Banking the Unbanked: Technology’s Role in Delivering Accessible Financial Services to the Poor

How can microfinance have macro impact in the world such that billions of today’s urban and rural poor gain access to financial services? By undertaking 3 pilot studies in Uganda, a consortium of private and public actors sought to determine the role technology could play in increasing the reach of microfinance. This paper discusses the findings of the studies.

It begins by highlighting the problem and considering the question: What are the problems keeping the industry from achieving greater scale? The study concludes that the key issues relate to over-dependence on donor funds for wholesale finance and operating costs, the absence of consistent, sector-wide operating standards and business practices, fragmentation within the sector, technical challenges and high transaction costs, and the need for flexibility to offer diverse financial services that meet local needs and priorities.

The paper sets out how the actors involved in the study then designed a technological solution in an attempt to overcome these issues identified. The technology was designed to process loan payments, savings deposits, withdrawals and transfers, based on a combination of smart-cards, point-of-sale terminals, a transaction server and connectors that send data directly to the MFIs’ accounting and general ledger systems.

Three key lessons that were drawn from the study are discussed in detail by the paper:

  1. Technology combined with business process change brings the greatest return
  2. Emerging markets require innovative, appropriate technologies that are designed for scale
  3. The costs associated with building the infrastructure to support this enabling technology is too high for MFIs to go it alone
  • Resource type
  • Author Firpo, J
  • Organisation
  • Year of Publication2006
  • Region
  • LanguageEnglish
  • Number of pages10 pp.

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