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Impact Assessment of Technology Adoption in Microfinance in India Page 1
Impact Assessment of Technology Adoption in
Microfinance in India
B L Mishra
Dr. Manesh Chowbwy
Centre for Microfinance Research
Bankers Institute of Rural Development
Chandragupt Institute of Management, Patna
Impact Assessment of Technology Adoption in Microfinance in India Page 2
CONTENTS
SR. NO. TOPIC PAGE NO
Contents i
List of tables ii-iii
List of graphs and exhibits
iii
List of abbreviations
iv
Executive summary
vi-xvi
1. Introduction
1-8
2. Methodology 9-13
3.1 Adoption of modern technology in microfinance institutions and
banking for financial inclusion in India and other countries
14-59
3.2 Computerisation in banks 60-71
3.3 Use of various technologies by selected banks and mFIs 72-75
4 Factors affecting Technology Adoption in Microfinance
76-89
5.1 Awareness and impact of modern technology in microfinance
90-100
5.2 Awareness and impact of modern on microfinance and bank
clients
101-148
6 Management information system in Microfinance
149-152
7 Strategy for penetration of technology based products and
services
153-160
8 Suggestions and Recommendations
161-165
9 Bibliography
166
Annexure
I Legal status of the institutions
167
Annexure
II Sources of Fund
169
Annexure
III No. of staff in banks and mFis
170
Impact Assessment of Technology Adoption in Microfinance in India Page 3
Annexure
IV Outreach of the institutions
171
Annexure
V Various technologies used by banks and mFIs
172
Annexure
vi
OFFICES OF COMMERCIAL BANKS IN INDIA from 2005
TO 2009
173
Annexure
VII
STATE AND POPULATION GROUP-WISE DISTRIUTION
OF OFFICES OPENED BY COMMERCIAL BANKS as on
March, 31, 2009
176
Annexure
VIII Status of National Electronic Fund Transfer (NEFT)
177
ANNEXU
RE IX Nation-wide network of banks as on 31 March 2009
178-182
Impact Assessment of Technology Adoption in Microfinance in India Page 4
LIST OF TABLES
Sl. No. Topic Pages 3.1 Adoption of modern technology in microfinance institutions
and banking
16
3.2.1 Status of Computerization in Public Sector Banks as on 31
March 2009 in percentage terms.
60
3.2.2 Computerization in Public Sector Banks (As on March 31,
2009)
64
3.2.4 Branches and ATMs of Scheduled Commercial Banks (As at
end-March, 2009)
66
3.2.5 Branches and ATMs of Scheduled Commercial Banks
(Continued) (As at end-March 2009)
68
3.2.6 Finance Indicators for India, 2001-08 71
3.3.1 Officials response on use of following technology 73
4.1.1 Factors that affect the adoption of technologies 76
4.1.2 Reasons for not using the following technologies 79
5.1.1 Awareness regarding following technology 82
5.1.2 Changes on cost structure they have experienced after
incorporating technology
83
5.1.3 Changes on outreach delivery after incorporating technology 84
5.1.4 Ranking for the Benefits of Technology 85
5.1.5 Cost of adoption of different technologies 86
5.1.6 Problems faced by mFIs and banks in adoption of technology 87
5.2.1.1 Age wise classification of clients 89
5.2.1.2 Education received by clients 92
5.2.1.3 Gender-wise classification of the clients 93
Impact Assessment of Technology Adoption in Microfinance in India Page 5
Sl. No. Topic Pages 5.2.1.3 Marital Status of the clients 93
5.2.1.4 Social group wise classification of clients 94
5.2.1.5 Family Size of the clients 95
5.2.1.6 Income wise classification of clients 96
5.2.1.7 Occupation wise distribution of clients 97
5.2.2.1 Clients response on Awareness regarding following technology 98
5.2.2.2 Clients response about the use of technology 99
5.2.2.3 Facilities for which the technology are being used 100
6.2 Microfinance and Banking technology providers in India 104
6.3 Software used in the various Banking and MFI institutions 1109
LIST OF GRAPHS & EXIHIBITS
Sl. No. Topic Pages
Figure 6.1 MIS technologies employed worldwide
96
ABBREVIATION
ATMs Automated teller machines
ACH Automated Clearing House
BC Business correspondent
CA Correspondent Agent
CD Cash Dispensers
CGAP Consultative group to assist the poor
CRDB Co-operative Rural Development Bank
CSC Common Service Centre
FOCCAS Foundation for Credit Community Assistance
Impact Assessment of Technology Adoption in Microfinance in India Page 6
FINCA Foundation for International Community Assistance
GCC Gulf Cooperation Council The
GK Grameen Koota
GSM Global System for Mobile Communications
GXI G-Xchange Inc
ICICI Industrial Credit and Investment Corporation of India
ICT information and communication technology
JCS Jitegemea Credit Scheme
LFIs Local Financial Institutions
mFIs Microfinance Institutions
MITRA Mobile Based Information and Transactions
MFT Micro development Finance Team
MGNREGA Mahatma Gandhi National Rural Employment Guarantee Act
NRI Non- Resident Indians (NRIs).
OIBM OPPORTUNITY INTERNATIONAL BANK OF MALAWI
OTC Over-the-counter
PDAs Personal Digital Assistants
POS Point of Sale
PRODEM Fondo Financiero Privado
RBAP Rural Bankers Association of the Philippines
RTS Remote transaction system
SBI State Bank of India
SECDEP Saint Elizabeth Community Development Enterprise Philippines
SHGs self-help groups
TAD Text-a-Deposit
UML Uganda Microfinance Limited (UML)
UMU Uganda Microfinance Union
USAID United States Agency for International Development
USSD Unstructured supplementary service data
VSAT Very Small Aperture Terminal
Impact Assessment of Technology Adoption in Microfinance in India Page 7
Executive Summary
Microfinance institutions in India face a number of constraints in trying to serve the poor. Many
of these constraints can be linked to insufficient availability and use of technology. There is no
reporting mechanism that correctly captures performance data. Information on the financial and
operational performance of microfinance institutions (MFIs) is paper-centric and not timely,
while data are not complete and cannot be independently verified. This situation is detrimental to
MFIs, microfinance clients, and microfinance industry regulatory bodies. Paper-based operations
consume a significant amount of loan officers‘ time. There is not, in most MFIs, a timely
connection between the head office, the branch offices, and the loan officers in the field due to
lack of, or incomplete use of, appropriate technology applications. Technology can help
microfinance institutions to reduce costs, improve efficiency, and increase outreaches. Modern
technology based solution proves proficient in enabling micro financing institutions to
conceptualize, develop and operate projects for financial inclusion.
Thus there are only few studies explaining impact of technology adoption in microfinance
institutions in India. The need remains, however, to examine the use of various technology
products and channels in the delivery of micro finance in India. In Bihar there is hardly any study
to understand local technological and socioeconomic environment to understand the adoption
processes of modern technology. The current study ―Impact Assessment of Technology
Adoption in Microfinance in India‖ is an attempt in this direction.
The objectives of the project are stated as follows:
To review presently available technology for microfinance (for delivery channels and
MIS) in India. Extent of usage of modern technology in Indian Microfinance. Compare
the same with other countries based on secondary data.
To analyze the factors influencing the use of technology in microfinance in India.
Compare the same with other countries based on secondary data.
To analyse awareness about modern technology among MFIs and bankers, compare the
impact of use of technology on cost structure, outreach and delivery efficiency,
adaptability etc. Separately for banks and MFIs.
Impact Assessment of Technology Adoption in Microfinance in India Page 8
Management information system on microfinance by banks and awareness of this among
bankers.
To formulate the strategies for penetration of technology based microfinance products
and processes.
Keeping the broad aspects of the study, two sets of questionnaires were prepared for Banks
officials & mFIs officials and clients. Stratified random sampling was used for the study. The
primary data were collected from 10 banks situated in Bihar and 20 mFIs from Bihar, Andhra
Pradesh, Orissa, Karnatka, West Bengal and Gujrat. Twenty clients each were selected from 10
banks and 10 mFIs.
Advanced and specialized tools like SPSS software were used to ensure authentic data analysis.
Cross-tabulation, comparison and processing were done to get detailed insights.
Major findings of the study are follows
Fully computerized public sector bank‘s branches were 95.7% of total branches which
81.4% branches were under core banking solution. Out of 171 banks 95 banks in the country
did using NEFT mechanism for transfer of funds constitutes 55.56% of the entire banking
system NEFT facility is still out of reach of the vast section of economy.
In private sector banks percent of ATMs to branch was three times as compared to public
sector banks. There was large variation amongst private banks in terms of percent of
ATMs to branches. Highest percent of ATMs to branches was found in Axis bank
(457.4%) followed by ICICI bank (334.5%) and HDFC bank (234%).
In India various experiments of technology use in micro financing and financial inclusion
has been attempted. Few examples are ICICI Bank‘s partnership with FINO, Business
Correspondents (BC) model- ICICI, ICICI Bank - I-Express, HDFC Bank financial
inclusion programme, SBI ties up with OXIGEN, Technology Assisted Financial
Inclusion- by BASIX, Dhanna X, E-Docs and real time monitoring by Equitas, mobile
banking by Eko financial services as business correspondence of SBI and ICICI, These
organizations use various types of technology which had helped micro financing and
financial inclusion.
Impact Assessment of Technology Adoption in Microfinance in India Page 9
In other countries, ATM networks are being rolled out by a number of banks and have been
tested by a handful of microfinance institutions as well. MFI clients in the Dominican
Republic can even access international ATM networks. Many of mFis has stated using
technology eg. Smart card, mobile banking, PDA etc.
Banks officials were generally more aware about the various technologies than the MFI
officials. Majority of the officials surveyed, were of the view that usage of technology have
reduced the transaction cost, total cost and bad debts. While most of them also said that after
adoption of technology they have experienced increased return on fund, productivity per
employee and productivity per branch. Technology had helped them to satisfy their clients
in better manner through proving quick transaction, loan amount assessment, processing of
loan, transfer of funds and other financial services. There was improvement in
disbursement, average debt per borrower, recovery % because monitoring of borrowers
became faster than earlier. Officials were not able to quantify the impact and some were not
clear about actual impact.
Availability of finance/capital and technological awareness were the major factors that
affected the adoption of technology in their organization. 40% of the bank officials and 50%
of the MFI officials ranked availability of finance/capital as the main factor affecting the
adoption of technology. The factors which were least important according to the officials
were Government regulation, demand of customer and degree of diffusion of technology.
Major technology provider to microfinance institutions are RM IT solution, Hyderabad,
Jayam Solution, Hyderabad, BASIX /Sathguru Hyderabad, Elitser IT Solutions,
Hyderabad, Force ten Technology, Kolkata, Graditum IT, Bangluru, Craft Silikan,
Bangluru, Surya Software Solution, Bangluru, Financial Information Network &
Operations Ltd, Zero Mass foundation, Kredits, USA, Bangalore (In India), Snowwood,
Chennai, Surya Software Systems, FINO, Mumbai, Eko India Financial Services Pvt. Ltd,
New Delhi, Eko India Financial Services Pvt. Ltd, New Delhi, ClassifEye's solution etc.
That there are various types of management information softwares used in various
microfinance institutions in India and abroad. There is no uniformity of the softwares. These
are location specific and designed according to need of its local and regional customers.
Impact Assessment of Technology Adoption in Microfinance in India Page 10
Various management information systems used by various microfinance institutions are
South Asia major Apparent Microfinance Manager, Common Cents 101 Micro Finance
Software, Southtech Ascend Banking, BEACON, IMP@CT, BankSoft, W-Bank,
MFASYS-Mobile Enabled Micro Finance, Micro Financer Standard Edition, ThemeproTM
Universal Micro Finance Solution (UMFS), Finance Solutions, McFinancier, Microfin360.
The various software used in Africa are Delta-Bank, e-Finance, El Mohassil 1.3, ELOGE
BANK, Delta Loan Tracking System, eMerge 1.0, EVOLAN PACK for Financial
Companies, Fin@ncia, FINCORESOFT, FinnOne Loans, GLOBAL BANK, Kredits
5.5503, Kredits 5.5539, LMS (Loan Management System, Loan Performer, Loan Tracker,
Loan Traking System (LTS), M2, Margill Loan Manager (MLM), MaxiSoftCB Banking
Software, MBWin - FAO-GTZ MicroBanking System, Microbank Information System
2.00, MICROFINA, Microfins, Mifos, MLAS (Microloans Administration System),
Octopus Micro Finance Suite.
In Latin America major software used are BANTOTAL COBIS, Conexus, CoopLeader,
eSIACOM, eConx, Emortelle, SIFCO, Topaz Microfinance, Orion, SIMCO PLUS, eConx,
SIFC Net. In North America the various microfinance institutions were using various kinds
of software. major software used are Mercury, Down Home Loan Manager 2.05, SYSDE
BANCA, Mimota etc.
In India different mFIs used different MIS softwares. FIMO developed by Jayam Solution
was major MIS software used by different mFIs. Other software were FAMIS developed by
BASIX and Sathguru, Hyderabad, BIJLI developed by Force ten Technology, Kolkata, mf
expert developed by RM IT solution.
Recommendations
Infrastructure support like increasing power supply and increasing connectivity may be
adequately provided for increasing use of technology. Capacity of micro financial
institutions has to be increase by providing them technical and financial support.
Impact Assessment of Technology Adoption in Microfinance in India Page 11
Awareness about technology should be increased by capacity building of different
stakeholders.
Due to high initial cost micro financing institutions were not able to adopt latest
technology. Costs can be shared by assisting technology provider with financial support
which will reduce the cost by scaling up of technology. mFIs may get technology at
subsidized/ reduced costs. Incentive should be provided to mFIs who adopts technology.
It will help them in to scale up their business.
Appropriately staffing should be done by the mFIs to handle latest technology.
Recruitment of technical staff and their regular training on updates of latest technology
would help in adoption of technology.
Regular feedback should be provided to the service provider regarding functioning of the
software and other technology tools.
Requirement of mFIs differ amongst MFIs according to size, organizational form,
technical competency and adequacy of the technical staff. Tailor made solution should
be provided according to the need of mFIs.
Systems should be introduced to make for transparent reporting regarding their loan
portfolio and produce reports. It will help mFIs in timely and appropriate decision
making.
In choosing an appropriate technology, it is highly recommended that MFIs get their core
MIS right first before building any kind of delivery system on top of it. Technology
provider should address the problem of mFIs promptly.
Research done on mFIs about those who have successfully introduced new technologies
should share the finding with others which will help in penetration of technology.
Impact Assessment of Technology Adoption in Microfinance in India Page 12
CHAPTER I
INTRODUCTION
Financial inclusion is delivery of banking services at an affordable cost to the vast sections of
disadvantaged and low income groups. Unrestrained access to public goods and services is the
sine qua non of an open and efficient society. As banking services are in the nature of public
good, it is essential that availability of banking and payment services to the entire population
without discrimination is the prime objective of the public policy. In India the focus of the
financial inclusion at present is confined to ensuring a bare minimum access to a savings bank
account without frills, to all. Internationally, the financial exclusion has been viewed in a much
wider perspective.
According to the United Nations the main goals of Inclusive Finance are
i. Access at a reasonable cost of all households and enterprises to the range of financial
services for which they are ―bankable,‖ including savings, short and long-term credit,
leasing and factoring, mortgages, insurance, pensions, payments, local money transfers
and international remittances. Sound institutions, guided by appropriate internal
management systems, industry performance standards, and performance monitoring by
the market, as well as by sound prudential regulation where required.
ii. Financial and institutional sustainability as a means of providing access to financial
services over time
iii. Multiple providers of financial services, wherever feasible, so as to bring cost-effective
and a wide variety of alternatives to customers (which could include any number of
combinations of sound private, non-profit and public providers).
Thus having a current account / savings account on its own is not regarded as an accurate
indicator of financial inclusion. There could be multiple levels of financial inclusion and
exclusion (V.Leeladhar, 2005). ―Financial inclusion may be defined as the process of ensuring
access to financial services and timely and adequate credit where needed by vulnerable groups
Impact Assessment of Technology Adoption in Microfinance in India Page 13
such as weaker sections and low income groups at an affordable cost.‖ (Rangarajan Committee
Report 2008), Out of 6 lakh villages, just 30,000 had been provided with banking services —
mere five percent of total villages in the country (S. Karuppasamy, Executive Director, Reserve
Bank of India (RBI), June 2011). 134 million households are financially excluded, which is 60
percent of country‘s population. (Microfinance Focus, January 2009). Moreover, Financial
Exclusion in Urban India is about 44 percent where as exclusion in Rural India is about 76
percent. National Rural Financial Inclusion Plan has been launched with a clear target to provide
access to comprehensive financial services to at least 50 percent of the financially excluded
households (approximately 55.77 million) by 2012 through branches of Commercial Banks and
Regional Rural Banks. The remaining households are to be covered by 2015. Fund for financial
inclusion of about Rs. 500 Crore to meet cost of technology adoption was set up by Finance
Ministry in 2007-08. (Frost & Sullivan’s Roadmap for IT-Enabled Financial Inclusion, 2010).
According to Frost & Sullivan (2010) ―On one hand, there are 234 million mobile users today –
the CAGR since 2001 is 87.9 %. While each mobile phone is an indicator of connectivity, it can
be presumed to be an enabler of Financial Inclusion. Since the number of mobile phones
currently is more than the number of borrowers from the banking system, it is envisaged that a
convergent technologies involving Information Technology and Telecom would be the most
efficient vehicle for achieving Financial Inclusion.
Financial exclusion is most acute in Central, Eastern and North – Eastern regions – having a
concentration of 64% of all financially excluded farmers‘ households in the country. Overall
indebtedness to formal sources of finance alone only sector 19.66 % in these three regions.
(Rangarajan Committee Report, 2008). The topography in hilly terrains is such that banks
cannot open branches in every corner. Mobile banking as a technology is certainly an answer to
the growing demand for banking facility at the village level.
