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 22 – 23 December, 2003, New Delhi
MicrofinanceIT
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Olivier Allais
Asia Director of PlaNet Finance,
sums up the discussion |
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For an industry as nascent as microfinance, the opportunity to explore new technology to both improve and augment its operations prove both irresistible as well as challenging. And, like any new direction, there are considerable doubts and concerns about adapting ICT in this field too. PlaNet Finance, along with i4d organised the first of a three part series of seminars pertaining to microfinance and ICT in Delhi on December 23 – 24, 2003 at the India Habitat Centre. Out of the subsequent seminars, one has been held at Beijing on January 12, 2004, and the last is due for Brussels on February 9, 2004.
The seminar saw over twenty leading microfinance institutions who had come all the way to share as well as obtain an understanding of what ICT could do for them. Likewise, several players from the ICT sector, notably, technology developers and providers obtained a clearer and objective view of what opportunities the microfinance sector provides for them.
In the inaugural address, Shri L Laxminarayanan, additional secretary, Department of Information Technology, Government of India highlighted how the Indian software industry have registered an export growth from 20 million USD to 12 billion USD in about 10 years – effectively, a growth of 31% since 2000. Already the industry comprises 30% of total exports from India. By 2008 it is expected to reach about 60 billion USD (McKinsey Global, survey commissioned by NASSCOM and Ministry of Information Technology).
In further addresses, representatives from the organisers hoped that the seminar would highlight real issues in term of poverty alleviation and ICT, as well as identify the real players. While government and other donors provide funds, NGOs play an equally important role in working at grass root level and towards empowering the poor. The number of NGOs has increased tremendously over the past decades. Many of these have not been successful in their objectives and some have even deceived their supporters. It is therefore essential that the partners with the right motives be found.
The first of the sessions highlighted the basic issues of poverty, and how microfinance had emerged as a powerful and effective tool towards alleviating the same. Speakers Narendra Deo from PlaNet Finance and Jyoti Patil from Chaitanya, a microfinance institution in Pune, highlighted how it was important to involve the poor themselves in formulating a microfinance programme and how it could help them generate an income multiplier.
Subsequently, R Santhanam from Indian Society of Agri Business Professionals and Anil Singh from NEEDS, Uttar Pradesh illustrated how the need for microfinance could be responsibly fuelled though the promotion of micro enterprise, and how new concepts such as eco trade and fair trade campaign could still be proactively used.
Nirmala Buch, who runs a micro credit organisation in Delhi illustrated the largely popular fact that women have traditionally made better microfinance organisers and players as compared to men. They have a demonstrated propensity of periodic borrowings and repaying the same, despite inherent and ingrained drawbacks such as lesser education and awareness. Her remarks were echoed by S Alagesan, representing a microfinance organisation in Tamil Nadu, through a case study of their experiences on field.
The question of multi-level borrowing and lending came to light with a lively discussion by members of Micro Credit Rating International, an agency that measures the credit-worthiness of a microfinance institution. Although many of the methods employed by them seemed suited for larger micro financial institutions, their contribution to keeping intact an environment of financial trust and credibility amongst the players was undeniable. The discussion continued the pace as many delegates had questions towards the fact as to why interest rates in the microfinance rates were so high as compared to banks and urban areas, all the more so in an era of perpetually dipping rates. Shekhar Ghosh from Bandhan, a microfinance institution in West Bengal explained how operating costs were responsible for this anomaly, further highlighting the need for ICT as means of reducing the same.
The issue of high loan administration costs was taken up further as BASIX, a pioneering system that integrates management, technology, customer service into a highly scalable loan administration system. A combined effort of a local area bank, a financial and insurance service provider, and a technical assistance and research provider, BASIX has developed a whole range of hardware and software that allows a series of field agents to administer and manage loans on the field through a highly controlled mechanism (more details elsewhere in the magazine).
Alex Lawrence from ASA, a microfinance institution in Tamil Nadu raised the question of what would the ‘appropriate ICT’ for a microfinance institution be. He argued that there would probably be a minimum size of holdings, a minimum scale of operations before such an organisation could select a custom-made ICT solution and use it to its fullest potential.
Janaki Turaga, social development consultant brought the session up to speed as to how the microfinance sector has progressed overall, and how government policy could take active steps to ensure that either sector could benefit from each other.
Savithri Subramanian from UNESCO illustrated with the help of examples from the work done by the organisation how ICT could be used even by the underprivileged and underserved to their advantage. This was followed up by an example by Chetan Sharma of Datamation, a non-profit organisation that has used ICT as a tool to empower widows who have been abandoned in the treets of pilgrimage cities.
Given either side of the story – i.e. high cost of operations and the fact that ways and means exist to counter the same, the onus of making either ends meet was left to the proceedings of the second day.
The second day of the event started with a presentation by GV Ramana Murthy from JavaSoft, a company that develops software solutions for microfinance. While the solution developed by his company, called CASHE (Credit And Saving for Household Enterprises) is a wholistic approach inclusive of software, training and capacity building, Shri Murthy illustrated the fact that customised solutions were by far the only ‘fully-viable’ method for a microfinance institution to adopt ICT.
K Subramanian, deputy director general of the National Informatics Centre presided over the next session that was dedicated entirely to transaction security. The use of smart cards as a portable and effective tool to carry financial data was mooted, as was the need to evolve common and ratified
Rishi Chawla of the Global Internet Policy Initiative chaired the subsequent session. During this hour, members from CSDMS made presentations about how a project involved mapping of resources within a community, using technology such as GIS and GPS. They were echoed by Deepak Singh of IR&AM Conversation, an independent non-profit body working towards empowerment of the rural poor. Basheerhamad Shadrach of OneWorld South Asia, the leading ICT portal highlighted the power of the Internet and how the community at large could benefit from it.
After lunch, the stage was set for some very unusual projects and experiences – some of which were taken from analogous subjects such as education, connectivity and the formal banking sector.
Shiffon Chatterjee of NIIT, India’s leading institution in IT education and development of educational software, illustrated how a simple approach of tapping into the children’s natural curiosity into ‘explorative’ learning. A carefully ‘unsupervised’ computer deployed at certain strategic points proved to be extremely beneficial to children who had never operated a computer before. At the end of the exercise, it so emerged that the children know more about operating the machine by playing around with it, than what they would have by ‘organised’ training.
Bindu Ananth of ICICI bank discussed about how new forms of technology had already been taken up by several banks all over the world, and how ICICI was itself adopting technology for what it calls ‘low cost ATM’s’ (See elsewhere in this issue).
The last speaker of the evening was Professor Ashok Jhunjhunwala, who flew down all the way from Chennai to demonstrate how a simple connectivity solution could be leveraged to open up a whole new world of services. The new protocol, called corDECT is already in use by public sector telecom agencies in terms of offering internet connectivity to retail users.
The event concluded with the organisers’ vote of thanks and a summary of the day’s events. It was unanimously decided to continue what was recognised as a fledgling process through a discussion on the net. The event also marked the launch of the Microfinance South Asia portal (www.microfinancesouthasia.org) – an online forum for the discussions and deliberations from this seminar, and its successors in Beijing and Brussels.
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