions could be answered vis-àvis 

an MIS, or a POS device, or any other 

technology. 

CARE partners have been having great 

difficulties in operationalizing the MIS, as 

they have different institutional needs and 

finding customized solutions is a great 

challenge. An MIS that works smoothly 

with one partner may not do so with the 

other. CARE should explore the option 

of entering into a partnership with an MIS 

provider, who would conduct a thorough 

study of all the partners, identify their 

individual needs, and provide an MIS with 

sufficient customization features to make 

it work in every institution. However, 

as CARE has experienced with current 

49 

partners, it is very important to have 

a local vendor to deal with frequent 

troubleshooting issues. This should be 

kept in mind while deciding on the partner. 

CARE could also look at the upcoming 

Core Banking Software from the ICICI 

bank, which aims to bring multiple 

MFIs under a single umbrella through a 

centralized MIS. Along these lines CARE 

should also engage with FINO to discuss 

how they could best help create unified 

technology solutions for partner MFIs. 

These centralized systems would have 

the advantage of data consolidation at the 

state and national level for all the partners, 

and CARE India would be able to track 

partner performance at any point of time. 

CARE India has a nationwide presence 

and a large network of partner 

organizations, which can be usefully 

leveraged to conduct technology pilots 

and sector studies. Emerging concepts in 

the sector such as Microfinance Exchange 

and Credit Bureau can be kick started 

and supported by CARE in the pilot stage, 

which would not only be useful for the 

sector, but also provide CARE with the 

strong advantage of controlling critical 

sector information. 

Though this study covered the issues with 

respect to technology implementation in 

MFIs, the scope was broad. This study 

has identified the key technologies that 

have the potential to impact microfinance 

practitioners, but CARE India could 

identify one of these technologies, and 

commission a detailed feasibility study, 

and present the outcome to the sector – an 

initiative that the sector is still lacking. In 

all, CARE’s role in bringing technology to 

MFIs should be one that emphasizes the 

great promise technology presents while 

helping partner organizations access the 

capital and skills to realize this promise as 

soon as possible. 



8 

LIST OF REFERENCES 

1. A seminar report April 26-27, 2003, 

Nairobi, Kenya. Information technology 

as a strategic tool for microfinance in 

Africa 

2. CGAP IT innovation series. ATMs, 

PDA, Smart Cards, Biometrics 

Technology, Credit scoring (http://www. 

cgap.org/publications/microfinance_ 

technology.html) 

3. Pal, J., Nedevschi, S., Patra, R.K., 

Brewer,E.A. A Multi-Disciplinary 

Approach to Shared Access Village 

Computing Initiatives: The Case of 

Akshaya. 

4. On behalf of ADA Luxembourg 2004 

KfW Financial Sector Development 

Symposium, Berlin, November 11-12, 

Goodman, P. Microfinance Investment 

Funds: Objectives, Players, Potential. 

5. Hay, K.A.J. Expanding Broadband 

Access in Rural India. 

6. Brewer,E., Demmer,M., Du, B., Ho, 

M., Kam, M., Nedevschi, S., Pal, J., 

Patra, R., Surana, S. The Case for 

Technology in Developing Regions. 

University of California at Berkeley 

Kevin Fall Intel Research Berkeley. 

http://tier.cs.berkeley.edu 

8. Magnette, N., August 2005. What 

works: scaling microfinance with the 

remote transaction system. 

9. Matthew, K., Tran, T. Lessons from 

Deploying the Remote Transaction 

System with Three Microfinance 

Institutions in Uganda. 

10. Toyama, K., Maithreyi, K., Ratan, 

L., Nileshwar, A., Vedashree, R., 

Macgregor, R.F., December 2004. 

Rural Kiosks in India. 

11. Cellular Operators Association of India, 

Feb 20, 2006. Teledensity data. 

12. Turaga, J. Opportunities and 

challenges in India ‘Kuch Apni Soch 

aur Kuch Jugaad’: Crafting the MF/IT 

Paradigm-The Indian Experience. 