RBI has granted permission to transfer fund across various mobile phone service provider. Three
public sector banks have started mobile banking solution. SBI had partnership with EKO
financial services and Spanco system. Union Bank of India and Bank of India have started their
mobile banking services in Mumbai. The RBI‘s guidelines call for a two-factor authentication for
validation of a customer. Several MFIs today act as a business correspondent (BC) to reach areas
Impact Assessment of Technology Adoption in Microfinance in India Page 14
where opening a bank branch is not viable. The bank through a BC can enroll clients; the clients
can be served by the bank using mobile banking thus fulfilling the objective and the spirit of
financial inclusion.
Microfinance institutions in India face a number of constraints in trying to serve the majority of
the poor. Many of these constraints can be linked to insufficient availability and use of
technology. There is no reporting mechanism that correctly captures performance data.
Information on the financial and operational performance of microfinance institutions (MFIs) is
paper-centric and not timely, while data are not complete and cannot be independently verified.
This situation is detrimental to MFIs, microfinance clients, and microfinance industry regulatory
bodies. Paper-based operations consume a significant amount of loan officers‘ time. There is not,
in most MFIs, a timely connection between the head office, the branch offices, and the loan
officers in the field due to lack of, or incomplete use of, appropriate technology applications
(www-wds.worldbank.org/.../528630PUB0link101Official0use0Only1.pdf).
Technology can help microfinance institutions to reduce costs, improve efficiency, and increase
outreaches (Lauren Braniff, 2008). Modern technology based solution proves proficient in
enabling micro financing institutions to conceptualize, develop and operate projects for financial
inclusion. It supports sector initiatives, which are aimed at enabling rural and remote un-banked
areas to enjoy the benefits of formal financial products and services. The entry of technology has
opened more options in the field of finance that lead to lower costs, greater efficiency, real time
information and better customer service. Micro finance offers a great, largely untapped market
for modern technology and a chance to make a big difference in outreach, sustainability and its
impact.
In a survey (CGAP, 2008), 62 financial institutions in 32 countries report using technology
channels such as automated teller machines (ATMs), POS terminals, and mobile phones to
handle transactions for poor customers. Some are using new technology to better serve existing
customers. But other institutions are using technology to develop ‗branchless‘ channels that
reach new clients in areas where setting up a bank branch may be too costly. The widespread
use of mobile has offered a gateway for handling financial transactions. After a number of years
where the innovative products in developed markets stalled, there are number of innovations that
Impact Assessment of Technology Adoption in Microfinance in India Page 15
have found in developed markets. It was observed that that around 45% of existing microfinance
institutions still track and record their operations and accounting in excel sheets or even
completely manually.
Technology can reduce transaction costs and improve transparency in delivering financial
services, both of which can translate into increased access and lower costs for many lower-
income clients. Streamlined and automated processes allow financial institutions to extend
services to harder-to-reach and more costly clientele by replacing people and branches with
point-of-sale (POS) devices and branchless banking strategies. Technology undergirds the
management information and reporting systems that are essential for efficient financial service
delivery. Despite the appeal of advanced delivery technologies, relatively few financial
institutions have successfully deployed them to reach poor and low-income clients. Developing a
solid management information system still remains one of the most important tasks facing
microfinance institutions, particularly those scaling up. Challenges include the high cost and
limited availability of existing technological solutions, lack of widely available local technical
support to support MIS software, consumer adoption rates of technology, lack of basic
communications infrastructure in many countries, and inadequate policy environments.
(www.microfinancegateway.org/p/site/m/template.rc/1.11.48240/)
Adoption of technology is expensive for MFIs, while use of currently available technology does
not always correspond to gains in revenue or increases in productivity in the short term. Due to
non-use of appropriate technology applications, there is a lack of holistic, sector-wise data on
MFI borrowers and outstanding portfolios. MFIs are unable to share useful information about
clients with each other. This contributes to the persistent client overlap seen in the microfinance
sector (RBI, financial inclusion, 2008).
Branchless banking is a distribution channel strategy used for delivering financial services
without relying on bank branches. While the strategy may complement an existing bank branch
network for giving customers a broader range of channels through which they can access
financial services, branchless banking can also be used as a separate channel strategy that
entirely forgoes bank branches. ATM and Internet banking have been around in India for a
while. While both modes have had some success, penetration and use levels have been moderate.
Impact Assessment of Technology Adoption in Microfinance in India Page 16
While ATMs offer convenience, they pose a perceived security threat in India given instances of
mugging around them. Senior citizens and women appear reluctant to use ATMs if they have a
choice to of the to a branch and withdraw money in safety. The security situation in India shows
little sign of improvement and therefore a large-scale proliferation of ATMs will remain a
challenge. Internet banking, on the other hand, relies on P C and Internet penetration. Estimates
suggest that there are approx 40 million Internet users that are expected to rise to 100 million
soon – despite this growth; penetration and use levels remain low, especially in non metro area.
Harma and Dubey (2009) stated that mobile banking, a symbiosis of technology and financial
services, is the hottest area of development in the banking sector and is expected to replace the
debit/credit card system in future. Unlike online banking, mobile banking has certain advantages
on its side. It would not attract much investment from the bank and would not need a change in
the existing infrastructure of the bank. Mobile banking has the potential to bring a whole host of
people that have no/little access to land lines/internet connections onto the electronic platform –
an innovative way to generate financial inclusion. To do so successfully will require customer
training, technology stabilization and managing carefully the ‗know your customer‘ issues.
(Microfinance Focus, 2009).
Management information system has become an essential part of microfinance institutions. The
MIS involves all aspects of gathering, storing, tracking, retrieving and using information within a
business or organization. The information system helps loan officers track their clients‘
repayment schedules and balances. It helps management assess the quality of the loan portfolio
and to monitor progress toward operational objectives. Management Information System
software can improve transparency and efficiency, lower costs, improve reporting, and allow
management to make more informed decisions. The right technology is invaluable in helping
microfinance institutions become better managed and more transparent institutions. Strong
information systems are the foundation of any financial institution. Yet many microfinance
institutions struggle with their systems resulting in inefficiencies which limit their ability to grow
and eventually take advantage of other technologies, such as branchless banking. A good back
office system lies at the core of every successful financial institution. In many cases, however,
MFIs struggle to generate accurate information and reports for themselves, funders, and
supervisors. This limits the soundness and efficiency of MFIs, reduces the government‘s ability
Impact Assessment of Technology Adoption in Microfinance in India Page 17
to supervise the market, and in turn, negatively impacts the expansion of access to financial
services (Lauren Braniff, 2009). A study by the Consultative Group to Assist the Poor (CGAP)
in 2004 showed that just half of all MFIs around the world have automated information systems,
and those that do invest in technology spend duplicative resources on custom-built systems that
are extremely costly and difficult to maintain.
Jim Rosenberg (2007) stated that IBM, had been touting its foray into open source solutions,
will partner with Grameen Foundation to help expand its MIFOS solution for information
systems. Grameen and IBM noted that microfinance institutions were inhibited from extending
their reach because they lack a flexible, cost-effective technology infrastructure that enables
them to expand their operations to provide loans to more people and to develop new products
and services. Many MFIs are still using pen and paper or simple spreadsheets to process loans.
Outsourced core banking systems could increase the efficiency and capacity of microfinance
institutions (MFIs). MFIs, however, have been slow in adopting the use of outsourced core
banking systems. They are concerned about finding a system that works for their unique
situation, fear losing control over sensitive client data, and worry about security risks. Moreover,
they are not convinced outsourcing will lead to reduced costs (Jim Rosenberg, 2008).
Although there is plenty of literature on adoption of new technology, only a handful of studies
look specifically at the financial services industry. There is a general recognition of the particular
importance of financial innovation (e.g. Silber, 1975; Van Horne, 1985; Miller, 1986, 1992;
Faulhaber and Baumol 1988; Campbell, 1988; Siegel, 1990; Finnerty, 1992; Merton, 1992).
Empirical studies on the technology adoption in financial services have focused on the
introduction of automated teller machines (Hannan and McDowell, 1984, 1987; Sinha and
Chandrashekran, 1992; Sharma, 1993; Ingham and Thompson, 1993; Saloner and Shepard, 1995;
Gourlay and Pentecost, 2000, 2002; Hester et al., 2001), small business credit scoring (Akhavein
et al., 2001), video banking (Pennings and Harianto, 1992), teleprocess terminals (Escuer et al.,
1991) and cash dispensers (CD), Point of Sale (POS) and remote banking (Buzzacchi et al.,
1995).
Mark Pickens and Claudia McKay (2010) studied the data about 8 branchless banking services
M-PESA in Kenya and Tanzania, Banco Postal in Brazil, FINO in India, G-Cash and Smart
Money in the Philippines, WIZZIT in South Africa, and WING in Cambodia. They found 37%
Impact Assessment of Technology Adoption in Microfinance in India Page 18
of active clients were previously unbanked. They also found that 5 of the 7 countries, branchless
banking serves more previously unbanked people than the largest MFI. Branchless banking is
scaling faster than MFIs. The branchless banking services needed 3 years to surpass the outreach
of the largest MFI in the same market, which on average operated for 15 years. (Branchless
Banking, CGAP, 2010).
It is quite significant that most of the studies are related to developed markets, e.g. US or
European banking markets. Arguably, this paucity in the literature needs to be addressed. Thus
there are only few studies explaining impact of technology adoption in microfinance institutions
in India. The need remains, however, to examine the use of various technology products and
channels in the delivery of micro finance in India. In Bihar there is hardly any study to
understand local technological and socioeconomic environment to understand the adoption
processes of modern technology. The current study ―Impact Assessment of Technology
Adoption in Microfinance in India‖ is an attempt in this direction.
Objectives of the study:
The objectives of the project are stated as follows:
To review presently available technology for microfinance (for delivery channels and
MIS) in India. Extent of usage of modern technology in Indian Microfinance. Compare
the same with other countries based on secondary data.
To analyze the factors influencing the use of technology in microfinance in India.
Compare the same with other countries based on secondary data.
To analyse awareness about modern technology among MFIs and bankers, compare the
impact of use of technology on cost structure, outreach and delivery efficiency,
adaptability etc. Separately for banks and MFIs.
To study Management information system on microfinance by banks and awareness of
this among bankers.
To formulate the strategies for penetration of technology based microfinance products
and processes.
Impact Assessment of Technology Adoption in Microfinance in India Page 19
CHAPTER 2
METHODOLOGY
Both primary and secondary data were collected. The primary data were collected from various
stakeholders e.g. banks, mFIs, clients of banks and mFIs, technology providers.
For the first objective to review presently available technology for microfinance (for delivery
channels and MIS) in India, extent of usage of modern technology in Indian Microfinance and
compare the same with other countries based on secondary data, data were collected both from
primary and secondary sources. Secondary data were collected through various reports, news
papers, websites of microfinance and technology provider‘s organisations.
To analyze the factors influencing the use of technology in microfinance in India and compare
the same with other countries data were collected from above secondary sources.
For primary data collection two different sets of questionnaires were developed each for
Banks/MFI officials and clients. Pre testing of questionnaires / schedules was done. Based on
the pre-testing, questionnaires / schedules were modified. SPSS software was used to ensure
authentic data analysis. Cross-tabulation, comparison and processing were done to get detailed
insights.
For technology provider interviews were conducted to understand the operations.
Pretesting of questionnaire was done by taking 40 samples of different stakeholders.
Questionnaires were revised with the help of opinions and suggestions made by different
stakeholders.
Sampling:
The sampling method followed was purposive sampling. The primary data were collected from
10 banks situated in Bihar and 20 mFIs from Bihar, Andhra Pradesh, Orissa, Karnataka, West
Bengal and Uttar Pradesh. 20 clients each were selected randomly from 10 banks and 10 mFIs.
Impact Assessment of Technology Adoption in Microfinance in India Page 20
The purpose of the selection was to analyse awareness about modern technology among MFIs
and bankers, compare the impact of use of technology on cost structure, outreach and delivery
efficiency, adaptability etc for banks and MFIs. The samples were taken from various region.
More representation was from South India because of availably of technology adopter
microfinance institutions.
The following microfinance institutions were selected.
1. Bihar Development Trust, Bihar
2. Trust Microfinance Services, Muzaffarpur
3. Disha Microfinance Pvt. Ltd. Gujrat
4. Nav Achetana Microfin Services Private Limited,
5. Mahashakti Foundation, M. Rampur Kalahandi, Orissa
6. Star Microfin Service Society (SMSS), Andhra Pradesh
7. Ushodaya Integrated Urban and Rural Development, Andhra Pradesh
8. Share Microfinance, Hyderabad, Andhra Pradesh
9. Agricultural Science Foundation, Hyderabad, Andhra Pradesh
10. Sambandh Finserve Pvt. Ltd, Hyderabad, Andhra Pradesh
11. SKS, Hyderabad, Andhra Pradesh
12. BASIX , Hyderabad, Andhra Pradesh
13. Spandan Sphoorty Finance ltd, Hyderabad.
14. Nano Financial Services India Private Limited Chennai, Tamil Nadu
15. Janlaxmi, Tamil Nadu
16. Gramin Koota, Karnatka
17. IDF financial service Pvt. Ltd, Karnatka
18. Ujjivan Finance Service Pvt. Ltd
19. Sanghamithra Rural Financial Services,
20. Bandhan Financial Services, West Bengal
Various banks were also selected to analysis the type of technology available with these
banks which help in financial inclusion.
Impact Assessment of Technology Adoption in Microfinance in India Page 21
1. RIG, HDFC Ranchi
2. State Bank of India
3. Canara Bank
4. Uttar Bihar Gramin, Bank
5. UBI, Patna, Bihar
6. Syndicate Bank, Patna Bihar
7. UCO Bank, Zonal Patna
8. PNB, Patna, Bihar
9. ICICI Bank, Patna, Bihar
10. Samastipur Kshetriya Gramin Bank
Technology providers were selected to understand the various kind of technology available in
microfinance and their uses by various microfinance institutions.
The purpose of the selection these technology providers were to understand description of the
various technology, its uses and different microfinance institutions adopting their technologies.
They were interviewed to understand technology solution in microfinance.
1. RM IT solution, Hyderabad
2. Jayam Solution, Hyderabad
3. BASIX /Sathguru
4. Elitser IT Solutions, Hyderabad
5. Force ten Technology, Kolkata
6. Graditum IT Banglore
7. Craft Silikan, Bangaluru
8. Surya Software Solution, Bangaluru
9. EKO financial services
10. Zero Mass foundation
Impact Assessment of Technology Adoption in Microfinance in India Page 22
Analysis of data:
The data collected were tabulated to facilitate easier sharing, referencing and analysis. Review of
available technology was done by analysing secondary information available on literature from
World Bank, Consultative Group to Assists the Poor (CGAP), Asian Development Bank,
Reserve Bank of India, NABARD, Microfinance focus journal, websites of different
microfinance and other financial institutions.
Use of various technologies by selected banks and mFIs were collected from primary and
secondary sources. Factors responsible for adoption of technology was collected and analysed.
Awareness about modern technology among MFIs and bankers were collected from
microfinance institutions and banks and analysed.
To study impact of technology, the use of technology was collected and their impact on cost
structure, outreach and delivery efficiency, adaptability were analysed separately for banks and
MFIs.
To analyse factors that affect the adoption of technologies the data were collected from 10 banks
and 20 microfinance institutions and analysed. The variables were identified and weighted
averages of response were calculated.
Data regarding Management Information System of banks and microfinance institutions were
collected and analysed. The secondary information regarding information was collected from
various sources and classified by various regions of the world.
Strategies for penetration of technology based microfinance products and processes were
prepared with feed back provided from different stakeholders.
Impact Assessment of Technology Adoption in Microfinance in India Page 23
Chapterisation of report
Report is divided into following eight chapters.
Chapter I: Introduction
Chapter II: Methodology
Chapter III: Adoption of modern technology in Banks and microfinance Institutions
Chapter IV: Factors affecting Technology Adoption in Microfinance
Chapter V: Awareness and impact of modern technology in microfinance
Chapter VIII- Suggestions and Recommendations
Chapter VI – Management information system in Microfinance
Chapter VII- Strategy for penetration of technology based products and services
Impact Assessment of Technology Adoption in Microfinance in India Page 24
CHAPTER III
ADOPTION OF MODERN TECHNOLOGY IN
MICROFINANCE
Technological advances have contributed to major improvements in the quality of financial
service delivery and have lowered transaction costs. Use of computers has reduced the time and
cost of dealing with transactions, clearing of cheques and screening of loan applicants. The
benefits are beginning to reach developing countries, but many rural communities remain
excluded. Buchenau (2003) reported that some MFIs are experimenting with technical
innovations to reduce operating costs and improve the quality of service in rural areas. A good
information system equips managers to make informed decisions and produce reliable reports
that follow recognized international and national standards. This transparency can also attract
funders and provide clients with immediate information about their accounts, thereby attracting
more customers.
The most important contribution of technology is lower operating costs. Researchers have tested
the relative costs of tellers and ATMs in several emerging market countries (including Brazil,
India, Kenya, Malaysia, Mexico, Nigeria, and South Africa). The comparison shows the potential
of cost reduction through technology, which is particularly important today as financial
institutions face increasingly competitive markets (CGAP).
The purpose of this chapter is to review presently available technology for microfinance and
banks in India and other countries.
Impact Assessment of Technology Adoption in Microfinance in India Page 25
Rural cash handling options for MFIs.
Major technologies used by microfinance institutions and banks are ATM, Biometric ATM,
solar powered ATM, automated teller machines (ATMs) linked to ‗smart‘ cards and palm-top
computers for rural loan officers, IVR, mobile banking, POS, hand held devices, GRPS system,
mobile banking etc.
The data were collected from primary and secondary sources to analyse the various kind of
technology adopted by microfinance institutions in India and other countries.
