The Impact of MIS on Microfinance Institutions
Management information systems (MIS) have played a key role in the traditional banking sector for years, but microfinance institutions have been much slower to utilize this technology, primarily due to budgeting shortfalls. A 2009 CGAP survey found that many microfinance institutions lack well-functioning information systems that would enable them to grow into vigorous institutions. Technology was consistently cited as one of the greatest challenges facing MFIs. Over the last several years, however, more and more MFIs have begun implementing information systems, which has the potential to provide several benefits to the industry as a whole and to MFIs in particular; ranging from loan tracking to greater transparency and risk management.
Management information systems are essentially applications which enable an institution to better organize its data for the purposes of decision-making, efficiency, and external reporting. Rather than hidden within a pile of manila folders, the data is crisp, up to date, and presented in a compelling and practical form. Benefits include easier cash-flow management and forecasting, timely information regarding portfolio risk, real time performance updates, more efficient accounting procedures, and simplified external reporting. In sum, a good MIS can increase an organization’s efficiency and decrease its operating costs.
The biggest hurdle to the utilization of such technologies among MFIs has been the prohibitively high cost of purchase and implementation. The CGAP survey found that a majority of MFIs use either custom-built or off-the-shelf systems to track their portfolios. But a new innovation, SaaS (Software as a Service), has been changing that. Typically the SaaS software vendor hosts the application on its web servers, which the customer can download on his mobile device or computer terminal on an on-demand basis. This system provides MFIs 24/7 access from anywhere in the world, real time information, data security and automatic backup. With an SaaS system an organization pays monthly “rent”, or in some cases a variable fee based on usage levels, for access to the software provider’s application. Instead of “buying” the software and using it in isolation, the purchaser gains access to the provider’s online cloud, and utilizes the internet to deposit, organize, and access their information. With this changed cost structure, more and more MFIs have been able to integrate MIS into their organizational structure. SaaS technology is designed to serve international microfinance networks, such as Opportunity International, as well as national MFI branches, such as Cresa Financial Services in India. Accordingly, SaaS services are emerging as the MIS model of choice for microfinance institutions.
A range of software firms has entered this market — some offer banking and financial services solutions, others are specifically microfinance focused. To assist MFIs in selecting appropriate MIS systems, a ‘decision guide‘ has been produced to identify processes and vendor selection guidelines. Today, some of the better known software vendors serving MFIs, include: Craft Silicon (with MFI clients in Africa and India), Kredits, Mambu, and Octopus (an open-source technology).