13. PRESENATION OF FERLO, 

April 2004. Introducing smart card 

technology into MFIs, Africap IT 

Conference, Nairobi. 

7. Castello, S.A., April 5th, 2004. 

Innovative technologies in 

microfinance for Latin America: 

building effective delivery channels. 

University of Mobile. 

50 



14. Microsave, October, 2004. Microsave, 

Innovative Models to Address Rural 

Needs. Technology Innovations, SEEP 

Annual Meeting. 

15. ICICI Bank, September, 2004. 

ICT4SED: case study. 

16. Gandhi, A., Parkinson, G., Gibson, A. 

Cost-effective communication system 

solutions for remote banking. 

17. Choudhary, D. Computer Munshi 

‘ Barefoot ICT entrepreneurs for 

providing accounting and MIS services 

to micro finance self help groups in 

India’. 

18. Coetzee, G., Kabbucho, K., Njema, 

A. Taking Banking Services to the 

People: Equity’s Mobile Banking Unit 

19. Waterfield, C., Ramsing, N. 

Management Information Systems for 

Microfinance Institutions-A Handbook 

20. Connecting Rural Communities 

– Global Conference on the role 

of Information and Communication 

Technologies in connecting the rural 

communities, by Commonwealth 

Telecommunications Organization, Jan 

30th – February 2nd , Cochin, India 

21. Census of India (2001) – http://www. 

censusindia.net 

51 



LIST OF ABBREVIATIONS 

ABB Any Branch Banking 

AMD Advanced Micro Devices 

ASA Activists for Social 

Alternatives 

ATM Automatic Teller Machine 

BPA Basix Pot Agents 

BPO Business Process Outsourcing 

CAGR Compounded Annual 

Growth Rate 

CCD Covenant Centre for 

Development 

CDMA Code Division Multiple Access 

CGAP Consultative Group to Assist 

the Poor 

CRM Customer Relationship 

Management 

DTP Desk Top Processing 

FA Financial Accounting 

FAMIS Financial Accounting and 

Management Information 

System 

GPRS General Packet Radio Service 

HO Head Office 

HRM Human Resource Management 

ICT Information Communication 

and Technology 

IIT Indian Institute of Technology 

ISP Internet Service Provider 

IT Information Technology 

ITSL Information Technology 

Solutions Limited 

IVR Interactive Voice Response 

JLG Joint Liability Group 

KBSLAB Krishna Bhumi Samiti Local 

Area Bank 

MFI Micro Finance Institute 

MFT Micro development 

Finance Team 

MIS Management Information 

System 

MS-DOS Microsoft Disc Operating 

System 

MSDS Multi-Service Delivery System 

NABARD National Bank for Agriculture 

and Rural Development 

NGO Non Government Organization 

PC Personal Computer 

PCO Public Call Office 

PDA Personal Digital Assistant 

PIC Personal Internet Connector 

PIN Personal Identification Number 

POS Point Of Sale 

POT Point Of Transaction 

PSU Public Sector Unit 

RBI Reserve Bank of India 

RII Rural Information 

Infrastructure 

ROI 

RTS 

SATM 

SBI 

SHG 

SIDBI 

SKS 

SLA 

SMS 

SSP 

STD 

TSP 

VSAT 

WiMax 

Return on Investment 

Remote Transaction Server 

SAFALSystems Automation 

in Finance and Livelihood 

Smart Automatic Teller 

Machines 

State Bank of India 

Self Help Groups 

Small Industries Development 

Bank of India 

Swayam Krishi Sangam 

Service Level Agreement 

Short Messaging Service 

Swayam Sikhshan Prayog 

Subscriber Telephone Dialing 

Technical Service Provider 

Very Small Aperture Terminal 

Worldwide Interoperability for 

Microwave Access 

52

Evolution of Technology - Application in Microfinance - CAB

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