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 Perspective
MIS-conceptions in microfinance
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SRN Raju
JavaSoft Technlogies
Government of India |
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This is quite unlike a bank, where the operations do not follow a “…learning curve”. This is one of the reasons why banking software hardly fit the micro finance industry. But that’s another story
Why are MIS’ so difficult to implement?
Firstly, the perception and need of an MIS platform varies from one microfinance Institution (MFI) to another. The platform, therefore, needs to be flexible and adaptable to each MFI.
Secondly, the information needs of an MFI change with business needs and new
opportunities, as they arise. Also, they must adapt to a rapidly changing environment and growth in order to reach sustainability. This change in needs is furthered as these MFI users gain knowledge, exposure and experience about their businesses. This is quite unlike a bank, where the operations do not follow a “…learning curve”. This is one of the reasons why banking software hardly fit the microfinance industry. But that’s another story.
Third, developing such software is complex and expensive. But then, it is a universally agreed-upon fact that software implementation itself is complex, expensive, and risky affair in every industry. Would this make software practice in microfinance any more a liability than it could be in any financial industry? In the microfinance industry, it has been so apparent that far less money is invested into improving the operations than invested into studies pertaining to the sector.
Fourth, the microfinance industry is relatively new, and has not been around for more than 10 years. On one hand, considerable misconceptions exist concerning MIS, on the other is far too much of variance in financial practices amongst MFI’s. Further, lack of common, ratified and regulated procedure, as opposed to the banking sector brings forth varying perceptions of need concerning an MIS.
MFI users often do not seem to realize that the upfront purchase cost of a soft ware package does not encompass the total cost of ownership of the product. According to a study done by Java Softech, in most cases, the price of software proved to be less than 10% of the total cost of ownership. The cost of training, maintenance, support, administration and other personnel costs necessary to run a software package efficiently can add up to as much as 50% to 70% of a software system’s total cost of ownership over its useful life. Instead of just looking at the price of
software, users may go through, institution-specific examinations of how
the software will be used, by whom and for what purpose. Those sorts of
questions ought to bring a software user much closer to his true costs —
and deliver a healthy dose of realism. The value of software for an MFI may
depend a lot on investment made in training, support, maintenance, etc. And
again, in the microfinance industry, negligible amount of money is invested in improving the operation.
The Consultative Group to Assist the Poor, or CGAP has launched a new initiative, the Information Systems Fund that is designed to help microfinance institutions (MFIs) select, adopt and leverage robust software solutions to improve their operations. In particular, the Fund seeks to stimulate and develop a market for specialist IS consulting services for microfinance, recognizing that many MFIs require help at all stages of the IS implementation cycle: preparation, needs assessment, selection, implementation and optimization. This is, indeed, good news for the MFIs.
The fund is being launched in a pilot phase, with a goal to scale up in
January 2004. CGAP intends to work with six MFIs in the pilot phase.
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