3.1: Adoption of modern technology in microfinance institutions and banking
in India and other countries
Both primary and secondary data were collected from various sources to understated the various
technology adopted by banks and microfinance institutions in India and other countries and
presented in table 3.1.
Impact Assessment of Technology Adoption in Microfinance in India Page 26
Table 3.1: Adoption of modern technology in microfinance institutions and banking for
financial inclusion in India and other countries.
Technology Banks/mFIs Partnership Uses
Smart card
Smart card
ICICI Bank Partnership with FINO Client identification
with biometrics
Client and agent
authentication with
PINs
Offline transactions,
including
withdrawals
Government of Bihar
financial inclusion, E
Shakti project
Glodyne Technoserve
SBI Zero Mass
PNB, BOI TCS
PRODEM,
BOLIVIA
Smart card and
POS devices in
GSM Network
Remote Transaction
System (RTS) at
Uganda Microfinance
Limited
Electronic passbook
Interest calculation
Mobile banking
ITZ Cash Tata DOCOMO Remittance
transactions and
Loan servicing Cashpor Microcredit
Varanasi
Atom technology
Reliance
communication
Atom Technology
SBI Eko financial Services
ICICI, SBI and
Centurion Bank of
Punjab
Eko financial Services Remittance
transactions and
Loan servicing
Smart
Communications,
Philippines
Faulu/Vodafone
Remittance
transactions and
Loan servicing
Impact Assessment of Technology Adoption in Microfinance in India Page 27
(Tanzania,Kenya)
Brand Banking,
Korea
Remittance
transactions and
Loan servicing
K-REP BANK‘S
KENYA
Remittance
transactions
VISA Apple i Phone Remittance
transaction
Duch Bangla Bank Banal link and Citycell Remittance
transactions Loan
servicing
enda – Tunisia Mifos platform MIS
Safaricom‘s M-Pesa,
Pakistan
Tamer and Telenor Remittance
transactions
Mobile Branches SBI Madhya Pradesh,
India
AISECT Remittance
transactions and
Loan servicing
Equity Building
Society (Kenya)
Money transaction
Loan processing
Hand held Device
Hand held device
using GRPS
technology
Sanghmitra Rural
Financial Services
- Loan processing
Hand held device Putiskar, Udaipur Albertson Loan processing
Common service
centre - point of
sale (POS)
terminals and
information
technology enabled
kiosks,
HDFC bank -Jharkhand government Remittance
transactions and
Loan servicing
POS Teba Bank (SA)
FOCCAS
Loan servicing
Impact Assessment of Technology Adoption in Microfinance in India Page 28
FINCA
Uganda Microfinance
Union.
Combination of
POS terminal and
magnetic strips
Correspondent
banking Model in
BANCOLAMBIA –
CONAVI in
Colambia and
Interbank in Peru.
Teba Bank (SA)
Loan servicing
Palm Pilot (a brand
of PDA)
Equity Building
Society, Kenya
Loan servicing
ATM
Prodem(Bolivia)
Innova (Bolivia)
PSHM (Alania)
Paynet (Kenya)
Banko Ademi
MEB Kosovo
Remiitance
transaction
Loan servicing
KIOSK Banking
Kiosk based
oxygen web
Retailers
SBI
-Oxygen supported by
Sahyog foundation
Customer acquisition
Product servicing,
disbursements,
and
collections
Kiosk banking - I InfoTech as BC Customer acquisition
Transfer to home
service –
remittance
facilities
Standard Chartered -Times of money Product servicing,
disbursements,
Banking
correspondence
with IGS – Hub
KBS bank IGS Customer acquisition
Product servicing,
disbursements,
Impact Assessment of Technology Adoption in Microfinance in India Page 29
and spoke model and
collections
e- based remittance services
Green money
transfer
Tata Indicom - Remittance
transaction
SMS based
payment system
Iway media - Remittance
transaction
E- Remittance
service
ICICI bank I- express Remittance
transaction
Other technology
No frill account Axis bank SunTec's TBMS-F Remittance
transaction
IVR Edyficar (Peru) / Voxiva (Peru,
worldwide) Client information
access, and product,
account, or branch
information
Account transaction
E pass book &
authentication
device
ICICI bank Partnership with Vikas
Sahyogis‘
Client identification
System security
Solar Powered
Rural ATM
Vortex Engineering -
Mifos Software ASOMI Grammen foundation MIS
Mifos software Grameen Koota,
Banglore
Grammen foundation MISD
STEM
Technology,
Technology
assisted financial
inclusion
BASIX - Financial inclusion,
accounts opening
Person to person
financing platform
Dhann - X - Person to person
loaning
e-docs, Equitas -
Impact Assessment of Technology Adoption in Microfinance in India Page 30
IT system Bank
2000
Equity Building
Society, Kenya
USSD in SMS like
format
G-CASH I-
Philippines
Globe telecom
Scoring
BancoSol (Bolivia),
Mibanco (Peru)
Banco Solidario
(Ecuador)
CMM Medellín,
CMM Bogotá
(Colombia)
Unibanka (Lativa)
LAPO (Nigeria)
Loan origination—
loan application
processing and
approval
Product servicing—
collections
Customer
retention—loyalty
programs
and incentives
Source: Primary and secondary data
Impact Assessment of Technology Adoption in Microfinance in India Page 31
Smart Card
Smart Cards are emerging as a solution for microfinance institutions (MFIs) to easily keep
accounts and record loan transactions. Wallet-sized plastic cards with embedded computer chips
that can process information or simply store data. It uses in Client identification with biometrics
and helps in client and agent authentication with PINs. It also helps in office transaction and
withdrawals. It helps clients in repayments of their microloans. The smart card allows for
withdrawals, deposits, currency exchanges, money orders and other services. As a security
precaution, fingerprint images are stored on the microchip and are compared with those taken by
biometric scanners at the time of transaction. Since Smart Cards hold their information on the
cards (in the microchip), transactions do not require a transfer of information from a central
source; transactions can be entirely off-line, rendering telephone lines and fibre-optic cable
unnecessary. In addition, since smart card transactions can reduce some of the paperwork,
transaction times are much shorter, enabling loan officers to service more clients. Information
reconciliation/consolidation from the vendor/loan officers to head office can occur through
information transfers at regular intervals.
In many countries Smart card was used by several microfinance institutions. Prodem, a Bolivian
mFI, has conducted a pilot project using Smart Cards to replace much of the paperwork
previously needed for transactions. A savings account with a smart card uses microchip
technology. A card with an embedded microchip allows microfinance institutions to have saving
deposits without being on-line. The balance and account transactions are kept in the
microchip.One large advantage Smart Cards have over traditional ATM and credit cards (which
are also being used by MFIs) is their ability to store and track purchasing and transactional
histories. The fingerprint as a control method for the savings account was developed because
twenty-seven percent of our clients do not read or write. Most clients are women who live in
rural areas. In the past, many of their clients instead of signing credit contracts used their
fingerprint because they did not know how to write. This fact led to use this tool as a means of
identification and given the fact that no two fingerprints are alike, company could be assured of a
secure identification.
Impact Assessment of Technology Adoption in Microfinance in India Page 32
Remote Transaction System (RTS) in Uganda Microfinance, supports both group and individual
lending, online and batch offline processing, and back office synchronization. The RTS is based
on the use of sturdy hand-held devices that can communicate over GSM cellular networks. This
solution was intended to become an industry standard, helped MFI reach isolated clients cost
effectively, and enable microfinance to reach a new stage of development. Combined with the
use of smart cards given out to clients and microfinance agents, the system allows MFI agents to
collect crucial financial data in the field and subsequently to transfer the data directly into the
MFIs‘ computerised financial management systems. The RTS eliminates the need to prepare,
transport, and enter hand-written reports, reducing costs for rural operations. In addition,
electronic collection of data raises client confidence in MFIs, as well as reducing fraud. Finally,
the system, if used by the industry as a whole, might allow MFIs to take full advantage of latent
synergies that exist among geographically and financially diverse institutions.
With prototype technology, the MFT implemented a pilot of the system in Uganda in partnership
with three MFIs active in this country. The three MFIs were Uganda Microfinance Union
(UMU), a cooperating partner of ACCION; the Foundation for International Community
Assistance (FINCA), and the Foundation for Credit Community Assistance (FOCCAS), a
collaborating partner of Freedom from Hunger. The difference in size and modus operandi for
each MFI has allowed the MFT to assess the value of RTS against a range of practices currently
in use in the microfinance industry, including group, branch, and individual clients. This
assessment showed that the most commercially-oriented of the three MFIs gained the most value
from the technology, in large part because they were most willing to re-engineer their business
model to take advantage of the RTS. The advantages of the system as implemented included
automation of transactions, reduced client time and travel, more frequent payments, reduced cash
management risk, and avoidance of costs for ―brick and mortar‖ branches.
Modular Corporation, a wholly owned subsidiary of Modular Techcorp Holdings of Malaysia,
announced the launch of its first Microfinance Smart Card for the Mahasemam Trust, a
microfinance institution based in Madurai, India. Field officers of the Mahasemam Trust will use
the Smart Card in combination with a small hand held device to record data such as payments
and transactions. This information would then be downloaded daily to a central server. The
Smart Card should help in better managing the collection and distribution of microloans, as well
Impact Assessment of Technology Adoption in Microfinance in India Page 33
as reduce fraud and increase information security such as user identity and account information.
This Smart Card will hopefully prove to be a more efficient management system than previous
manual processes.
In India ICICI Bank has partnership with FINO to provide technology solutions to the micro
finance sector. The technology solution comprises of core banking and smart card systems. In
light of the technology solutions available through FINO, the Bank has designed a new process
for delivering loans under the partnership model. Some of the key aspects where a strong
technology platform will add value to the micro finance operations include reduction in
transaction cost; better data management and reporting capacities and capability to interface with
multiple peripherals, etc. This would also enable enhanced disclosure and transparency in the
operations of MFIs, setting a platform for robust securitization / buyout opportunities to meet the
priority sector lending objectives of the regulator.
www.cab.org.in/ICTPortal/Lists/.../icicibank_strategy_promoting.pdf)
ICICI Bank also employed delivery channels backed by technological innovations to achieve
scale and outreach in a sustainable manner. The Bank‘s channel architecture includes branch and
non-branch channels. Branches act as a business hub providing banking services on the one
hand, while facilitating the fulfillment of products that have been sourced by the business
facilitators and business correspondents. Non-branch channels are of two types, business
facilitators and business correspondents. Business facilitators, referred to as ‗Vikas Sahyogis‘, are
outsourced channels that generate business opportunities for the Bank. Network of Vikas
Sahyogis has been set to act as referral or sourcing agents for loans, insurance and investment
products such as mutual funds. These centers are operated by local people with existing
relationship with the Bank‘s customer segments. Vikas Sahyogis include agri input dealers,
tractor dealers, automobile dealers and diesel dealers.
In India ZERO Microfinance and Savings Support Foundation (ZERO MASS Foundation/ZMF)
also uses Smart cards not needed for biometric authentication in local service area.
Union Bank is serving the underprivileged and disadvantaged 68000 beneficiaries serving
through biometric smart card and forging ahead to service 2.5 million customers through smart
cards in coming year.
Impact Assessment of Technology Adoption in Microfinance in India Page 34
Tata Consultancy Services (TCS), also launched its smart card solution that would enable banks
to reach the remote areas and address their need for micro financing. To begin with, the Punjab
National Bank (PNB) and Bank of India (BoI) have come forward to implement the solution on a
pilot basis. While PNB intends to apply it in three locations spread across Punjab, Gujarat and
Delhi, BoI is planning to enforce it in Maharashtra. The smart card technology enabled banks to
provide a multi-application smart card to the account holders. The card stores the necessary
customer information including demographic details and financial applications such as loans,
deposits and insurance. It also contains secure identification and authentication, and can be
integrated with the core banking system for automatic account update and fraud control. Both
fingerprint and PIN are provided for user authentication.
BASIX in Andhra Pradesh has worked as banking correspondence using smart card for their
account holders. BASIX also launched Technology assisted Financial Inclusion (TAFI)
operations in some slums of East Delhi, A tripartite agreement was signed between Axis Bank, A
Little World (our technology partner) and Indian Grameen Services. (Source: Annual Report
BASIX, 2009)
Mann Deshi Mahila Bank is undertaking an initiative to become one of the first rural banks in
India to utilize cutting-edge SMART card technology for its banking operations. These plastic
'credit cards' will display women's names and photographs, utilizing micro-chip technology to
store financial information. The cards instantly allow the bank's field agents and clients to view
savings account balance, loan account status, and repayment history. The use of SMART cards
will increase the efficiency and business capacity of the bank and provide clients with enhanced
security and service. The card benefits the client by discreetly keeping her account information
free from unwanted inquiries and alterations. However, it has been challenging to find an
appropriate vendor to supply the technology and the hardware for this innovative new idea.
Swadhaar Finance, an ACCION microfinance partner, offers savings accounts to its poorer
clientele by becoming a banking correspondent of ICICI Bank. Through the partnership,
Swadhaar sets up small kiosks where clients can make basic transactions (e.g., balance inquiries,
deposits, withdrawals). Clients needed to pay INR 200 (US $4) for smart cards to use these
kiosks.
Impact Assessment of Technology Adoption in Microfinance in India Page 35
Thus it can be seen from the above that smart card is widely used by banks in India and other
countries. The use of smart card was less prevalent in microfinance institutions in India except
few like BASIX. The reasons of less adoption are high cost to manage and maintain and
illiteracy among the clients.
Point of Sales (POS) devices
Small machine located at a third party merchant that can be used to authenticate the transfer of
funds from the customer to the retailer or the reverse depending on the transaction type.
Similarly, POS and cell phone systems offer an opportunity to MFIs to increase their outreach in
remote and rural areas. When the country infrastructure allows, POS-based systems are a less
expensive solution for providing financial services to remote and rural clients when compared
with the expenses associated with opening a new branch.
Benefits to POS/ PAD
Microfinance can increase the security of financial transactions
Reduce transaction cost to service clients
Reach new areas without branch infrastructure
Staff can focus on customer acquisition and service
Additional services and revenue streams
Benefits for Clients
Reduced transaction cost
educed risk of cash handling
Prestige of access to international payment networks (VISA)
Impact Assessment of Technology Adoption in Microfinance in India Page 36
In Colombia the correspondent agent model (CA) allows financial institutions to reach remote
areas by using a combination of POS terminals and magnetic strip cards. This model is currently
implemented in several Latin American institutions, including BANCOLOMBIA-CONAVI in
Colombia and Interbank in Peru. In this model, the financial institution works closely with an
external technology provider to identify potential locations for the remote branches. The ideal
locations include retail stores, supermarkets, convenience stores, and gas stations. The hardware
requirements for these locations are minimal, mostly consisting of the POS device. From the
Colombian and Peruvian experiences, the main benefit the CA model offers to financial
institutions is the fact that this solution is a cost-effective way to increase outreach in remote
areas. CA model provides great savings for financial institutions to increase their local coverage:
a branch is 40 times more expensive than using a CA agent and similarly, an ATM is seven times
as expensive as a CA agent.
(Source: Client-Focused Technologies in Microfinance, microNOTE # 31, USDA)
Another example of an organization experimenting with Palm Pilot technology to optimize field
operations can be found in the Grameen Bank‘s own backyard in Bangladesh. Remote transaction
Model system at UGANDA MICROFINANCE LIMITED currently allows clients to make savings
deposits and payments of microfinance loans through a network of agents. This system is at the final
stages of its pilot phase at Uganda Microfinance Limited (UML). Once the pilot of the solution is over,
this technology should be able to support a full range of financial transactions, including withdrawals and
account- to-account transfers. The RTS technology currently works through a combination of smart cards
and POS devices in a GSM network. The system uses wireless POS devices running the RTS client
software. These POS terminals wirelessly communicate with a central server, which then connects to the
MFI‘s main MIS.
In Malawi, OPPORTUNITY INTERNATIONAL BANK OF MALAWI (OIBM) has combined
biometric-enabled POS devices and smart cards to provide banking services to Malawi‘s low- income
population. OIBM‘s biometrics and smart card model overcomes the identification problem by using
fingerprints. This eliminates the need for clients to have PINs and makes the transaction process easier for
illiterate customers because they do not have to select and memorize any numbers to access their
accounts. As part of this model and through partnerships with small retail outlets, the bank has set up a
network of POS agents in rural areas. OIBM is using the POS solution at one of its branches located in a
high-transit area, allowing the institution to bring its POS services to more peri-urban and rural clients.
Impact Assessment of Technology Adoption in Microfinance in India Page 37
The institution currently has more than 60,000 clients using the service on a regular basis. Use of POS in
OIBM has the Increased in outreach, Productivity and customer satisfaction gains, Efficiency of
operations and Lowered operating costs.
(Source: www.opportunity.net/.../opportunity_international_bank_malawi)
In Uganda Microfinance Union in Uganda, FINCA, Teba Bank, FOCCAS using POS devices.
Banco Solidario, with support from ACCION International, implemented a PDA-based
application for microfinance purposes. This first generation of ACCION‘s Porta Credit
application was called Credi Palm. The Palm-OS-based application was implemented in all of
the bank branches to create an easy way to capture and store credit evaluation information in the
field, A solution that allowed credit officers to become more familiar with the use of technology
for their daily field activities, and an effective interface between the main MIS of the institution
and the PDA application.
(Source: www.mixmarket.org/mfi/banco-solidario)
In India, HDFC bank using branches as hubs for other inclusion initiatives such as direct
linkages to self help groups and joint liability groups, bank on wheels, point of sale (POS)
terminals and information technology enabled kiosks, and other information & communication
technology (ICT) backed initiatives in these locations. Under the Project Jharkhand program
the Bank has launched its services at a Common Service Centre (CSC) in Kanke (Ranchi)
comprising over 1.5 lakh households spread across 100 villages in 30 Panchayats. The Bank
also adopted Chakala village near Ranchi as part of the programme. The programme
envisages covering over 45 lakh households in the State through both the CSC and village
adoption models, subject to regulatory provision. CSC is an integral component of the Central
Governments National e-Governance Plan that seeks to set up over 5,000 CSCs in Jharkhand
and about 100,000 in the country (HDFC Bank Annual Report 2011). POS device was also
used on trail by ICICI bank in Karnataka and Wrana Sugar cooperative in Maharashtra.
