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 Insight
Mobile computing for micro finance
An innovative approach using mobile computing and a multitude of stakeholders is making waves in the microfinance sector in Andhra Pradesh
Background
More than 70% of India’s one billion population lives in villages of which about 40 million people live below the poverty line. They earn less than $1* a day and still strive to meet their both ends meet. The major hindrance in the development of the poor is not lack of opportunities, but the availability of the credit and the related support services to promote sustainable livelihood activities. Till a decade ago, rural poor were not considered in the financial domain of the mainstream financial institutions. The poor were not considered to be bankable and credit worthy. The local moneylenders had a field day by charging exorbitant interest rates and taking un-due advantage of the underprivileged and un-educated rural poor. During later years, the concept of microfinance gained popularity and the organizations like BASIX have provided innumerable services to the poor in promoting large number of sustainable livelihoods.
BASIX is one of the largest and the fastest growing microfinance institutions in India. BASIX group works with more than 100,000 rural poor households providing range of financial services including credit, savings, insurance and technical assistance and support services (TASS) in an integrated manner. BASIX operates in 10 states of India covering in excess of 10,000 villages for providing financial services in remotest of the places where the formal financial services are otherwise unavailable.
The thought process for this project has began in early 2000, when BASIX was growing rapidly and contemplating expansion into different geographic locations. When the ball was set rolling for expansion, BASIX had faced unique challenges like i) Increasing the outreach without compromising on the portfolio quality ii) Maintaining same level of effective customer service as before iii) Having a foolproof system to handle increasing number of financial transactions at the field, iv) Introducing different loan, insurance and saving products to address the needs of different groups of people and v) Catering to the growing demand of technical assistance and support services information requirement at the field. Addressing these challenges was of paramount importance to achieve the mission of BASIX, which is to promote large number of sustainable rural livelihoods on a commercially sustainable basis. To achieve this gigantic task, proper supporting systems need to be put in place. Needless to say, Information and Communication Technologies played a vital role in building the required systems.
Even though BASIX has good back-end (MIS) and decision supporting systems (DSS), we could not extend our information systems support to the field operations. More than 80% of transactions happened at the field and there was no automation of processes at the field. Hence, the mobile computing solution was planned to provide better service, reduce financial cost to the customer by reducing transaction cost and increase the credibility of whole Microfinance system in the eyes of rural people.
In our context, customer service agents are involved in direct interaction with the customers for disbursement and collection of the repayment instalment amounts. The regular tracking of the disbursements and repayments is essential for having a healthy portfolio for any microfinance institution.
The customer service agents would gather at the unit offices (offices at district levels), once a week, to share the information on the customers and to take the reports, which would be useful for the next week. Lot of data entry has to be done at the unit offices for knowing the latest status of the customer services agent portfolio and thousands of customers, leading to data entry issues and untimely reports. Another problem that is common in microfinance institutions is that the operations involve huge number of financial transactions in dispersed locations and there is scope for error and fraud.
In the backdrop of above constraints and issues, a highly automated solution using various information and communication technologies was required. It helps the organisation by having single data entry point of an “electronic transaction” that seamlessly links information flow from the villages to the unit offices and to the head office.
The specific objectives of the project are:
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Taking the professional micro financial services to the doorstep of rural-poor in a cost effective manner.
- To build self-sustainable microfinance institution by ensuring availability of good portfolio management tools to all the field staff.
- To prepare for the rapid expansion of future planned operations.
- To reduce the transaction cost by minimizing duplication of work, reducing field staff necessity for travel and building foolproof systems.
- To build a transparent system by providing customers’ accounts related information on demand at the field.
- To acknowledge the financial transactions by giving computerized receipts to minimize the frauds and to increase faith in BASIX.
- To provide technical assistance and support services (TASS) by providing quick access to the information through Internet.
Project description
The current project involves the use of mobile computing technologies in microfinance institution operations. It facilitates transaction processing, information collection and dissemination, directly at field level. Before implementing this project, the customer services agent used to carry various manual records like collection statements, over due statements, different ledgers, receipt books etc.
The customer service agent takes with him an easy-to-carry kit, which contains the Palmtop computer with the required application software, mobile printer and a modem. The user performs all the required transactions using the kit and synchronizes the data with the unit office back-end system at the end of the day from any public call office using the modem.
Initially, our back-end application software generates a text file that contains relevant details about customers as required by the customer services agent to perform various activities during the specified period. This text file will be transferred into the handheld device by using connectivity software. After the transactions are completed, the data is synchronised with the backend system at the unit office through a telephone. This would ensure reduction in travel, duplication of data entry, reconciliation efforts and improve the efficiency of the field-staff.
It is interesting to note that all the details of the customers are available on the fingertips of the customer service agents and they are in a position to provide much better service. In addition, the portfolio manager (an application software developed specifically for this purpose) provides extensive and exhaustive security features that help in effective monitoring of customer services agents as well as in preventing errors in data entry.
In effect, the mobile computing solution allows the organisation to provide all financial services at the rural poor doorstep in a highly integrated and cost effective manner.
