Greg Chen represents CGAP in the South Asia region. Recently he visited a new and innovative microfinance institution (MFI) that has begun operations over the last year or so.
When it comes to microfinance, information systems
are critical to stronger internal controls (over cash flow, financial reporting, portfolio quality, etc.). You can see this in action at Equitas
, a new MFI which has more than 200,000 borrowers and follows the Grameen style
of group-based lending model.
Efficiency is driven by innovations which combine the use of several simple technologies at various stages of the credit process. Here are two examples:
E-Docs. Membership and loan applications are completed manually by branches but are couriered to a central processing center. The documents are then scanned and from there on out, remain paperless. Forms use a series of check boxes which can be read by scanners and coded automatically. Remaining manual entries (e.g. names) are entered by a dedicated back office processing unit.
Real Time Meeting Monitoring. Within 15 minutes of the end of a group meeting, loan officers send a text message (SMS) by cell phone with three pieces of information: meeting attendance, loan collections, and when the meeting ended. This information is picked up by Equitas’s system which then compares it with what is expected, and creates a branch-by-branch report.
In this way, in real time, Equitas can see attendance rates, collections problems, and if meetings are running late.
There is also truly tight cash management. Relying on the real time recovery data provided by SMS, a courier picks up – and deposits – closing cash balances at the end of each day into the company’s bank account. The courier also delivers fresh cash at the beginning of each business day. No cash is left in branches overnight and it is all fully banked and tallied at the end of each day.
Combined, these systems enable a more efficient operation. Overall, it means stronger internal controls. There is much less room for fraud or abuse of cash or group meetings at the field. Equitas is one example of how good MIS is essential to well-managed microfinance.