ICICI bank has supported several of its mFIs partners in Madurai, India. ICICI supported
community internet and tele centre projects in the region.
Impact Assessment of Technology Adoption in Microfinance in India Page 38
Manvish MiFAUN-Micro finance device developed in Bangalore is
an internet enabled hand held device that is stand alone, (IP
addressable) and can communicate to any remote server located
anywhere on the net via TCP/IP/Wifi, GSM/GPRS or a PSTN
Modem. This makes it completely PC independent. Data files can be
encrypted and can communicate with Oracle (tested already) or any
other database (DB2, SQL etc) and vice-versa with a high level of
data integrity.
KBS Bank Chincholi is able to provide banking services in Chincholi town (hub) and door-step
services in about 25 villages (spokes). Together with IGS, KBS Bank has established such
Business Correspondent outlets in 18 Hub locations and 45 spoke locations in the three districts
of its operation. In the next three to five years, the bank seeks its presence in all the 147
blocks/hoblis through hub outlets and over 1500 villages through spokes. (Source: Annual report
BASIX, 2009-10).
SKS Microfinance introduced a prototype data collection system using the popular Palm Pilot
PDA devices and smart cards in May of 2001. Loan officers used the PDAs to record client
transactions in the field, which were simultaneously recorded on the smart cards that were
provided to clients as a form of backup. During the year-long pilot program, SKS tested the new
system in two client centers, marking improvements in accuracy, loan officer productivity and
operational efficiency. This initial pilot was supported through $125,000 in grants and soft loans
received from CGAP (the World Bank's apex body on microfinance), Digital Partners and
Grameen Foundation USA (two US-based non-profits working on technology based solutions for
international development challenges). ( http://www.sksindia.com/Milestones.htm).
Sanghmitra Rural Financial Services, Bangluru has used 45 hand held device for online real
time reporting of transactions particularly in regard of repayment of loan installment by using
GPRS technology. It has purchased another 35 instruments from Quantam System, software,
Bangluru. Total cost of up gradation and 35 new machines costs 10 lakhs funded by SIDBI.
They dispensed with issuance of manual acknowledgement receipt to SHG since January, 2010.
This ensured prompt reporting by field staff and eliminated opportunities to misuse of money
recovered from groups, besides it facilitated proper monitoring of recovery at regional office and
head office.
Impact Assessment of Technology Adoption in Microfinance in India Page 39
(Annual report, 2010, Sanghmitra Rural Financial Services, Bangluru)
Pushtikar, a Jodhpur-based cooperative MFI, has introduced handheld devices to cover clients
at their doorsteps especially for collecting periodic payments. This is an MFI, registered under
the Multi-State Cooperatives Act, engaged in thrift and credit. It provides individual loans and
also forms and finances women self-help groups (SHGs), through four branches. Handheld
devices (similar to credit card transaction machines, but without any reading capability such as
magnetic strip or biometric) with a printer and inbuilt memory are used by their field staff. As
indicated by the MFI, the device costs Rs 12,500 per machine (supplied by Albertsons).
Thus it may be concluded here that Hand held devices are used in India as well as other part of
the world. Prevalence was more in African countries. India adoption was less as compared to
African and Latin American countries.
PERSONAL DIGITAL ASSISTANTS
PDAs are small, handheld digital computers that can run specialized programs to manage MFI
and client data and perform financial calculations. Using PDAs, loan officers can consult an
electronic list of borrowers in arrears to plan collections visits, review clients ready to apply for
their next loans, and refer to historical client information, while working in the field. Loan
officers can even fill out that that loan applications forms on the PDA and calculate the
indicators used for loan review and approval. Virtually all client data and client visit records are
stored electronically and are immediately available in a device small enough to fit in a shirt
pocket. Since PDAs are a platform that can run various software programs, MFIs can use the tool
to improve performance in a range of tasks. MFIs may want to employ PDAs to standardize their
credit methodology and operating policies, improve loan officer efficiency, and increase data
accuracy and access in the field.
In Latin America, where increasing competition is forcing MFIs to lower costs and improve
service, several MFIs are using PDAs to save on relatively high labor costs (CGAP). It helps in
Customer acquisitions, Certification to origin, tracking produce for payments. PDA technology
does not replace an MIS. Rather, it requires a well-functioning MIS for effective results. Any
changes to an MIS after implementation of PDAs may necessitate changes to the PDA software
to maintain compatibility.SKS Microfinance (India) implemented PDAs to record transaction
data during group meetings, not for detailed loan analysis. PSHM (Albania) and ACCION Latin
Impact Assessment of Technology Adoption in Microfinance in India Page 40
America are using Personal Digital Assistants. BanGente and Banco Solidario have improved
workflow efficiency, reduced operational costs, and made better information available to loan
officers. Fin Comun‘s used PDA technology which has increased the consistency of work among
loan officers and saved staff time in the field.
in Mexico Asociación Programa Compartamos—an MFI targeting very low-income women—
is experimenting with Palm Pilot (a brand of PDA) usage in cases where greater productivity is
predicted and integration with MIS is justified. PDAs are small portable handheld computers that
can allow loan officer‘s access to his/her Institution‘s MIS from the field. Depending on location,
information can be updated by the loan officer to the head office instantaneously or every day,
which decreases the need for data entry clerks.
In India Dharani Mahila Macs, a microfinance institution in Andhra Pradesh, has decided to introduce
first Personal Digital Assistant (PDA)-based Management Information and Credit Monitoring System
with technology back up by Hyderabad-based Elitser IT Solutions. The PDA, a hand-held device, will
help to carry information, make collections and issue receipts instantly to the clients. The collected data is
stored and updated to the computer at the headquarters. Based in Bachannapet, Warangal District,
Dharani Mahila Macs has 3 branches and around 7,000 members. Using a tailor-made solution for
member-lending methodology, the technology can integrate PDAs, biometric solutions and smart cards
for enabling ease in managing field operations typical to microfinance organisations, said a statement.
The software solution also supports mobile phone based technologies and is available with multilingual
facility.
Figure: Dharani Mahila Macs
Impact Assessment of Technology Adoption in Microfinance in India Page 41
Based in Bachannapet, Warangal District, Dharani Mahila Macs has 3 branches and around
7,000 members. Using a tailor-made solution for member-lending methodology, the technology
can integrate PDAs, biometric solutions and smart cards for enabling ease in managing field
operations typical to microfinance organisations, said a statement. The software solution also
supports mobile phone based technologies and is available with multilingual facility.
Equipped with features like automated SMS alerts, e-mails to clients, mail-merge facility for
sending letters to clients, facility to track, scan and store documents, the product also features
Financial Accounting and Management Information systems to serve any microfinance
institution irrespective of its lending model, said the statement, highlighting further that the
savings module covers all types of thrift activities pertaining to microfinance.
The software enables financial accounting reports, comparative financial statements, member-
related reports, operating reports, management reports, funder reports, field officer-wise reports
and other miscellaneous data that is required by all stakeholders in microfinance operations.
Thus it may be concluded here that PDAs are used in India as well as other part of the world.
Prevalence was more in African countries, Maxico, Latin America. India adoption was less as
compared to African and Latin American countries.
BIOMETRICS TECHNOLOGY
It Measure‘s an individual‘s unique physical or behavioural characteristics to recognize and
confirm identity. It helps in clients‘ identification and system security. In Malawi it helps in
client identification and system security. In Malawi Opportunity international also uses this
technology.
In India Punjab national Bank has started using biometric ATM for their rural and uneducated
customers. Vortex‘s solar-powered Gramateller with built-in Biometric capabilities, Gramateller
ATMs have been used by the Government to disburse wages under the MGNREGA (Mahatma
Gandhi National Rural Employment Guarantee Act) programme.
Impact Assessment of Technology Adoption in Microfinance in India Page 42
Thus it may be concluded here that biometric devices are used in India as well as other part of
the world. Prevalence was more in Malawi. In India adoption was less as only restricted to
banks.
MOBILE PHONES/BANKING
Mobile phones can be used for financial services in three different ways: for micropayments (m-
commerce), as electronic money (e-money), and as banking channel Consumers of Tata. The
key potential benefits of using mobile phones to deliver banking services are lower cost of
deployment for MFIs and greater choice and control over financial services by the client. The
potential benefits of mobile banking should be related to an MFI‘s own strategic drivers. The
four core strategies that MFI may follow to promote and protect growth are: 1) increase market
penetration; 2) sell more services to existing clients; 3) retention of most valuable clients; and 4)
reduce cost of service provision. In a year of 2010, mobile banking users soared over 100 percent
in Kenya, China, Brazil and USA with 200 percent, 150 percent, 110 percent and 100 percent
respectively.
In South Africa WIZZIT Bank was established as a commercial, mobile phone-based bank,
operating off of the banking license of the South African Bank of Athens. With a combination of
ATMs, POS devices, and Maestro cards, WIZZIT clients have access to cash across the country,
allowing them to perform more than just mobile banking transactions. WIZZIT uses USSD
technology that allows for a continuous session with instantaneous responses. The transactions
are done in a single session and the system notifies the client when the transaction is completed.
The WIZZIT service works with any type and generation of cell phone. Customers of WIZZIT or
MTN Banking in South Africa use their phone as the primary way of accessing their bank
account. MTN, a mobile network operator, is partnered with Standard Bank, and WIZZIT is
partnered with the South African Bank of Athens. Customers load cash into their bank accounts
at branches or automatic teller machines (ATMs), or through a direct deposit of salary, and can
use their mobile phone to purchase airtime and make payments, transfers, and balance inquiries.
With the help of international agencies like International Finance Corporation these
technologies were tired in least developed countries like Africa, Latin America, and Asian
countries. In June 2010, the Financial Services for the Poor initiative at the Bill & Melinda Gates
Impact Assessment of Technology Adoption in Microfinance in India Page 43
Foundation partnered with USAID on the Haiti Mobile Money Initiative (HMMI), featuring a
$10 million fund to provide incentives to mobile service providers to quickly launch and expand
m-money services. Notably, Digicel, Haiti‘s leading mobile provider, won the first-to-market
prize of $2.5 million in January 2011 after launching its Tcho Tcho Mobile service. Soon
thereafter, Voila, Haiti‘s second largest mobile provider, released its T-Cash m-money service
and received a $1.5 million USD second-to-market award. To help monitor the impact of the
HMMI as well as m-money service use and financial access in general, the Gates Foundation
commissioned InterMedia to design and conduct a series of household surveys of Haitian adults
(aged 18+). The first Haiti Mobile Money Tracker (HMMT) survey was conducted in March
2011, in the early days of m-money usage, and sampled all ten Haitian administrative
departments based on figures from the latest census in 2003. Follow-up surveys will be
conducted to establish usage trends – hopefully based on a more up-to-date 2011 census.
InterMedia‘s HMMT Online Data Analysis Tool allows financial access practitioners and
stakeholders to dive into the survey data themselves in a user-friendly way. The combinations of
financial, mobile and demographic data are easily cross-referenced to support project planning
and analysis.
In the Philippines, Globe Telecom lets customers load cash (or G-Cash) onto their mobile phones
at partner merchants or Globe outlets. For one million customers, G-cash is real value that can be
stored and withdrawn as hard cash, transferred to a friend across town or across the world, or
used to pay for products at restaurants and stores. In addition, customers of Globe, and of
Safaricom in Kenya (which has a similar product called M-Pesa), can use their virtual money to
repay loans to, or make deposits in, microfinance institutions.
HIFIVE was established in June 2010 as part of a longer term response to the disaster in an effort
to establish long term financial services for all Haitians; HMMI was created by the Bill &
Melinda Gates Foundation in partnership with USAID. HMMI, implemented by the USAID
project HIFIVE, provides incentives to encourage mobile operators and financial institutions to
launch mobile money services. It has tied up with Haiti Mobile Money Initiative (HMMI).
Impact Assessment of Technology Adoption in Microfinance in India Page 44
Visa, is actively working with leaders in the mobile and financial services industry to deliver the
next generation of payments and financial services. VISA believed that mobile technology can
democratize financial services for billions of people worldwide by helping the industry overcome
historical challenges to deliver mobile financial services to more than 1 billion consumers
worldwide who own mobile devices but do not have a formal banking relationship.
Safaricom‘s M-Pesa is in the mobile banking world that it has come to be accepted by some as a
blueprint for mobile financial services. The service relies on the phone in the hands of the
customer (now more than 12 million) to perform transactions and the phone in the hands of the
agent (all 20,000 of them) to credit and debit accounts. But in markets that have either lower
penetration of mobiles or higher fragmentation among operators, offering over-the-counter
(OTC) payment services.
G-Cash in Philippines is a mobile banking solution offering a range of payment services through
the use of unstructured supplementary service data (USSD) in an SMS-like format type. G-Cash
is operated by G-Xchange Inc (GXI), a wholly-owed subsidiary of Globe Telecom. The
subsidiary manages all of the G-Cash operations and is registered as a financial company. G-
Cash started operations in 2004 and now has more than 3,100 outlets.
It is providing following services:
i. Payment for goods and services: At any G-Cash outlet, including utility companies,
schools, and grocery stores.
ii. Cash withdrawals: At authorized G-Cash stores.
iii. Deposits: G-Cash can make deposits through the Text-a-Deposit (TAD) service,
iv. Money transfer services: G-Cash allows clients to receive and send local and
international money transfers.
v. Account balances.
vi. Airtime transfers between two client accounts.
(Source: www.globe.com.ph/gcash/)
K-Rep in Kenya in adopting cell phones for banking purposes. The K-Rep experience with the
use of the mobile phones was brief and did not prove successful.
Impact Assessment of Technology Adoption in Microfinance in India Page 45
By implementing a mobile banking system, K-rep wanted to offer the following services to its
clients: Money transfer between accounts, Account balance inquiries, and Mobile real-time
transfers between accounts.
The main problem with K-rep‘s mobile banking solution was an inappropriate choice of vendor
and technology type. The bank‘s technology provider was not able to provide an unstructured
supplementary service data (USSD) technology capable of a reliable transfer of transactional
data. Several of K-rep‘s mobile transactions were lost between the phone and the bank, creating
issues with the transaction reconciliation. The USSD is a technology that permits subscribers of a
mobile phone carrier to send and request information, normally with the use of text menus,
between a mobile phone and a network application. The information exchange under USSD is
done in a continuous session with real-time responses, allowing transactions to be completed in
one session. Hence, the user does not need to wait for a text message response or SMS to
complete a transaction. (Source: www.shorecapexchange.org/k-rep)
Mobile banking is used in many parts of the world with little or no infrastructure, especially
remote and rural areas. This aspect of mobile commerce is also popular in countries where most
of their population is unbanked. In most of these places, banks can only be found in big cities,
and customers have to travel hundreds of miles to the nearest bank.
In Iran, banks such as Parsian, Tejarat, Mellat, Saderat, Sepah, Edbi, and Bankmelli offer the
service. Banco Industrial provides the service in Guatemala. Citizens of Mexico can access
mobile banking with Omnilife, Bancomer and MPower Venture. Kenya's Safaricom (part of the
Vodafone Group) has the M-Pesa Service, which is mainly used to transfer limited amounts of
money, but increasingly used to pay utility bills as well. In 2009, Zain launched their own mobile
money transfer business, known as ZAP, in Kenya and other African countries. In Somalia, the
many telecom companies provide mobile banking, the most prominent being Hormuud Telecom
and its ZAAD service.
Telenor Pakistan has also launched a mobile banking solution, in coordination with Taameer
Bank, under the label Easy Paisa, which was begun in Q4 2009. Eko India Financial Services,
the business correspondent of State Bank of India (SBI) and ICICI Bank, provides bank
accounts, deposit, withdrawal and remittance services, micro-insurance, and micro-finance
Impact Assessment of Technology Adoption in Microfinance in India Page 46
facilities to its customers (nearly 80% of whom are migrants or the unbanked section of the
population) through mobile banking.
Dutch-Bangla Bank (www.dutchbanglabank.com) launches the very first mobile banking service
in Bangladesh on 31 March, 2011. This service is launched with ‗Agent‘ and ‗Network‘ support
from mobile operators, Banglalink and Citycell. Sybase 365, a subsidiary of Sybase, Inc. has
provided software solution. There are around 160 million people in Bangladesh, of which, only
13 per cent have bank accounts. With this solution, Dutch-Bangla Bank can now reach out to the
rural and unbanked population, of which, 45 per cent are mobile phone users. Under the service,
any mobile handset with subscription to any of the six existing mobile operators of Bangladesh
would be able to utilize the service. Under the mobile banking services, bank-nominated
‗Agents‘ perform banking activities on behalf of the banks, like opening mobile banking
account, providing cash services (receipts and payments) and dealing with small credits. Cash
withdrawal from a mobile account can also be done from an ATM validating each transaction by
‗mobile phone & PIN‘ instead of ‗card & PIN‘. Other services that are being delivered through
mobile banking system are person-to-person (e.g. fund transfer), person-to-business (e.g.
merchant payment, utility bill payment), business-to-person (e.g. salary/commission
disbursement), government-to-person (disbursement of government allowance) transactions.
Brand banking, Korea uses Mobile banking uses the same infrastructure like the ATM solution.
But it is extremely easy and inexpensive to implement. It reduces the cost of operation for
bankers in comparison to the use of ATMs. They were also using compact HTML and WAP
technology. In countries like Korea, two SIM Card is used in mobile phones one for the
telephonic purpose and the other for banking. Bank account data is encrypted on a smart-card
chip. About 3.3 million transactions were reported by Bank of Korea in 2004.