The actors involved in the project are the various user groups of the system such as the customers - rural poor people; customer services agents, the field executives and the unit head. The field executive and the unit head use the system for the MIS and data analysis purposes. They analyse the portfolio quality, product diversification, density of operations and customer services agents behaviour, etc.
Some unique features are:
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Instant loan account status – to provide the customer accounts information on demand.
- Transaction acknowledgement at the field to minimize fraud and errors.
- Unique receipt number generation and tamper proof print management - to maintain the uniqueness of the transactions happening at the field and build customer confidence.
- System captures the user name, date and time of the transaction to resolve grievances which may come latter point of time
- Can handle different type of transactions such as loan repayment, loan processing fee, cash security, penal fee, insurance premium etc. Customers can perform different transactions with the customer services agent.
- Online help on application software and its usage. In case of requirement, on-line Internet access to browse and download required information.
- Fool-proof system
- Secure financial transaction handling
- Log reports for having effective audit trails
- Hierarchical security system
- MIS and portfolio analysis reports
- Graphical representation of portfolio health
- Supports remote connectivity to transfer/receive the data from the field
The technology used in the mobile computing solution has three areas;
- Software: This software is developed using Symbian - Epoc as an operating system.
- Hardware: The hardware used is Series 5MX and Revo models from Psion and OSARIS from Oregon Scientific. These are high-end models that are rugged with ease of use. It has various features like communication through RS 232 port, infrared, email, database management system, voice recording etc. Mobile printer used for this project is CITIZEN iDP-c3111
- Communication: Communication technology is used to synchronize the field staff’s palmtop with the unit office back end system. The data transfer is done using telephone line, FTP facilities of the handheld device and the RAS feature of Windows 2000 server.
The solution is developed keeping in view the profile of the field staff that will be using the handheld devices. At the end of one week of training on hardware and software, the users can become adept in using the system. The device and application maintenance training is also included in the one-week training that is given.
This initiative helps the poor to avail of formal financial and Technical Assistance and Support Services at their doorstep, provided by microfinance institutions that use this mobile computing solution. While IT has been an integral part of microfinance efforts for many years, it has generally been restricted to office-based MIS and has necessitated long-winded and error-prone data entry procedures. Field-based mobile computing solutions can be the key innovation that allows microfinance institutions to get over the last hump in their efforts to reach financial sustainability. This is significant for the clients of microfinance. In as much as many microfinance institutions count their client base in the hundreds or thousands, or even in millions, systems such as this mobile computing solution could reduce the transaction costs of providing financial services to the poor.
Results
This project was initiated in September 2001 and it is still operational, under adverse conditions of large volume of transactions, dusty environs, rugged use, etc. Around 18 field staff use these palmtop computers in BASIX Khammam unit office of Andhra Pradesh state in India. In the last one and half years, more than 50,000 transactions worth US$ 450,000 have been processed through these devices and integrity of the whole system is found to be very satisfactory. The number of members who have benefited from the system has crossed 4000. The positive feedback from the users and the benefits generated out of the system have inspired us to implement this project across the organisation in the next couple of months. Once the project is fully implemented, around 300 field staff, spread across 5,000 villages, is going to use these palmtop computers. It is aimed to process 0.75 million transactions and US$ 15 million worth of financial services per year through these palmtop computers. The sheer size of the usage, volume of transactions processed and the people covered makes it one of the largest mobile computing solutions for the microfinance industry in the world.
The results of the project are very encouraging. We observed that the solution not only benefits the organization, but also the people living in the remotest of the places by ensuring timely availability of financial and information services on a continuous basis. The results of this project can be broadly considered as:
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It has helped the organisation to come out with a proven solution for microfinance industry field operations. BASIX has taken up the challenge of addressing the problems faced by microfinance institutions in their field operations and has tested various solutions before implementing this project. The whole project life cycle is time-consuming affair. It has been proven that the mobile computing solution can work in the field and the industry can benefit from this. In addition to the financial services, technical assistance and support services are critical ingredients in promoting the livelihoods of the poor. Cost effective and timely services are required to have real benefit on the lives of the poor. Using the mobile computing solution, these services can be provided effectively and on time. This adds a value to our service and helps the poor to get access to the information, which was not available till now.
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Time delay in actual transaction happening at the field and reporting to the unit office is minimized. Now, we have almost real time operations information.
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Transaction cost involved in delivering financial services has come down. For a microfinance institution, transaction cost is one of the crucial factor/bottleneck to increase the profits and to have a long-term sustainability. This specific project will help us in reducing the transaction cost, by cutting down the cost on manpower, stationary used in generating MIS reports and manual receipts, minimising revenue loss by avoiding the frauds and the additional 10% business generated by the same field staff. This will further reduce the overall financial cost to the customer. This project will be sustainable on its own. We have estimated that return on investment (ROI) can be achieved in 2-3 years.
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The results achieved as on today in context with BASIX is as follows:
- Portfolio management has become easy. Indirectly it is helping us to maintain healthy portfolio
- Control on remote transactions has been achieved
- Duplication of work and data entry at the unit office is removed, which results in increased job satisfaction of the support staff
- Timely information is available to all the field staff and our customers
- As we are giving computerized receipts at the field, customer confidence on our system is on the increase.
