ICTs IN MICROFINANCE – A SURVEY OF THE TANZANIAN LANDSCAPE
This survey attempts to establish the extent of
usage, role, impact, needs and challenges that accompany the use of ICTs in the
microfinance industry, using a microfinance technology and stakeholder
ecosystem framework. This work is at the intersection of inquiry on ICT for
development and the digital divide, the impact of microfinance, and the use of
ICT in the financial services industry.
If you're a stakeholder, please contribute to this survey measuring
institutional expectations, perceptions, and experiences with client-focused
technologies, as reported by the MFIs. Your insight is invaluable to this
research and will be treated confidentially.
Background
The Millennium Development Goals of the United
Nations address a series of global social development issues, including halving
extreme poverty by 2015 (United Nations MDG, 2008). Since the publication of
the millennium goals in 2000, much attention in the field of ICT has been
focused on bringing ICT to poverty-stricken areas. Such projects have often not
been evaluated scientifically, so there was until recently little evidence of
the efficacy of ICT for development (ICT4D) in these environments (Batchelor et
al, 2003). However, most evidence supports deployment of ICTs in such areas and
by some reports, ICTs can assist with several of the MDGs simultaneously
(Harris and Rajora, 2006).
Provision of microfinance services reduces poverty
as they enable the poor to increase their household income, expand their asset
base, and also improve their livelihood (Parikh, 2006; Hishigsuren, 2006). This
has been further supported by the father of microfinance Mohammad Yunus, the
founder of Grameen Bank in Bangladesh who surmises that 5% of the clients of
the Grameen Bank exit poverty every year (The Economist, 2009). It is noted
that MFIs serve as better avenues for providing microfinance services to the
disadvantaged members of society and small and medium enterprises (SMEs), than
the well-established financial institutions (Parikh, 2006). Yet, MFIs face a
lot of challenges, as most of their served customers depend on agriculture
which is subject to weather risks, seasonality and poor productivity, and
involve weak SMEs. The customers are mostly rural dwellers and live in
geographically dispersed areas with sparse population, and have limited
financial transactions. Other customers live in urban areas which have very
poor infrastructure. These challenges increase transactions costs for services
provided by the MFIs. To succeed, MFIs should be efficient through the use of
technological innovations.
According to Brynjolfsson and Hitt (2000), the use
of ICT can help to cut down the costs of coordination, communication, and
information processing, and to enable efficient service provision at lower
cost. ICT is a strategic tool that enables users to be efficient and effective.
ICT promotes the dual objective of microfinance, which is the sustainability
and outreach to the poor people. Although ICT can help MFIs to reduce
transactional costs, expand their market, and provide affordable and flexible
services to customers, many of them continue to rely on inefficient manual data
processing systems (Parikh, 2006) which create inefficiency. While some MFIs
belong to SMEs which are characterized by limited technology and management
capabilities (Caldeira and Ward, 2002), and a plethora of studies on SMEs and
ICT usage (Harindranath et al., 2008, Ssewanyana and Busler, 2007 and Frempong,
2007) have been carried out, none of these studies focus specifically on MFIs
and ICT usage in developing countries.
Difficulties
of providing financial services to the poor
Open Source Software has the potential to increase
the impact of microfinance (MF) especially for the very poor. Small and medium
organizations play a crucial role, because they are more flexible in operations
and familiar with the local context. New information and communication
technology (ICT) can increase the outreach of MF to the very poor within a
self-sustainable holistic approach. Although no suitable solutions have emerged
yet, free/open source software projects have a potential to address the
computing needs of small and remote MFIs. While the use of FOSS and ICTs in
general can help increase outreach, there’s a need to draw attention to the
challenges that come with it; one should not forget that access to basic
financial services is not all that is needed – especially by the very poor.
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