In Kenya, the Financial Institutions Supervision Department is responsible for the prudential
regulation of banks and deposit taking MFIs. The country‘s National payment system (NPS)
views M- Pesa (Third party provided – Non bank led model) as a payment service provider
dealing with e- money, however it does not have specific regulations to supervise the payment
system. With respect to bank led models, Central Bank of Kenya (CBK) is approving agents on a
hoc basis. It exercises its approval right in its sole discretion. The telecommunications regulator,
Impact Assessment of Technology Adoption in Microfinance in India Page 47
Central Communications of Kenya (CCK) and the National Communications Secretariat agree
that the central bank should oversee financial services offered by MNOs. CBK is primarily
responsible for regulating and supervising the payments system. There are no licensed credit
reference bureaus yet in Kenya, but there are firms providing some of the same services. (Liu
and Mithika.2009) The regulation of M- Pesa‘s services is not yet formalized by the Central
Bank, which has agreed to allow the transactions under the assumption that ―remittance is not
banking‖ and should be viewed as a payment service. The country has AML/CFT law in the
form of AML Bill 2007. The agents are not covered by any law.
South Africa has made it a priority to extend reliable financial service in spite of the e – money
to be issued by only banks. The South African Reserve Bank (SARB-Central bank of South
Africa) issued a Position paper on E- money enabling e- money issue only by banks. The
payments of bills are considered payment services, but transfer payments between people
(remittances) are considered deposits. Under the National Payment System Act, SARB is
permitted to delegate its responsibilities with respect to control of the national payment system
to payment Association of South Africa (PASA) which is the self regulatory body for payment
system. Bank Circular 6 and Exemption 17 allows bank to open mobile phone operated banks
accounts without face-to-face KYC procedures, beyond a limit, it is necessary. These data must
then be verified against a third- party source, such as credit bureaus or databases containing
information from the Department of Home Affairs. To transfer money Wizzit uses the well
developed South African inter-bank clearing house system as an autonomous division of the
South African Bank of Athens Ltd. The financial Intelligence Center Act (FICA) and its
regulations govern anti-money laundering. The country permits a range of player subject to
appropriate regulation.
M-Pesa M-PESA (M for mobile, pesa is Swahili for money)
is the product name of a mobile-phone based money
transfer service for Safaricom, which is a Vodafone
affiliate. It was initially developed by Sagentia
before transitioning to IBM.
Impact Assessment of Technology Adoption in Microfinance in India Page 48
The initial concept of M-PESA was to create a service which allowed microfinance borrowers to
conveniently receive and repay loans using the network of Safaricom airtime resellers.[3] This
would enable microfinance institutions (MFIs) to offer more competitive loan rates to their users,
as there is a reduced cost of dealing in cash. The users of the service would gain through being
able to track their finances more easily. But when the service was trialled, customers adopted the
service for a variety of alternative uses; complications arose with Faulu, the partnering
microfinance institution (MFI). M-PESA was re-focused and launched with a different value
proposition: sending remittances home across the country and making payments.
M-PESA is a branchless banking service, meaning that it is designed to enable users to complete
basic banking transactions without the need to visit a bank branch. The continuing success of M-
PESA, in Kenya, has been due to the creation of a highly popular, affordable payment service
with only limited involvement of a bank. The system was developed and ran by Sagentia from
initial development to the 6 million customer mark. The service has now been transitioned to be
operationally run by IBM Global Services on behalf of Vodafone, the initial 3 markets (Kenya,
Tanzania & Afghanistan) are hosted between Rackspace and Vodafone. The Bangko Sentralng
Pilipinas (BSP), the central bank of Philippines, in 2000, issued two circulars requiring banks
wishing to offer services via electronic channels to seek prior approval from payment system unit
of BSP before offering them to the public. Pursuant to the circulars, five commercial bank (each
having applied individually) have entered into partnerships with smart, the largest MNO, to use
the Smart Money mobile payments platform for account opening, marketing, data processing and
other functions. In Philippines, e- money is not considered as deposits. In 2006, the BSP passed a
circular for consumer protection, and it requires face to face check by remittance agents. Smart
money and G-Cash render international remittances services through mobile. A draft of the
Payments and Settlements system act is pending for implementation. And G-Cash was chosen by
Rural Bankers Association of Philippines and Microenterprise Access to Banking service
(MABS) to provide microfinance products to the rural poor. The country follows FATF‘s AML
CFT recommendation.
Branchless banking was started in MALAWI by Opportunity International Bank of Malawi
(OIBM). A $2.9 million joint program with The MasterCard Foundation, the CEBB is intended
Impact Assessment of Technology Adoption in Microfinance in India Page 49
to test the use of financial education in supporting branchless banking among low-income
populations in Asia and Africa. Spanning over 3 years, the programme seeks to strengthen
understanding of the value of branchless banking services among youth, women and the
unbanked, and to build financial capabilities that can support the adoption and sustained use of
mobile banking and electronic card services. Opportunity International Bank of Malawi is
currently offering its clients two branchless banking channels: ―Banki M‘khonde‖ and ―Banki
M‘manja‖ service. ―Banki M‘khonde‖ allow customers to use their bank cards at local agents to
perform cash in and out transactions whereas through ―Banki M‘manja‖ customers can access
their bank accounts using mobile phones. OIBM joins Mobile Transactions in Zambia, FINO
Fintech Foundation in India and RBAP-MABS in the Philippines as partners in the CEBB
program. Over the next year, Microfinance Opportunities will continue to work with these
partners to develop financial education toolkits for branchless banking.
The mobile Banking Services Report released by World Economic Forum 2011 reported that
India is strengthened with readiness of market environment and whereas the country has
competitive disadvantage in the agency network. Mobile banking in India, viewed by the
government as a potent tool for financial inclusion, is yet to clear many hurdles before it can
fulfill its objective of reaching the unbanked masses. RBI released operative Guidelines for
Banks on mobile banking. Bank are now permitted to offer the service subject to a daily cap of
Rs. 50,000 per customer for both funds transfer and transactions involving purchase of goods/
service with certain conditions. The challenges to the growth of mobile banking services depend
upon the various issues such as working of agency model BCs and BFs, Know Your Customer
(KYC) norms, mobile technology and risk connected with mobile banking services.
In India TATA DoCoMo has developed to pay mobile bills via SMS using an ItzCash card.
ItzCash Card Ltd, a multi-purpose prepaid cash card of its kind in the country, facilitates a
simple process of mobile bill payment wherein a Tata DoCoMo customer can SMS the keyword
PAYBILL, the amount, ItzCash account number and password and sends it to 121. ItzCash
Card, which was available in denominations ranging from Rs. 100 to Rs. 10,000, could be
obtained from their franchisees. The card also enables micro payments of Rs 10 also. With no
hidden costs, the card users get confirmation of transactions in real time. ItzCash Card Ltd., part
of the Essel Group established in 2004, has an annual turnover of Rs. 2000 crores.
(www.hindu.com/2009/12/03/stories/2009120360841600)
Impact Assessment of Technology Adoption in Microfinance in India Page 50
Cashpor Microcredit adopted ClassifEye's innovative camera-phone-based transactions and
authentication solution. This helped to facilitate broader financial inclusion, enabling Cashpor to
broaden its customer base and allow their agent-serviced customers to improve their financial
reach. It has also adopted mobile banking system with the partnership of ATOM technology
(Source : annual report, Cashpor Microfinance, 2010).
Eko has tied up with Centurion Bank of Punjab (CBoP) and launched a pilot in West Delhi‘s
Uttam Nagar area in February 2008. EKO financial services has established customer service
points manned by a bank correspondent, and use a secure password to withdraw or deposit
money into his account. Eko is based on the fundamental premise of reducing the cost of secure
financial transactions and providing an extremely intuitive user interface such that access to
financial service can be democratized. Eko works as a Business Correspondent of State Bank of
India, ICICI Bank and as a distribution partner of Bharti AXA Life Insurance. It provides the
ability for these customers to deposit cash, withdraw cash, remit funds and pay the insurance
premium at these local ‗kirana‘ like stores. It has network of more than 1000 retail outlets
(processors, pharmacists, cybercafé, etc) across 5 states in India i.e, Delhi- NCR, Bihar,.
Jharkhand, Maharastra & Uttar Pradesh). It has 75000 customers, processes more than 2 million
across 25000 transactions per day. SBI in collaboration with Bhopal based organisation AISECT
has launched mobile banking services in Madhya Pradesh. Two mobile banking vans fitted with
ATM and Kiosk banking machanisms have started operation in the districts of Hosangabad and
Tikmgarh to provide banking services to rural population. Additionally AISECT and SBI have
launched a scheme to benefit the rural migrants who are hesitant to enter corporate banking set
up.
The ZERO platform is based on new generation mobile phones and Fingerprint authentication
which converts new generation low-cost NFC (Near Field Communication) mobile phones with
large storage capacities as a secure, self-sufficient bank branch, with biometrics based customer
ID, for customer enrollments for no-frills accounts and all types of transactions in the village
with the local Customer Service Point operator acting as a Teller. Existing Mobile
communications networks are used for all transaction uploads, downloads and application
updates. The platform ensures that banking facility is provided to the right people at the right
time and the right amount of money is transacted. The CSPs are equipped with a mobile phone
Impact Assessment of Technology Adoption in Microfinance in India Page 51
and a Fingerprint Scanner cum Receipt Printer to carry out Banking and Payment transactions
(i.e. Cash Deposit, Cash Withdrawal, Account to Account Transfer, Balance Enquiry, Mini
Statements, etc.) using both online connectivity to Banks and in an offline mode.
The RBI guidelines 2008 and 2009 reflect a fact that RBI plans to provide additional guidance
for mobile banking to take off. And RBI indicated that it sees high potential for electronic
banking to increase efficiency and have concern for mobile security, particularly authenticating
users accessing bank accounts remotely. The mobile payment is being guided by the payment
and settlements systems bill 2008 and the country has an agency model called BC model and the
Prevention of Money Laundering Act 2002 govern the AML/CFT. There are few pilot projects
going on in few States of India, however all the projects are under bank led model, of which,
FINO (a financial services technology provider) emerged just three years ago, reached 10 million
poor clients with various financial services on behalf of banks. FINO has launched FINO-
MITRA (Mobile Based Information and Transactions) a comprehensive set of end-to-end
offerings for enabling microfinance initiatives leveraging mobile as a platform. SKS micro
finance, from India, is testing m- banking model in the State of Andhra Pradesh in collaboration
with Andhra Bank.
Thus it may be concluded here that mobile banking is used in India as well as other part of the
world. Prevalence was more in African countries, latin America, East Asia, Europe etc. In India
Banking correspondence and mobile service providers has started mobile banking apart from
commercial banks.
MOBILE BRACHES /ATM
It is ATM on a truck or a branch in a bus that goes from one village to another in rural area,
which can be served infrequently. It helped in Customer acquisition, Product servicing,
disbursements and collection. Some of the security features built into mobile units are a dial up
alarm system that communicates over cellular or land line, door contacts, PIR, motion detectors,
Impact Assessment of Technology Adoption in Microfinance in India Page 52
double squeeze buttons, siren, tilt device, ignition lock out and security camera's. Global
Positioning Systems and armor protection with BR windows are additionally available.
In abroad many of the banks uses mobile branches/ ATMs some of the examples are SunTrust Banks,
PNC Banks, Star Bank, Regions Bank, Bank of China, Qatar National, Amsouth Banks, Barnett
Banks, Tinker FCU, Inter. Bk of Commerce, Colonial Bank, Bank Atlantic, Bank of Boston, Five
Points Credit Union, Ridgewood Savings Bank, Regions Bank, Suncoast Schools FCU,
Woodlands Bank, Whitney Bank, Huntington Banks, Parda FCU, Crestar Bank, Visa-Winter
Olympics, Omni Bank, Sowa Bank, Japan, Fifth Third Banks, Chevy Chase Bank, M&T Banks,
Standard Charter, Ghana, Inco FCU, US Banks, Kuwait Finance House, Muscat Bank, Oman,
BankUnited, FL, Banco Popular, Bk of Guam, Ridgewood Saving, First Union, Glendale Federal,
BB&T, Security Service FCU, Union Planters, Bay Bank, North Fork Banks, Alhamrani U, Saudi
Arabia, First State Bank, Texans U, Guaranty Banks, North Jersey FCU, FL Telco CU, Wells
Fargo, Bank of America, State Street Bank, Core FCU, Shawmutt Bank, Riverside Bank,
Southside Bank, State Empl. CU, NC, Cinco FCU, Omni American CU, Visa-Atlanta Olympics,
Qatar Islamic Bank etc.
In India Tamilnadu Mercantile bank have Learn more about the extensive global branch network
of Tamilnad Mercantile Bank established 2 mobile bank braches apart from 251 full fledged
branches all over India, 1 Service Branch, 7 Regional Offices, 11 Extension Counters, and 263
Automated Teller Machines. Learn more about the extensive global branch network of
Tamilnadu Mercantile Bank. UCO Bank today has also planned to open 100 mobile branches
across the country to make mobile banking services available to the people within a year.
The State Bank of India (SBI) in association with the Bhopal based organization AISECT have
started mobile banking services catering to villages in the state of Madhya Pradesh. This service
is a part of the Financial Inclusion Scheme. Corporation Bank has introduced branch-less
banking facilities including a mobile ATM van and a financial literacy and credit counselling
centre. The "Corp Vikas" mobile van will provide ATM (automated teller machine) services
while plying at a fixed route, and will stop at specific locations at fixed timings. The mobile
ATM van will also have internet connectivity facilities, and will showcase short films or
Impact Assessment of Technology Adoption in Microfinance in India Page 53
important general information on matters of financial literacy and inclusion. The staff in the van
will help customers in filling up account opening forms and loan applications, and also in
collecting the same from them for submitting in the branch. The bank has opened more than 1.3
million no-frills accounts across the country through its branch-less banking model.
The service is comprised of two mobile vans equipped with an ATM machine and a banking
kiosk. This service has been started keeping in mind the rural population which is not
comfortable in visiting corporate banking setups and tend to make use of slower traditional
banking methods. The new service will help people in making remittances and open fresh
accounts with the bank. This service has been projected to cover most of the districts of Madhya
Pradesh State and Chhattisgarh State also. The security systems designed into mobile branches
were designed by one of the largest bank security companies in the country. Additionally, the
designs are continuously reviewed by our customers' security personnel and modified to their
specific requirements. Thus it may be concluded that mobile branches has helped in providing
financial services in remote areas in India and other countries.
INTERACTIVE VOICE RESPONSE TECHNOLOGY
IVR technology may be a viable solution for MFIs that seek to enhance customer service and
reduce the bottlenecks in day-to-day operations that are caused when large numbers of clients
request simple information from staff at branch offices. An investment in IVR technology would
only be cost-effective for institutions that have a fairly large number of clients and that have
clients who have access to telephones and are comfortable with them and electronic technologyIt
allows callers to request information from, or conduct business with, an automated system by
speaking into a telephone or inputting information through its keypad. It helps in Client
information access, and product, account or branch information. Edyficar (Peru)/Voxiva (Peru,
worldwide) uses Interactive Voice Response technology.
EDYPME Edyficar (Peru) Edyficar implemented IVR technology to limit the amount of staff
time at its branch offices consumed by responding to client information requests. Its objective
was to reduce the number of client visits to a branch and the costs of serving each account, while
increasing the quality of customer service. After considering several options, including opening
mini-offices for information requests only, the organization began considering technology-based
Impact Assessment of Technology Adoption in Microfinance in India Page 54
solutions. Edyficar‘s board, senior management, and staff all view technology as one of the
institution‘s key competitive advantages and historically have been willing to invest in
technology to realize benefits in the future. In 2002, Edyficar implemented a pilot IVR system
(called EDYFONO) hosted by Voxiva, Inc. The pilot was designed to help Edyficar understand
(a) the geographic areas from where clients would use the service more frequently, (b) the
percentage of callers that would be clients, (c) the economic status of those clients using the
service, and (d) the most popular services on the IVR system. Within three to four months of
launching the new EDYFONO service, Edyficar received 1,500 calls per month, but only about
50 percent of those calls were clients accessing account information. The other calls were from
people seeking more information about Edyficar‘s services. A significant percentage of calls
came from outside the geographic regions where Edyficar operates, which drove up operating
costs without providing immediate benefits.
Based on the number of clients that used the EDYFONO service, and the reduced number of
visits to its branch offices, Edyficar decided to install IVR technology in its main offices to
prepare for expanding the implementation. At present, Edyficar has suspended the automated
service while the transition takes place, and while the communications network in its region
stabilizes after having been acquired by a foreign operator. It is also upgrading its MIS to
integrate the in-house IVR system (http://www.voxiva.com).
In India Elister IT solution has developed IVR technology for their microfinance institutions
clients.
INTERNET BANKING
It is Web-based application (fund transfer, bill payments, securities trading etc). It helps in Loan
servicing and payment transaction and Payment transactions.
The adoption of electronic banking in sub-Saharan Africa is expected to surge during the next
few years, despite it being a developing market. With improvements in delivery channels, the
scope for automation and back-office integration - based on electronic banking - will grow.
Africa was the fastest growing cellular phone market in the world in 2005. From 1999 to 2004,
the number of mobile subscribers in Africa rose to 76.8 million from 7.5 million, an average
Impact Assessment of Technology Adoption in Microfinance in India Page 55
annual growth rate of 58%. Growth in Internet use in Africa from 2000 to 2006 was the highest
of all world regions at 625.8%, compared with 479.3% for the Middle East, 245.5% for Asia,
193.7% for Europe, 141% for Oceania/Australia and 112% for North America. And the potential
for further growth in Africa is significant, with only 3.6% of the population using the Internet.
Africa accounts for only 3% of Internet use globally. More than nine out of every 10 Standard
Chartered Bank customers who use electronic banking in sub-Saharan Africa do so via the
Internet. (Vinod Madhavan 2007).