- Manpower cost has reduced, as most activities are highly automated
- Foolproof systems developed for automating the field transactions will make the rapid expansion of the operations easy. This in turn will help the organisation to promote large number of sustainable livelihoods.
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Finally, the objectives set for the project are met.
Lessons learned and advice
During the development and testing of the project, very important lessons were learnt which has helped us to come out with a solution that meets requirements of the end users; meets the objectives and can benefit the industry.
Obstacles
Following are the few unexpected problems, we have faced, and the solutions found during execution of the project
Problem faced: Loss of data and application software from the devices
Solution arrived: The situation; Psion series 5 MX palmtop computer works on power supply. When the power is not available, it will work on two double “A” alkaline batteries that are also called the main batteries. Depending on the usage, they typically last for about a month. If the main batteries are exhausted, the device automatically starts functioning on backup batteries, which typically last for 24 hours. Till the main batteries are replaced, the backup batteries are used to safeguard the application and the data available on the device.
To handle these types of situations, we have added memory flash cards to the device. Flash cards are a permanent and reliable data storage media for the palmtop computers. In the worst-case scenario, data and application software can be restored from the flash card. This can be easily done by the customer services agent at the field. Hence, the loss of data and application software does not arise.
Problem faced: Data security is not high
Solution arrived: The situation; the data interface for palmtop computer and the backend system is the text file. There are chances to open these text files and to manipulate the data. To avoid this situation, we are maintaining an audit log of all the transactions in the mirror database, within the device. Only a unit head or an independent local auditor would have the access to this database. They can generate the exceptional reports developed for this purpose and can tally with the manual books of accounts. As the audit trails developed cannot be tampered with.
Problem faced: Frequent power cut in villages is interrupting the data transfer.
Solution arrived: Electric power can be highly un-reliable in villages. This is causing a major hindrance in data transfer. Imagine a situation where the data has to be transferred urgently and power is not there to run the modem. How nice it will be if the modem also works with some alternate power as the device and the printer? We have done a research and have identified few models of modems that work with the power of the telephone line. This is yet to be implemented in the field. In future, absence of electricity cannot be a hindrance in conducting our operations smoothly in the villages.
Development aspects of the project (or potential)
Poverty can be fought by various ways and means that are country specific. But one method that has been internationally acclaimed and has proved its worth in alleviating poverty world over is microfinance. Microfinance is a weapon that is being used by Governments, NGO’s, Banks and other organizations to reach the poorest of the poor in the smartest way possible. Any solution that will help these institutions in achieving their noble cause is welcome. This solution addresses the problems at the field, the grass root level where the service is provided. With many problems plaguing the field staff being resolved, they can concentrate on their job in hand, to provide effective service to the needy. This solution will help the microfinance institutions to expand their operations very fast and can design the products suitable for the financial needs of poorest of the poor. It will ultimately help in promoting sustainable livelihoods in a larger way.
Access to financial and technical assistance and support services for poor people has become easier. Presently credit and insurance services are being provided through this solution. Imagine a situation in future wherein the needy will be able to do savings, avail credit, insurance and support services at the click of the button. If required, they browse the Internet, download necessary information, educate his fellow villagers and contribute to the betterment of society etc., all with one small device that is carried by the customer services agent.
The solution builds in transparency into the whole system. The customer can know the status of his loan at any given point of time so that he can plan his finances better. Even illiterates can gain the confidence on the transactions that they are doing with the organisation. The amount collected as instalment can be played as an audio in the local language so that the illiterate poor people are confident of the money they have paid, which is going to be acknowledged by the system.
Even though, India is well known for IT developments and for knowledge base, still 70% of the population are not deriving the benefit and power of IT. PC penetration in India is one of the lowest in the world. Internet usage is not very high, even in cities. Many people in rural areas may not even seen a PC, leave alone working on one. Once this project is implemented fully, more than 50,00,000 people spread across 5,000 villages in 5 states of India gets exposed to the cutting edge technology like mobile computing solution. Our belief that IT should not be restricted to the air conditioned rooms of corporates but should be useful at the grassroots, where it is truly required, is reinforced with the solution. And in times to come, information access to the poor, needy and those who are deprived of information will have to the power of ICT in their hands.
The benefits of working on palmtop computers can be extended to other related areas like health, education, insurance, FMCG’s etc., that have impact on the society. The technology can be moulded to suit the requirements of the society. If the technology can’t be used for the society, then the technology has no place in the society. This solution has become role model for other organizations working in different industries in rural community. But whatever may be the means; the destination is the same for all these organizations, contribution to the society in bringing up the rural poor.
This project can be replicated across the industry in any of the continents, as the common goal of the MFIs is the same, i.e. to reduce transaction/financial costs and to create sustainable livelihoods. This solution is designed and developed keeping in view the larger interests of the society. Currently, this solution has found an echo in Kenya. Soon our experiences shall be shared with a leading microfinance institution where another 40,000 rural customers are going to be benefited out of this system. Also other leading MFIs and the NGOs who are having international base are showing keen interest in the use of this technology in their operations.
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