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Selecting and Installing a Portfolio Management System
Article - English

Selecting and Installing a Portfolio Management System

Topic :

As microfinance institutions (MFIs) scale up their operations, the need for timely and accurate information about their portfolios increases. The reliability of their management information systems (MIS) is often the difference between the institution’s success or failure. This useful article describes the process involved in selecting the proper MIS. As such, it will be of interest principally to managers of MFIs.

The author divides the process of choosing an MIS into three sections: assessing institutional needs, evaluating and selecting an MIS, and the process and cost of installing an MIS. The first section, the author stresses, is of maximum importance: as different institutions have different needs, a loan-tracking package that functions well for one MFI will not necessarily answer the needs of another MFI. Differences in lending methodologies make transferring a software package impossible. Moreover, different MFIs have different levels of sophistication, roughly divisible according to the number of clients served: small-scale MFIs with fewer than 2000 clients have different needs to those of medium-sized institutions with from 2000 to 10,000 clients, which are less complex again than large-scale microfinance institutions with more than 10,000 clients. A simple MIS will suffice for the least sophisticated MFI, while expanding medium-sized “transitional” (from smaller to larger) MFIs often need a complex MIS but do not have the resources to develop one. Large MFIs usually have well-established operating procedures and skilled staff, and can often justify the high cost (sometimes more than $100,000) of developing their own MIS. The article outlines, step by step, the method of identifying the information needs of different types of MFI, by suggesting useful questions whose answers will help managers select an information system. Moreover, the longevity of an MIS should be about five years, at minimum, with the capacity to grow with the institution. So flexibility is an important deciding factor in choosing an MIS.

Input from key staff is considered essential. Indeed, a task force of personnel including one knowledgeable person from each department and from each level of the institution should be formed, to assess staff capabilities, technologies, and cost considerations. Staff computer literacy is a critical ingredient. Not only that, but it is necessary to consider hidden costs like technical assistance after the software is installed. The task force ought to consider these issues carefully before moving on to selecting an MIS. There are three options for management information systems: first, to buy one off the shelf; second, to modify an existing system used elsewhere; and third, to develop a custom system in-house. The article considers each option carefully. Using off-the-shelf products can end up affecting the way the MFI itself does business, simply because the product has limited flexibility. The second option, modification of an existing system, is often the most attractive, given the very high cost of designing a system in-house.

The article provides a very useful framework for asking logical but often not obvious questions about an MFI’s requirements for a management information system. Following its suggestions would form a useful, even essential first step in tackling the complex problem of managing an MFI’s information.

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