There are numerous benefits of electronic banking, and banks are continually trying to improve
security. There is a wide range of delivery channels available, depending on a company's
requirements in terms of volume of transactions and overall cost. Most delivery channels can
support cash management and trade functions in most African markets. Although electronic
banking is still relatively undeveloped in Africa, it has significant growth potential.
During the next few years, the adoption of electronic banking in sub-Saharan Africa is likely to
surge. The attraction of markets such as South Africa for the establishment of shared service
centres will increase the take-up rate. As improvements in delivery channels are introduced, the
scope for automation and back-office integration will grow.
Grameen Koota has partnered with Money Gram international Inc to offer remittance services
to both clients and non – clients in rural and semi urban areas. The moneygram international is a
global repayment company.
Axis Bank in India, one of the leading private sector banks in India, replaced its home grown
legacy system with SunTec's TBMS-F solution and established a centralized dynamic billing and
pricing framework, thus increasing its operational efficiency significantly. The Relationship-
based Pricing and Centralized Billing product suite enabled Axis Bank to manage fee billing for
current account, cash credit and savings account banking functions. TBMS-F also provided Axis
Bank with the ability to offer personalized product packages to specific customers or groups of
customers, and also to go to market with fresh product packages and promotional plans quickly.
(Axis bank, Annual report, 2010). Punjab national Bank in Bihar has started specialised
microfinance branch which is providing all the facilities to self help groups.
Impact Assessment of Technology Adoption in Microfinance in India Page 56
ICICI Bank also employed Business Correspondent (BC) model to extend financial services
especially the much-needed savings services to rural customers. In the pilot stage, the
transactions by BC are being done with the help of an 'e- Passbook' and an Authentication
Device (AD). The e-Passbook can display and store the customer KYC information, customer
account details and the transactions in each account. It also has a unique feature of biometric
authentication by the way of fingerprints, thereby mitigating the risk related to PIN (Personal
Identification Number) in the rural scenario. ADs provide Customer interface with user-friendly
menu options, enabling transactions. Business facilitators, referred to as ‗Vikas Sahyogis‘, are
outsourced channels that generate business opportunities for the Bank. Network of Vikas
Sahyogis has been set to act as referral or sourcing agents for loans, insurance and investment
products. These centres are operated by local people with existing relationship with the Bank‘s
customer segments. Vikas Sahyogis include agri input dealers, tractor dealers, automobile dealers
and diesel dealers.
HDFC Bank offers products and services such as savings, current, fixed & recurring deposits,
loans, ATM facilities, investment products such as mutual funds and insurance, electronic funds
transfers, drafts & remittances, etc. The Bank also leverages these branches as hubs for other
inclusion initiatives such as direct linkages to self help groups and joint liability groups, bank
on wheels, point of sale (POS) terminals and information technology enabled kiosks, and other
information & communication technology (ICT) backed initiatives in these locations. Under the
Project Jharkhand program the Bank has launched its services at a Common Service Centre
(CSC) in Kanke (Ranchi) comprising over 1.5 lakh households spread across 100 villages in
30 Panchayats. The Bank also adopted Chakala village near Ranchi as part of the programme.
The programme envisages covering over 45 lakh households in the State through both the
CSC and village adoption models, subject to regulatory provision. CSC is an integral
component of the Central Governments National e-Governance Plan that seeks to set up over
5,000 CSCs in Jharkhand and about 100,000 in the country. (Source: HDFC Bank Annual Report 2011).
Glodyne Technoserve, a technology services company in partnership with the Government of
Bihar has rolled out rural financial inclusion services in the state providing banking facility to
the 25 million ‗E-shakti‘ MNREGS (National Rural Employment Guarantee Scheme) project.
Smaarftech Technologies, a subsidiary of Glodyne Technoserve Limited which is implementing
Impact Assessment of Technology Adoption in Microfinance in India Page 57
the ‗Eshakti‘ project in the state has initially partnered with Central Bank of India. Under this
scheme, ―No Frills‖ Bank Account will be opened for every beneficiary as per KYC norms and
payment of wages will be done through banking channel. Glodyne, through its subsidiary
Smaarftech Technologies has partnered with the Rural Development Department of the
Government of Bihar for implementing and managing the National Rural Employment
Guarantee Scheme (NREGS) project in Bihar, ‗E-shakti‘. (www.glodynetechnoserve.in/)
Standard Chartered Bank, India‘s largest international bank, announced the launch of its online
remittance service, Transfer2Home, as part of its NRI services offering. The service will enable
customers to transfer money to India from USA, UK, UAE, Singapore, Hong Kong and Bahrain.
Standard Chartered has tied up with Times of Money in order to service customers in United
Kingdom, United Arab Emirates, Singapore, Hong Kong and Bahrain. The Bank has also entered
into a strategic arrangement with BNY Mellon for providing Automated Clearing House (ACH)
based remittance service from the United States. BNY Mellon is the global leader in asset
management and securities servicing. ( http://transfer2home.in)
3i Infotech Foundation (3i Infotech) has joined hands with the State Bank of India (SBI) to
provide 'Kiosk Banking' facilities to the rural citizens of India. 3i Infotech is a National Business
Correspondent for SBI, and shall leverage the I-SERV stores across rural India to provide
banking services to the hitherto unbanked population of the country. These services include
opening of accounts, cash transactions, deposits (Fixed and Recurring Deposits) and loans (Crop,
Home, Automobiles, Business, etc.). The tie-up, which will provide SBI access to over 6,000
villages in Tamil Nadu alone through more than 2,000 I-SERV stores of 3i Infotech (apart from
various other states where it will be gradually rolled out) over a course of time, will go a long
way in achieving the goal of financial inclusion in the country, especially in rural India.
The I-SERV initiative of 3i Infotech I-SERV model will involve the use of biometric devices,
which will enable verification and authentication of the identity of customers through recognition
of their fingerprints. It will therefore enable a rural customer to carry out the aforementioned
banking transactions at the remotely located Kiosk, instead of having to travel several miles to
the nearest bank branch.
(Source: SBI, National initiative on financial inclusion, 2010)
Impact Assessment of Technology Adoption in Microfinance in India Page 58
Tata Indicom has tied up with Corporation Bank and Paymate to launch Tata Indicom Green
Money Transfer. Tata Indicom hopes that Tata Indicom Green Money Transfer can bring the
unbanked millions of Indians closer to the banking system. This will result in better financial
inclusion and economic freedom. Facts support the case for mobile banking in India, where there
are millions on the countryside who don‘t have bank accounts, but have a mobile phone instead.
In many African countries, mobile phones have become an alternate banking tool for many
people who don‘t have bank accounts.
DhanaX is an online-offline person-to-person lending platform that allows Indians to lend and
borrow money from each other DHANAX is inspired by the idea of an online community‘s
ability to come together and help each other. NGOs take up the task of disbursing these loans to
needy communities in their areas of operation. Interest is charged at 24%, of which DhanaX
keeps approximately 6%. (Source: DhanaX Information Services Pvt Ltd,)
There are systemic problems often thought to be typical of the developing world: poverty,
illiteracy, unreliable power supply and poor telecommunications. This hinders adoption of
internet banking. But this is also growing very fast with the development around the different
parts of world apart from India.
RURAL/MICROFINANCE ATM
Prodem is a microfinance institutions has installed 20 smart operated automatic teller machine
inside its branches. These ATM is unusual as that they incorporate fingerprints readers for clients
verification rather than PIN technology. For Prodem primary benefits of ATM network is greater
convenience for customers and increased deposit mobilisation.
BankoADEMI partnered with A TODA HARA (ATH), an electronic fund transfer service
providers that operates a network of 1000 rural ATMs supported by ATH. It provides 24 hour
acess to fund to its clients through multiple location.
MEB Kosovo has installed ATM to help the overburdened network of seven branches. It has
partnered with compass plus of Russia to design and implement an ATM network to support its
Impact Assessment of Technology Adoption in Microfinance in India Page 59
increasing client base. it also uses walled ATM rather than stand alone for greater security
(adapted from Whelan 2005.
In India none of microfinance institutions have ATM network. Because microfinance institutions
worked on group methodology and cannot accept deposits so that they do not have stated with
ATM. There is power shortage in rural areas. There is an attempt to start Rural ATM. Vortex
Engineering, a pioneer and leading provider of Rural ATMs (Automated Teller Machines),
announced India‘s first large-scale rollout of Solar ATMs. This rollout follows the winning of an
order from State Bank of India for a deployment of 545 ATMs across semi-urban and rural India.
Of these 545 ATMs, over 300 will be solar-powered. A conventional ATM consumes about 1000
W of power and requires an air-conditioned environment-another 1500 W-for functioning. Thus,
a conventional ATM consumes about 1800 units of power every month. Vortex‘s Solar-powered
Gramateller Duo ATMs consume less than 100 W of power and do not require air conditioning,
thus consuming less than 72 units per month. This indicates a saving 1728 units per month and at
least Rs 1,20,000 per year (at a conservative commercial rate of Rs 6 per unit) when compared to
a conventional ATM installation. Compared to conventional ATM installations, Vortex‘s solar-
powered Gramateller Duo ATMs reduce CO2 emissions by at least 18,500 kg per year. With
built-in Biometric capabilities, Gramateller ATMs have been used by the Government to
disburse wages under the MGNREGA (Mahatma Gandhi National Rural Employment Guarantee
Act) programme.
(www.vortexindia.co.in)
Equity Building Society in Kenya were doing their operation manually initially. Its growth was
slow and profitability was marginal. Equity installed its first IT system, Bank 2000, and within
one year, its total number of accounts rose to 100,000 and its ability to process accounts tripled.
It was doing two or three times the business as before without increasing its staff. With manual
systems, there had been a physical limit to the number of people they could serve, but that limit
was burst by technology. As Equity gradually developed and refined its system, particularly user
interaction with the system, they were able to significantly increase staff productivity.
BANKING CORRESPONDENCE MODEL
Impact Assessment of Technology Adoption in Microfinance in India Page 60
According to the Central Bank of Brazil, Correspondent Banking (CB) is “a measure aimed at
extending services to bank clients in areas where that bank did not have a branch”. Introduced
in the 1970s, the correspondent banking channel has risen in relevance, especially after 1999
when regulatory changes broadened the range of services that could be offered by correspondent
banking agents. As the fifth largest country in the world with a population of 201 million, Brazil
has correspondents covering 62 percent of the total number of points of service of the financial
system. All of the 5,564 municipalities in Brazil are now reached by the channel, with 25% of
the municipalities being served only by correspondents. Between 2000 and 2008, the
correspondent banking system grew 85.5 percent while bank branches grew only 16.7 percent,
clearly indicating the increasing presence of the channel. Brazilian Central Bank (BCB) launched
a financial inclusion program to improve financial access in the country. Similarly commercial
banks were in a position to benefit from exploring correspondent banking as a noteworthy
business model. Given the years of hyperinflation in the early 90s, banks undertook technology
improvements to allow for fast transaction processing. At the same time, banks became the
predominant recipients for bill payments, as the public sought quick deposit and use of their
rapidly depreciating currency. The resulting considerable increase in foot traffic to branches
related to payment business became a strong driver for the need to find a cost effective
alternative.
In India, financial inclusion has been a focus of attention in recent times. However, the facts
above reveal the real and somewhat uncomfortable picture. The increase in the number of
branches has not answered the needs of the farmers; and reaching the unbanked population to
enable inclusive growth is a serious problem today. Branchless banking could be the big step
towards providing easy financial access to the poor people and achieving financial inclusion. AP
model scheme operates on the financial inclusion platform; created by banks through their BCs.
Banks have been allotted specific mandals for bringing the unbanked population to the banking
system. As banks do not have branches at remote locations, the services of BCs are utilized.
These BCs organize enrolment camps at village level and collect information of the ‗would be
account holders‘ as also their biometric identification. The concerned government department
communicates the list of social security benefits to ensure that all intended beneficiaries in a
specific locality are brought under inclusive banking. Every account holder is issued a smart
Impact Assessment of Technology Adoption in Microfinance in India Page 61
card, which contains the basic data of the account holder along with the biometric data and
photograph. The BCs have been provided a handheld device that facilitates connecting to bank‘s
database and carry out cash-in and cash-out function on behalf of the bank. A day or two before
the due date of payment, the government gives a cheque to the bank along with the details of the
beneficiaries. The bank credits the accounts of the beneficiaries enabling the BC to access the
account balance through a mobile access device and disburse cash at gram panchayat level.
Eko financial services mobile phone is a low-cost, low energy consuming, always-on device that
has today breached geographic boundaries and consumer segments. Eko has tied up with
Centurion Bank of Punjab (CBoP) and launched a pilot in West Delhi‘s Uttam Nagar area in
February 2008.
EKO financial services has established customer service points manned by a bank correspondent,
and use a secure password to withdraw or deposit money into his account. Eko is based on the
fundamental premise of reducing the cost of secure financial transactions and providing an
extremely intuitive user interface such that access to financial service can be democratized. Eko
works as a Business Correspondent of State Bank of India, ICICI Bank and as a distribution
partner of Bharti AXA Life Insurance. It provides the ability for these customers to deposit cash,
withdraw cash, remit funds and pay the insurance premium at these local ‗kirana‘ like stores. It
has network of more than 1000 retail outlets (processors, pharmacists, cybercafé, etc) across 5
states in India i.e, Delhi- NCR, Bihar,. Jharkhand, Maharastra & Uttar Pradesh). It has 75000
customers, processes more than 2 million across 25000 transactions per day.
(Source: interaction with EKO financial services officials)
Reliance Communications (RCom) has entered into a strategic tie-up with Atom Technologies,
an m-commerce solutions provider from the Financial Technologies India Ltd group. The
agreement enables RCom offer a fast, secure, inter-operable and convenient platform to conclude
payment transactions using Reliance Mobile. Atom will offer, through RCom, multiple banks
(Indian and foreign) as well as merchants on a common platform, allowing its subscribers to
make payments across the entire merchant base. The transactions are secure and PIN protected.
Impact Assessment of Technology Adoption in Microfinance in India Page 62
Atom currently has merchant acquiring relationship with ICICI Bank, HDFC, Citi and Axis
Bank. (www.rcom.co.in/rcom/.../press_release_detail.jsp?id=362 –)
Indepay Networks has tied up with Tripura State Co-Operative Bank Limited (TSCB) to launch
rural banking services. The company will use a biometric enabled, UID compliant Micro ATM
infrastructure to process and deliver rural payments, including those for government schemes
such as Mahatma Gandhi National Rural Employment Generation Scheme (MGNREGA).
The program was piloted at a few branches of TSCB and is now being expanded throughout
Tripura. Biometric smart cards are being distributed. Indepay plans to open an extended rural
banking branch in each village through the Banking Correspondent model, and also offer non
financial services such as Rail/Air ticket booking and utility bill payments. IndePay has a
financial payment and transaction processing business that includes point-of-sale services, card
issuance and master merchant acquiring services for debit, prepaid, credit cards, rural banking,
electronic distribution of prepaid recharge and content, money transfer and utility bill payment
services.
Insurance Regulatory and Development authority also stressed the need engagement for
exploring the Banking Correspondents model for increasing the reach of insurance products in
rural areas.
KIOSK MODEL
It is fixed locations with personal computer and some form of internet access. It helps collections
of payments or deposits and financial product marketing. Apart from financial services it also in
getting market information, aggregation of inputs and sales, price quotes. In India ICICI bank
uses village kiosk to serve their rural clients. ITC also using these technologies as ―e Chaupal to
network with farmers.
BASIX started STEMS (Single Terminal Enabling Multiple Services), which is kiosk model,
substituting for bank branch. STEMS would be effective as part of BC arrangements. BASIX
will be able to reduce transaction costs; the poorer sections will find it easier to get access to
financial services, and the kiosk operator will not only earn commissions on the transactions, but
Impact Assessment of Technology Adoption in Microfinance in India Page 63
will also be able to derive extra income from the BASIX customers by providing them other
services, such as ordering supply of inputs, receiving information on market prices for
commodities, accessing information from the Internet and so forth.
BASIX launched Technology assisted Financial Inclusion (TAFI) operations in some slums of
East DelhiA tripartite agreement was signed between Axis Bank, A Little World (our technology
partner) and Indian Grameen Services. (Annual Report BASIX, 2009).
I-Express is an instant money transfer service for Non Resident Indians (NRIs). This service is
expected to be available through ICICI Bank‘s select partners in the six nation Gulf Cooperation
Council (GCC). The I-Express facility offers the remitter, the option of visiting any partner outlet
to transfer an instant credit into the beneficiary account maintained with ICICI Bank in India, at
no extra cost. Under this service, the funds will be transferred immediately and the beneficiary
can withdraw the money within minutes of the payment.
KBS Bank is able to provide banking services in Chincholi town (hub) and door-step services in
about 25 villages (spokes). Together with IGS, KBS Bank has established such Business
Correspondent outlets in 18 Hub locations and 45 spoke locations in the three districts of its
operation. In the next three to five years, the bank seeks its presence in all the 147 blocks/hoblis
through hub outlets and over 1500 villages through spokes. (Annual report BASIX, 2009-10)
Equitas is an 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. It is using E-Docs and Real
Time monitoring. 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.
(Source: Greg Chen, 2009 Innovation in India: Microfinance and Information Systems (MIS)
India based company ‗iwaycash‘ – cash on mobile using prepaid debit cards, customers will be
able to top-up through their existing bank account transfers or by depositing cash. These cards
can be used in ATMs for withdrawals. Ordinary phones with simple SMS knowledge are
Impact Assessment of Technology Adoption in Microfinance in India Page 64
sufficient to have the safest payment process. For shopping, utility bills, and money transfers,
simple SMS based instruction will enable easy, fast and safe mode of payments.
