Do not be surprised but here?s a little known truth about microfinance institutions (MFIs) in India. Irrespective of the fact they are deeply involved in the nuances of number crunching, about 45% of the existing MFIs still track and record their accounting and operations in Excel sheets. Some even undertake such arduous tasks manually. Needless to say, all this results in considerable wastage of time and resources, leaves ample room for errors, thereby preventing them from growing rapidly.
In recent times, MFIs are undergoing an image makeover. With integrated management seen as the ultimate goal, MFIs are in the process of building an integrated communications network to improve their agility, profitability and productivity. Various operational centres of MFIs are being networked as connectivity is seen crucial for their overall efficiency.
In such a scenario, automation is expected to play a significant role in their application infrastructure strategy. This would allow them to develop scalable software applications for their internal systems and also complement their Web hosting services. Not surprising, IT majors are vying this as an opportunity for growth.
For instance, IBM has developed a ?microfinance processing hub.? Essentially, this is a shared infrastructure and software platform that provides groups of MFIs with a centralised core banking system, data centre, operations management and transaction processing. In the process, MFIs will be able to build in-house software for their integration activity. However, smaller MFIs are yet to develop and depend on IT service companies.
Srikant Appana, assistant vice-president (IT), SKS Microfinance says, ?The primary goal of our networked project is intended for resource consolidation and put in place a centralised information system, so that SKS employees can retrieve the financial data from their respective locations.? SKS Microfinance has tied up with Tulip IT and Reliance to support connectivity across all its offices in India. The company has 667 branch and area offices in the country with a sound IT/telecom and networking backbone in place. Presently, SKS is adding 50 new branches every month.
?We plan to develop an end-to-end solution and connect all the 100-odd area offices and 1,000-odd branch offices, to boost collaboration by integrating voice and data over a single network,?? Appana opines. The entire exercise endeavors to provide efficient WAN infrastructure, while providing complete end-to-end communication services with security to SKS Microfinance. ?Different technologies have been explored to support the connectivity; the model is a hybrid solution with a mix bag of RF and VSAT solutions. In places where electricity supply is erratic, we have battery back up so that our offices are linked at all times,? he adds.
Among others, Chennai-based microfinance lending institute Equitas has deployed an integrated software solution in its network that takes care of various functions?from lending to balance sheet. According to H Mahalingam, chief technology officer, Equitas, the company?s branches are networked using broadband and the application software is already internet-enabled. The software takes care of lending, loan management, accounting and MIS.
For the centralised procurement of data across India, SKS Microfinance has partnered with HCL for desktops and with Wipro Infotech for laptops to supply across all its offices in the country. SKS Microfinance is investing in creating a data centre to support mission-critical systems and also protect them from virus threats and attacks.
The data centre will be hosted in Bangalore. According to SKS Microfinance officials, the existing MIS will not be an ideal application to match the new growth plans of the company, since it is based on standalone architecture.
?A robust Web-enabled software solution parent platform needs to be created on which sub-models can be plugged in and out on a need basis, providing huge scalability and upgrading options. The existing data will be migrated to the new platform after validation and integrity testing,? says Appana. SKS has chosen Compulink as its software partner to develop software applications. A three-tier Web application is already in development phase. It will support not just SKS? core banking solution but also support different products that the company plans to introduce in future.
In the case of Equitas, software has been sourced from a third party vendor called Craft Silicon, a Kenyan-based company. With the implementation in place, company officials inform that the cost for an IT backbone would be in line with a regular ERP solution development and implementation of this scale. The true value would be in terms of improved efficiencies down the line, increased transparency, quicker response time, etc. Since there is no manual process, MFIs could look forward to operational advantages like speed, high level of accuracy and low HR costs.
Citing some of the key benefits, Equitas? Mahalingam points out the loan register can now show updated trial balance. Equitas has also deployed an online collection meeting monitoring system, which is SMS-based and is claimed to be the first of its kind in the MFI segment in the country. Similarly, biometric solutions are being adopted by the microfinance institutions.