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Information systems for microfinancial services

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This article provides an overview, as of early 1999, of different information systems available for use in microfinance. The management of information has a clear importance for microfinance institutions (MFIs). Poor information systems have an impact on every aspect of an institution’s performance, from operational effectiveness to strategic management. The authors carried out a survey, world-wide, with the aim of discovering which information-management packages were used in a variety of MFIs. The article is based on 93 completed questionnaires, all but two from MFIs (the others were from FAO), which represents only a 20% response rate, and thus its conclusions can only be considered tentative. All those who responded (apart from FAO) run credit programmes, with 52% having a village bank-type programme, 62% a group solidarity methodology, and 45% an individual credit scheme. Thus a variety of different methods can be said to be covered by the survey.

The authors were particularly interested in information technology (IT) and computerised information systems. The principal question in this area is whether to use an off-the-shelf standardised package or to pay more to have a fully-customised system, or perhaps some hybrid of the two. The majority of respondents indicated the use of a mixed manual and computerised system, though about a third indicated that they used a purely manual system. Most large MFIs use computers for loan tracking, but a fully-integrated system – one in which one entry into a computer database is fed automatically through all levels of the system – was not seen as necessary to manage a large portfolio.

Interestingly, a majority of respondents indicated that they were using IT systems that were either fully customised (24% of respondents) or partially customised (30%). This tends to imply the existence of an in-house IT department, and indeed 58% of the institutions queried had permanent IT staff, 93% of which were given the task of developing future systems as well as maintaining the current ones. Of the off-the-shelf products available, FAO’s MicroBanker is the most widely-used system in the world, but only four respondents said they used it. MicroBanker and two other systems permit some adaptation of the system’s functioning by system administrators rather than programmers, but there is a real danger that a computerised system and its limited flexibility could determine financial product design itself, a clear example of the “tail wagging the dog”. Moreover, as of 1999, none of the three systems which permit product flexibility showed much skill at generating new management information about non-standard products or adapting the report style to reflect new financial products. Discouragingly, even systems in development at time of writing did not, in general, allow the easy incorporation of new products.

Information management appears to be a difficult area for many MFIs. Two areas of weakness need improving: first, there is a lack of understanding of information problems and possible solutions, and second, there is an absence of software packages appropriate to the sector. IT management remains a highly specialised sector and this may continue to be a barrier to solving the above problems. This article is an interesting starting-point for MFIs considering how to approach the problem of data management, but it seems likely that the market in information systems for rural finance has developed significantly over the last six years, and a new survey is needed to reflect the current situation.

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