(www.indiaprwire.com/pressrelease/financial.../2009102836483.htm)
MANAGEMENT INFORMATION SYSTEM BASED SOFTWARE
Philippines-based SECDEP, working with the Grameen Foundation and Mifos Cloud made
technology. Before SECDEP's Mifos deployment in December 2009 the organization operated
completely on a manual basis, making everything from basic loan disbursements and account
maintenance to reporting time-consuming tasks. Management knew that a technology upgrade
was needed, but with a small staff and limited budget, operating an in-house server on which to
run software would not be possible. SECDEP serves just over 7,000 clients throughout Iloilo in
the Philippines. For small, emerging microfinance institutions the costs and time investment in
technology upgrades like Mifos can be intimidating.
Jitegemea, a growing Kenyan MFI automated their operations with support from local Mifos
Specialist and collaboration with fellow Mifos users around the globe in our online community.
For Jitegemea Credit Scheme (JCS), working with Mifos provided access to a technology
community in addition to much-needed data management tools. When JCS first started, they
processed loans and all financial transactions using custom-built Microsoft Excel spreadsheets.
However, as the organization grew, this rudimentary system became inadequate for handling
sensitive client data and reporting. JCS immediately benefited from its new found ability to
create customized loan products, accurately track impact, and keep client information secure.
SHARE has an effective Management Information System (MIS) to monitor borrower
repayment as well as individual employee accountability. The integrated technology platform
that SHARE has adopted would enable all the branches to send data online daily to a centralised
server for consolidation and analysis. It would help SHARE increase its operational efficiency
and employee productivity, which in turn would minimize cost and time. It would also provide
timely decision support to the management and ensure strict monitoring controls. The key factors
Impact Assessment of Technology Adoption in Microfinance in India Page 65
that have influenced SHARE‘s investment in technology are flexibility, scalability and
interfacing capabilities of the technical solution. Its technology partner has been successful in
customising all microfinance products as per the requirements of the company. Moreover, the
task of validation and critical assessment of SHARE‘s technology platform has been carried out
by an international consulting firm.
Mahasemam Trust, in Tamil Nadu a microfinance institution with about 1 lakh customers,
employed the technology to ease the tedious process of collection of repayments for micro-loans.
it uses MiFI software is developed with the latest technology tools, like .Net platform as front-
end and SQL Server as back end. The flexible nature of the MiFI‘s N-Tier Architecture has
enabled the software to easily adapt to Mahasemam operations with ease. MiFI software collects
and maintains the financial information of all the clients, which enables the management to take
decisions quickly, reduces the operating cost, and reduces workload of the branches, which
enabled them to concentrate more on the field operations. It works in decentralized mode where
branches operate in stand-alone application (client-server model) and the data is transfer to the
head office at the time of EOD (End of the Day) Process through Dialup connections with in few
minutes.
Once the information has been transmitted to the MFI‘s MIS, this system performs the
corresponding entries and reconciliations. To ensure security for clients, the RTS smart cards
contained encrypted information which can only be decrypted by the RTS server. The smart card
users have their own PINs to perform transactions. The PINs can be authorized at the server
level, when the system is online, or at the POS device level, when the system is on offline mode.
As Table indicates, a simple cost analysis of the RTS solution shows the financial benefits of this
solution for MFIs thinking of expanding their operations to remote areas. The start up cost is
$1500 which is much cheaper than setting up branch which costs $ 40000 to $ 60000. Monthly
operating costs are $3550 in RTS where as in branch model it is $7000 to $10000.
www.sevaksolutions.org/docs/RTS%20Uganda%20Case%20Study.pdf
Leading Tunisian MFI Enda adapts Mifos platform into their operations to drive continued
growth and service innovation to poor women throughout Tunisia. Alignment between people,
processes, and technology played an important role in the Mifos deployment at enda inter-arabe,
Impact Assessment of Technology Adoption in Microfinance in India Page 66
an award winning Tunisian MFI that had plans for rapid expansion and now serves more than
135,000 clients. Wishing to expand to an individual lending model but lacking the technology
needed to effectively track and report on loans.
The details of MIS used in microfinance and banking given in Chapter VI.
It may be conclude that various kinds of technology are used in various parts of the world.
Technology has helped financial access to the poor who are spread across Asia, Africa, and Latin
America etc.
In India various experiments of technology use in micro financing and financial inclusion has
been attempted. Few examples are ICICI Bank‘s partnership with FINO, Business
Correspondent (BC) model- ICICI, ICICI Bank - I-Express, HDFC Bank financial inclusion
programme, SBI ties up with OXIGEN, Financial inclusion by Axis Bank, Transfer2Home tie
up with Standard Chartered Bank for money transfer, Kisosk Banking of SBI with 3i Infotech
Foundation, Solar Powered ATM for Rural India by Vortex Engineering, GPRS technology by
Sanghmitra Rural Financial Services, Bangaluru, hand-held service by PUSHTIKAR -a low-
cost model, Andhra Pradesh model of opening no frill account, STEMS— technology pilot from
BASIX, Banking Correspondent for KBS Bank in Chincholi, Technology Assisted Financial
Inclusion- by BASIX, Dhanna X, E-Docs and real time monitoring by Equitas, mobile banking
by Eko financial services as business correspondents of SBI and ICICI, Tata Indicom Green
Money fund Transfer, iwaymedia - SMS based payment solution, ItzCash ties up with Tata
DoCoMo, Mobile banking Cashpor Microfinance, Varanasi and Glodyne Technoserve. These
organizations use various types of technology which had helped micro financing and financial
inclusion. Technology led Business correspondent model has helped in adoption of technology
for financial inclusion. But business viability of business correspondence is a question. There is
needed to make business correspondents viable by adopting profit sharing models.
Various banks have started banking correspondence model for financial inclusion. MFIs, as
agents of banks operating as Business Correspondents (BCs) are also being tried. The way the model can
work is for banks to use the outreach and the efficient distribution structures that MFIs have established.
However, as an off-shoot of banks, the channel can be used to not only push credit, but also to offer a
much wider range of products - savings, credit, insurance, pension and remittances. The model can de-
risk MFIs from a variety of risks such as the political and operational risks that came to the forefront in
Impact Assessment of Technology Adoption in Microfinance in India Page 67
AP. Local political interests will find it difficult to interfere at an operational level with agents of banks,
regulated by RBI. MFIs as BC model will also ensure greater degree of oversight from banks (and
hopefully RBI) than has been the case with the bulk lending model currently in vogue. At the same time,
MFIs as agents of banks will be able to offer clients with a wider range of products.
From the above it may be concluded that different banks and mFIs have started micro financing
with the help of technology adoption, but efforts were made scattered way. Various banks and
mFIs using different kind of technology and an integrated effort have not been made. There may
be difficulties in transfer of data from one organisation to another if integrated efforts were not
taken. It is obvious from the above that different kinds of technology are being used in different
parts of world. Indian microfinance finance has also started using various kinds of technology.
Still lot has to be done seeing the vast demand in microfinance and other such institutions. Indian
microfinance institutions and banks should learn from experiences of different parts of the world
and should adopt technology. It would help them in access of rural and urban poor which were
excluded from mainstream of financial inclusion.
If we see the scenario of MFIs, because most of the MFIs in India are only into credit operation,
the face to face interaction is vital part. Adoption of technology is limited to maintaining the
management information system. Adoption of technology for delivery to the customers is very
limited. Technologies can help MFIs increase their scale and efficiency. Microfinance
institutions like SKS and BASIX has developed their own technologies. Many of the
microfinance institutions have purchased the technology from technology providers. But most of
the technology adoption in at microfinance institutions is limited to managing their information
system. There are huge R&D costs associated with these technologies, not to mention the
expenses required in customer education and outreach. However the potential of technology –
the potential it has to really revolutionize the industry and expand the banking services available
to the poor. Under the new regulatory guidelines, with interest and margin caps, the outreach of
typical group microfinance, and outreach in far-off areas, will be constrained. MFIs will not be
able to address remote clients unless some form of local agent structures are integrated into the
delivery methodology. Local kirana (grocer) shops, medical shops, teachers etc. can be agents
for MFIs, who in-turn act as agent aggregators and managers for banks, to enable technology
backed delivery models with lower delivery costs. One reason for higher adoption of technology
Impact Assessment of Technology Adoption in Microfinance in India Page 68
in different parts of the world may be that the microfinance institutions are allowed to accept
deposits and also provide other financial services like remittance and insurance. In India, due to
regulatory framework, the microfinance institutions mostly register as society and non profit
company who were not allowed to accept deposits.
3.2: Computerization in public sector banks
As on 31st March 2009, out of the over 56203 branches of Public Sector Banks, only 45730
(branches have been fully computerized. Lack of computerization among over 50,000 branches
of Public Sector Banks provides a huge market for players in IT Industry.
Having gained experience in the earlier mode of computerization, the second Rangarajan
Committee constituted in 1988 drew up a detailed perspective plan for computerization in Banks
and for extension of automation to other areas like funds transfer, electronic mail, BANKNET,
SWIFT, ATMs etc.
The computerization in Public Sector Banks is a result of these initiatives. RBI has also gone
ahead in creating nationwide and localised network for integration of the entire financial system
Table No. 3.2.1: Status of Computerization in Public Sector Banks as on 31 March 2009 in
percentage terms.
Name of the Bank
Branches Under
CBS
Branches
Already Fully
Computerised
Fully
Computerised
Branches
Branches Partially
Computerised
Public Sector Banks 81.4 14.3 95.7 4.3
Nationalised Bank 73.4 20.4 93.8 6.1
Allahabad Bank 40.1 59.6 99.7 0.3
Andhra Bank 100.0 0.0 100.0 -
Bank of Baroda 65.8 34.2 100.0 -
Bank of India 85.8 14.2 100.0 -
Bank of Maharashtra 54.4 45.6 100.0 -
Canara Bank 38.6 61.4 100.0 -
Central Bank of India 34.2 52.7 86.9 13.1
Corporation Bank 100.0 - 100.0 -
Dena Bank 51.2 48.6 99.8 0.1
Indian Bank 100.0 - 100.0 -
Impact Assessment of Technology Adoption in Microfinance in India Page 69
Indian Overseas Bank 95.3 3.1 98.4 1.6
Oriental Bank of Commerce 100.0 - 100.0 -
Punjab National Bank 100.0 100.0 100.0 -
Punjab and Sind Bank - 11.8 12.9 87.1
Syndicate Bank 100.0 0.0 100.0 0.0
UCO Bank 49.8 1.5 51.3 48.7
Union Bank of India 100.0 - 100.0 -
United Bank of India 69.3 22.2 91.5 8.5
Vijaya Bank 100.0 0.0 100.0 -
State Bank Group 100.0 0.0 100.0 -
State Bank of India 100.0 0.0 100.0 -
State Bank of Bikaner and
Jaipur 100.0 - 100.0 -
State Bank of Hyderabad 100.0 - 100.0 -
State Bank of Indore 100.0 - 100.0 -
State Bank of Mysore 100.0 - 100.0 -
State Bank of Patiala 100.0 - 100.0 -
State Bank of Saurashtra 100.0 - 100.0 -
State Bank of Travancore 100.0 - 100.0 -
Source: RBI Report, 2009
Impact Assessment of Technology Adoption in Microfinance in India Page 70
Table 3.2.2: Computerization in Public Sector Banks (As on March 31, 2009)
Sr.
No.
Name of the
Bank
Branches Under
Core Banking
Solution
Branches
Already Fully
Computerised#
Fully
Computerised
Branches
(3+4)
Branches Partially
Computerised
No. of
Branches
1 2 3 4 5 6 7
Public Sector
Banks 45730.0 8049.0 53779.0 2423.0 56203
Nationalised
Bank 28932.0 8049.0 36981.0 2423.0 39405
1. Allahabad Bank 906.0 1346.0 2252.0 7.0 2259
2. Andhra Bank 1432.0 0.0 1432.0 0.0 1432
3. Bank of Baroda 1924.0 1002.0 2926.0 0.0 2926
4. Bank of India 2593.0 428.0 3021.0 0.0 3021
5.
Bank of
Maharashtra 773.0 648.0 1421.0 0.0 1421
6. Canara Bank 1053.0 1676.0 2729.0 0.0 2729
7.
Central Bank of
India 1202.0 1854.0 3056.0 462.0 3518
8. Corporation Bank 1111.0 0.0 1111.0 0.0 1111
9. Dena Bank 606.0 576.0 1182.0 1.0 1184
10. Indian Bank 1642.0 0.0 1642.0 0.0 1642
11.
Indian Overseas
Bank 1824.0 59.0 1883.0 30.0 1913
12.
Oriental Bank of
Commerce 1467.0 0.0 1467.0 0.0 1467
13.
Punjab National
Bank 4470.0 0.0 4470.0 0.0 4470
14.
Punjab and Sind
Bank 10.0 108.0 118.0 794.0 912
15. Syndicate Bank 2227.0 0.0 2227.0 0.0 2227
16. UCO Bank 1029.0 30.0 1059.0 1006.0 2065
17.
Union Bank of
India 2557.0 0.0 2557.0 0.0 2557
18.
United Bank of
India 1005.0 322.0 1327.0 123.0 1450
19. Vijaya Bank 1101.0 0.0 1101.0 0.0 1101
State Bank
Group 16798.0 0.0 16798.0 0.0 16798
20.
State Bank of
India 11687.0 0.0 11687.0 0.0 11687
21.
State Bank of
Bikaner and Jaipur 860.0 0.0 860.0 0.0 860
22.
State Bank of
Hyderabad 1031.0 0.0 1031.0 0.0 1031
Impact Assessment of Technology Adoption in Microfinance in India Page 71
23.
State Bank of
Indore 470.0 0.0 470.0 0.0 470
24.
State Bank of
Mysore 718.0 0.0 718.0 0.0 718
25.
State Bank of
Patiala 846.0 0.0 846.0 0.0 846
26.
State Bank of
Saurashtra 460.0 0.0 460.0 0.0 460
27.
State Bank of
Travancore 726.0 0.0 726.0 0.0 726
- : Nil/Negligible.
# Other than branches under Core Banking Solution.
Source : RBI Report, 2009
From the above tables it may be observed that 95.7% of branches were fully computerized of
which 81.4% branches were under core banking solution and 14.3% were already fully
computerized. Remaining 4.3% branches were partially computerized. The break-up of bank-
wise position presented a mixed picture of computerization while branches of 17 banks
belonging to SBI groups and nationalized banks, viz. Andhra Bank, Corporation bank Indian
Bank, Oriental Bank of Commerce, Punjab National Bank, Syndicate Bank, Union Bank of
India, Vijaya Bank were fully computerized, branches of other nationalized banks (10) were at
varied stage of computerization. The branches of Punjab and Sind Bank and UCO Bank were
least computerized.
Number-wise out of total number of branches (56203), 53786 branches were fully computerized
and 2417 branches were yet to be fully computerized.
Impact Assessment of Technology Adoption in Microfinance in India Page 72
3.2.3: Branches and ATMs of Scheduled Commercial Banks
Branches and number of ATMs of schedule commercial banks are presented below in table
3.2.3.
Table 3.2.3: Branches and ATMs of Scheduled Commercial Banks (As at end-March, 2009)
Sr
.
N
o.
Name of the
Bank
Branches ATMs Per
cent of
Off-
site to
total
ATMs
Per
cent of
ATMs
to
Branc
hes
Rural Semi-
urban
Urban Metro-
politan
Total On-site Off-
site
Total
1 2 3 4 5 6 7 8 9 10 11 12
Scheduled
Commercial
Banks 20,058 16,146 14,761 13,643 64,608 24,645 19,006 43,651 43.5 67.6
Public Sector
Banks 18,941 13,504 11,994 10,999 55,438 17,379 9,898 27,277 36.3 49.2
Nationalised
Banks 13,381 8,669 8,951 8,375 39,376 9,861 5,177 15,038 34.4 38.2
1 Allahabad Bank 952 398 466 401 2,217 121 90 211 42.7 9.5
2 Andhra Bank 393 394 376 262 1,425 248 477 725 65.8 50.9
3 Bank of Baroda 1,099 651 536 629 2,915 691 488 1,179 41.4 40.4
4 Bank of India 1,231 603 542 559 2,935 300 200 500 40.0 17.0
5
Bank of
Maharashtra 518 262 270 357 1,407 258 87 345 25.2 24.5
6 Canara Bank 726 694 678 642 2,740 1,218 788 2,006 39.3 73.2
7
Central Bank of
India 1,351 897 686 599 3,533 302 98 400 24.5 11.3
8 Corporation Bank 190 219 309 317 1,035 522 510 1,032 49.4 99.7
9 Dena Bank 352 225 219 297 1,093 289 102 391 26.1 35.8
10 Indian Bank 474 410 407 321 1,612 547 208 755 27.5 46.8
11
Indian Overseas
Bank 544 450 497 436 1,927 445 131 576 22.7 29.9
12
Oriental Bank of
Commerce 275 325 453 369 1,422 576 269 845 31.8 59.4
13
Punjab and Sind
Bank 283 127 226 222 858 43 – 43 – 5.0
14
Punjab National
Bank 1,881 895 849 702 4,327 1,541 609 2,150 28.3 49.7
15 Syndicate Bank 657 530 557 502 2,246 911 179 1,090 16.4 48.5
16 UCO Bank 769 410 451 428 2,058 304 110 414 26.6 20.1
17
Union Bank of
India 760 619 608 583 2,570 1,099 691 1,790 38.6 69.6
18
United Bank of
India 615 235 314 281 1,445 156 66 222 29.7 15.4
19 Vijaya Bank 257 229 336 279 1,101 290 74 364 20.3 33.1
Other Public
Sector Bank
20 IDBI Bank Ltd. 54 96 171 189 510 372 528 900 58.7 176.5
State Bank Group 5,560 4,835 3,043 2,624 16,062 7,146 4,193 11,339 37.0 70.6
Impact Assessment of Technology Adoption in Microfinance in India Page 73
21
State Bank of
India 4,366 3,311 2,022 1,773 11,472 5,229 3,319 8,548 38.8 74.5
22
State Bank of
Bikaner and
Jaipur 292 240 157 168 857 294 201 495 40.6 57.8
23
State Bank of
Hyderabad 262 318 249 193 1,022 452 158 610 25.9 59.7
24
State Bank of
Indore 119 138 87 125 469 204 146 350 41.7 74.6
25
State Bank of
Mysore 210 138 148 168 664 294 87 381 22.8 57.4
26
State Bank of
Patiala 263 229 222 134 848 372 123 495 24.8 58.4
27
State Bank of
Travancore 48 461 158 63 730 301 159 460 34.6 63.0
– : Nil/Negligible.
As on 31st March 2009 there were 64608 branches of Scheduled Commercial Banks comprising
20058 rural branches, 16146 semi-urban branches, 14761 urban branches and 13643
metropolitan branches operating in the country. Out of total 64608 branches of scheduled
commercial banks there were 55438 branches of public sector banks. Out of 55438 branches of
public sector banks 39376 branches belonged to nationalized banks.
43651 ATMs were installed out of which 24645 were on site and 19006 were offsite all over the
country by all scheduled commercial banks. Out of 43651 public sector banks had set up 17379
on-site and 9898 off-side ATMs all over the country forming 62.5% of total ATMs installed in
the country. Out of 27277 ATMs set up by the public sector banks 15038 ATMs comprising
9861 on-site and 5177 off-site ATMs were set up by nationalized banks forming 35.1% of total
ATMs set up by public sector banks and 34.4% of total ATMs set up by all scheduled
commercial banks in the country.
Among public sector banks SBI and its associates had set up 16062 ATMs in the country out of
which there were 7146 on site and 4193 off site ATMs forming 36.8% of total ATMs in the
country.
Total ATMs (43651) set up by all scheduled commercial banks formed 67.6% of total branches
(64608). The ATMs (27277) set up by public sector banks constituted 49.2% of total branches of
public sector banks and 62.4% of total ATMs set up by all scheduled commercial banks.
Impact Assessment of Technology Adoption in Microfinance in India Page 74
Among nationalized banks, IDBI Bank Ltd, Corporation Bank, Canara Bank, Union Bank of
India, Oriental Bank of Commerce were leading banks in setting up ATMs forming 176.5%,
99.7%, 73.2%, 69.6% and 59.4% of their total branches respectively. Other nationalized banks
were laggard in setting up ATMs in proportion to their branches which ranged between 9.55
minimum (Allahabad Bank) and 50.9% maximum (Andhra Bank).
Of all the ATMs (43651), 24645 ATMs were on-site and 19006 ATMs were off-site forming
56.5% and 43.5% of total ATMs respectively. Among nationalized banks, Andhra Bank and
IDBI Bank Ltd had set up 65.8% (highest) and 58.7% off site ATMs in proportion to their
branches. Other nationalized banks had set up off site ATMs which ranged between 16.4%
minimum (Syndicate Bank) and 49.4% maximum (Corporation Bank).
From the above analysis it may be concluded that there is lot of scope left for setting up of
ATMs in the country as ATMs (total numbering 43651) formed only 67.6% of total branches of
all scheduled commercial banks. It may be said that this was beginning only considering the
network of banks in the country as a whole and the magnitude of population served by them.
Table 3.2.4: Branches and ATMs of Scheduled Commercial Banks (Continued) (As at end-
March 2009)
Sr.
No.
Name of the
Bank
Branches ATMs % of
Off-site
to total
ATMs
Per cent of
ATMs to
Branches Rural Semi-
urban
Urban Metrop
olitan
Tota
l
On
-
site
Off-
site
Tota
l
1 2 3 4 5 6 7 8 9 10 11 12
Private Sector
Banks
1,113 2,638 2,715 2,411 8,87
7
6,9
96
8,32
4
15,3
20
54.3 172.6
Old Private Sector
Banks 842 1,554 1,344 933
4,67
3
1,8
30 844
2,67
4 31.6 57.2
1
Bank of Rajasthan
Ltd. 99 92 142 125 458 84 27 111 24.3 24.2
2
Catholic Syrian
Bank Ltd. 19 194 100 47 360 87 51 138 37.0 38.3
3
City Union Bank
Ltd. 36 61 72 40 209 117 5 122 4.1 58.4
4
Dhanalakshmi
Bank Ltd. 21 80 52 28 181 59 13 72 18.1 39.8
5 Federal Bank Ltd. 39 321 152 99 611 345 271 616 44.0 100.8
6 ING Vysya Bank 83 83 147 131 444 172 179 351 51.0 79.1
7
Jammu and
Kashmir Bank
Ltd. 220 83 124 64 491 182 68 250 27.2 50.9
8 Karnataka Bank 90 94 138 129 451 133 37 170 21.8 37.7
Impact Assessment of Technology Adoption in Microfinance in India Page 75
Ltd.
9
Karur Vysya Bank
Ltd. 33 95 113 69 310 263 61 324 18.8 104.5
10
Lakshmi Vilas
Bank Ltd. 36 86 81 44 247 88 16 104 15.4 42.1
11 Nainital Bank Ltd. 24 24 22 22 92 – – – – –
12
Ratnakar Bank
Ltd. 24 26 17 17 84 9 – 9 – 10.7
13
SBI Commercial
and
International Bank
Ltd. – – – 2 2 2 – 2 – 100.0
14
South Indian Bank
Ltd. 68 236 130 85 519 212 68 280 24.3 53.9
15
Tamilnad
Mercantile Bank
Ltd. 50 79 54 31 214 77 48 125 38.4 58.4
New Private
Sector Banks 271 1,084 1,371 1,478
4,20
4
5,1
66
7,48
0
12,6
46 59.1 300.8
16 Axis Bank Ltd. 30 189 314 253 786
1,0
04
2,59
1
3,59
5 72.1 457.4
17
Development
Credit Bank Ltd. 4 14 13 50 81 73 43 116 37.1 143.2
18 HDFC Bank Ltd. 67 325 468 548
1,40
8
1,7
49
1,54
6
3,29
5 46.9 234.0
19 ICICI Bank Ltd. 138 461 400 410
1,40
9
1,8
63
2,85
0
4,71
3 60.5 334.5
20
IndusInd Bank
Ltd. 5 36 88 53 182 174 182 356 51.1 195.6
21
Kotak Mahindra
Ltd. 14 37 48 121 220 212 175 387 45.2 175.9
22 Yes Bank Ltd. 13 22 40 43 118 91 93 184 50.5 155.9
– : Nil/Negligible.
Source: RBI data bank, 2009
Amongst private banks, ICICI Bank has largest number of ATMs (4713) followed by Axis Bank
(3595) and Federal Bank (616). The private banks having least number of ATMs were installed
by International bank (2) and Ratnakar Bank (9). Although International bank has only 2
branches which were 100% computerised.
Private sector banks have more ATMs in terms of percent of ATM to branches. 172.6 % ATM
were found per branch in case of private sector banks that means 1.7 ATM per branch which is
three times as compared to public sector banks. There was large variation amongst private banks
in terms of percent of ATMs to branches. Highest percent of ATMs to branches was found in
case of Axis bank (457.4%) followed by ICICI bank (334.5%) and HDFC bank (234%).
Impact Assessment of Technology Adoption in Microfinance in India Page 76
Some of the private banks were having very less percent of ATMs to branches. Ratnakar Bank
has only 10.7% of ATMs to branches. Other banks viz. Bank of Rajasthan, Catholic Syrian
Bank, Laxmi Vilas bank have less than 50 % of ATMs to branches where as city union bank,
Dhanlaxmi bank private limited, Tamil Nadu mercantile bank has more than 50% but less than
100% of ATMs to branches. These banks should expedite to establish ATMs to serve the
customer in better way.
3.2. 5 : Branches and ATM in foreign banks
Table 3.2.5: Branches and ATMs of foreign Banks (As at end-March 2009)
Sr.
No.
Name of the Bank Branches ATMs Per cent
of Off-site
to total
ATMs
Per
cent of
ATMs
to
Branc
hes
Rural Semi-
urban
Ur
ban
Metro-
politan
Tot
al
On-site Off-
site
Tota
l
1 2 3 4 5 6 7 8 9 10 11 12
Foreign Banks 4 4 52 233 293 270 784 1,05
4
74.4 359.7
1 AB Bank Ltd. – – – 1 1 – – – – –
2
ABN-AMRO Bank
N.V. 2 – 9 19 30 34 88 122 72.1 406.7
3
Abu Dhabi
Commercial Bank
Ltd. – – – 2 2 – – – – –
4
American Express
Banking Corp. – – – 1 1 – – – – –
5 Antwerp Bank Ltd. – – – 1 1 – – – – –
6
Bank Internasional
Indonesia – – – 1 1 – – – – –
7
Bank of America
NA – – – 5 5 – – – – –
8
Bank of Bahrain
and Kuwait B.S.C. – – – 2 2 – – – – –
9 Bank of Ceylon – – – 1 1 – – – – –
10
Bank of Nova
Scotia – – 1 4 5 – – – – –
11
Bank of Tokyo-
Mitsubishi UFJ
Ltd. – – – 3 3 – – – – –
12 Barclays Bank PLC – 1 2 2 5 6 5 11 45.5 220.0
13 BNP Paribas – – – 9 9 – – – – –
14 Calyon Bank – – – 6 6 – – – – –
15
Chinatrust
Commercial Bank – – – 1 1 – – – – –
16 Citibank – 1 11 29 41 54 415 469 88.5 1143.9
17 DBS Bank Ltd. 2 2 – 6 10 – – – – –
18 Deutsche Bank AG – – 6 7 13 12 20 32 62.5 246.2
Impact Assessment of Technology Adoption in Microfinance in India Page 77
19 HSBC Ltd. – – 9 38 47 71 107 178 60.1 378.7
20
JPMorgan Chase
Bank – – – 1 1 – – – – –
21
JSC VTB Bank
Ltd. – – – 1 1
22
Krung Thai Bank
Public Co. Ltd. – – – 1 1 – – – – –
23 Mashreqbank psc – – – 2 2 – – – – –
24
Mizuho Corporate
Bank Ltd. – – – 2 2 – – – – –
25
Oman International
Bank S.A.O.G. – – 1 1 2 – – – – –
26 Shinhan Bank – – – 2 2 1 – 1 – –
27 Societe Generale – – – 2 2 – – – – –
28 Sonali Bank – – 1 1 2 – – – – –
29
Standard Chartered
Bank – – 12 78 90 92 149 241 61.8 267.8
30
State Bank of
Mauritius Ltd. – – – 3 3 – – – – –
31 UBS AG – – – 1 1
– : Nil/Negligible.
Source: Master office file (latest updated version ) on commercial Banks.
It is obvious from the table that branches of foreign banks are concentrated mostly (79.52) in
metropolitan area. Standard Chartered Bank has highest number of branches followed by HSBC,
City bank and ABN Amro. Percent of ATMs to branches was 359.7 which means 3.6 ATMs
were available per branch. Number of ATMs was highest in case of City bank followed by
Standard Chartered bank and ABN –AMRO bank.
Impact Assessment of Technology Adoption in Microfinance in India Page 78
3.2.6: Financial indicators of banks in India
Table 3.2.6: Finance Indicators for India, 2001-08
Indicator 2001 2002 2003 2004 2005 2006 2007 2008 Benchmark
(OECD)
Access to finance
Demographic
branch
penetration (
branches per
100,000
people)
6.42 6.33 6.25 6.26 6.33 6.37 6.35 6.6 10—69
Demographic
ATM
penetration (
ATMs per
100,000
people)
1.63 1.93 2.4 3.28 47--167
Deposit
accounts per
1000 people
416.77 420.84 418.67 426.11 432.11 442.87 459.52 467.35 976-1671
Loan accounts
per 1000
people
50.99 53.93 55.84 61.88 71.42 78 83.59 89.03 248-513
Geographic
branch
penetration (
branches per
1000 km2)
22.18 22.26 22.41 22.57 22.99 23.46 24.13 25.49 1-159
Geographic
ATM
penetration
(ATMs per
1000 km2)
5.93 7.11 9.11 12.68 1-437
Performance and Efficiency
Return on
Equity (%)
13.8 17.3 21 23 16.9 17 17.31 17.34 1.90--28.10
Impact Assessment of Technology Adoption in Microfinance in India Page 79
Return on
Assets(%)
0.9 1.1 1.5 1.7 1.3 1.31 1.43 1.57 0.10--1.80
Staff Cost
Ratio(%)
68.1 64.7 62.1 60.17 58.29 56.9 54.54 51.55 14.87--54.63
Net Interest
Margin (%)
2.98 2.66 2.85 3.07 3.07 3.01 2.99 2.61 0.40-2.93
(Source: Kiatchai Sophastienphong , Anoma Kulathunga (2001) ―Getting Finance in South Asia 2010‖,
The World Bank)
Note: The Benchmark Indicator ranges are for selected high-income OECD member countries (Australia,
Canada,France, Germany,Italy,Japan, the republic of Korea, New Zealand and the United States)
From the above table it may be observed that demographic branch penetration in India during the
period 2001-08 was comparatively very low and ranged between 6.25 to 6.6, as compared to
OECD bench mark 10-69. During the year 2001 it was 6.42 and thereafter it declined to 6.33
during 2002 and further declined to 6.25 during 2003 but thereafter it started rising and was 6.26,
6.33, 6.37, during 2004, 2005 and 2006 respectively. Again the penetration went down from 6.37
during 2006 to 6.35 during 2007. However, it registered the highest penetration indicator at 6.6
during 2008 for the period 2001-08.
Demographic ATM penetration in India was found to be low in the range of 1.63 to 3.28 during
2005 to 2008 as compared to OECD benchmark 47-167. However, it had shown rising trend.
Deposit accounts per 1000 people, although showing rising trend from 416.77 during 2001 to
467.35 during 2008 (except the year 2003 in which it had declined to 418.67 from 420.84 during
2002) but it was also very low as compared to OECD benchmark 976-1671.
Loan accounts per 1000 people had continuously registered rising trend from 50.99 during 2001
to 89.03 during 2008 but it was also very low as compared to OECD benchmark 248-513.
Geographic branch penetration showed uptrend from 22.18 during 2001 to 25.49 during 2008
which could be categorized as modest performance but was very low when compared to higher
OECD benchmark at 159.
Impact Assessment of Technology Adoption in Microfinance in India Page 80
Geographic ATM penetration was rising at a faster rate and had gone up from 5.93 during 2005
to 12.68 during 2008. However, it was too low from OECD higher range (benchmark) at 437.
Return on equity of banks in India was hovering around 17 and was quite high from lower range
benchmark (OECD) at 1.90 but was much lower than higher range (benchmark OECD) at 28.10.
So far as return on assets was concerned, it ranged between 0.9 to 1.7 during 2001-2008 and was
near to higher benchmark (OECD) at 1.80. Staff cost ratio of Indian banks was consistently very
high. However, it had shown declining trend and it was 51.55 during 2008 which was lower than
higher benchmark range at 54.63. Net interest margin of Indian banks was consistently good
which can be favourably compared with OECD higher benchmark at 2.93.
Impact Assessment of Technology Adoption in Microfinance in India Page 81
3.3: Use of various technologies by selected banks and mFIs
The responses of use of different technology were collected from sampled banks (10) and
microfinance institutions (20) are presented in table 3.3.1. Microfinance institutions were
selected representing various region of the country. The south region was given more
representation because of concentration of more number of microfinance institutions and more
technology adoption in southern region of India. The purpose of this section is to analyse
awareness about modern technology among MFIs and bankers, compare the impact of use of
technology on cost structure, outreach and delivery efficiency and adaptability for banks and
MFIs.
Table 3.3.1: Officials response on use of following technology
Sl.
No.
Name of
Technology Banks/MFIs
Used Not Used Planning Stage
1 24 hour on call
service
Banks 7 3 0
70.0% 30.0% 0.0%
MFIs 3 16 1
15.0% 80.0% 5.0%
2 Automated Teller
Machine (ATMs)
Banks 8 2 0
80.0% 20.0% 0.0%
MFIs 0 20 0
0.0% 100.0% 0.0%
3 Biometric Card
Banks 7 3 0
70.0% 30.0% 0.0%
MFIs 3 15 2
15.0% 75.0% 10.0%
4 Charge Card
Banks 3 7 0
30.0% 70.0% 0.0%
MFIs 0 20 0
0.0% 100.0% 0.0%
5 Credit Cards
Banks 8 0 2
80.00% 0.00% 20.00%
MFIs 0 20 0
0.0% 100.0% 0.0%
6 Credit Scoring
Banks 6 3 1
60.0% 30.0% 10.0%
MFIs 3 14 3
15.0% 70.0% 15.0%
7 E-Payment of Banks 7 0 3
Impact Assessment of Technology Adoption in Microfinance in India Page 82
utility bills and
taxes 70.0% 0.0% 30.0%
MFIs 8 6 6
40.0% 30.0% 30.0%
8
Interactive Voice
Response
Technology
(IVR)
Banks 4 6 0
40.0% 60.0% 0.0%
MFIs 1 18 1
5.0% 90.0% 5.0%
9 Internet Banking
Banks 8 2 0
80.0% 20.0% 0.0%
MFIs 9 11 0
45.0% 55.0% 0.0%
10 Mobile Banking
Banks 6 3 1
60.0% 30.0% 10.0%
MFIs 6 13 1
30.0% 65.0% 5.0%
11 Personal Digital
Assistant (PDA)
Banks 6 4 0
60.0% 40.0% 0.0%
MFIs 4 14 2
20.0% 70.0% 10.0%
12 Point of Sale
(POS) Terminals
Banks 6 4 0
60.0% 40.0% 0.0%
MFIs 3 15 2
15.0% 75.0% 10.0%
13 Computer
Banks 10 0 0
100.0% 0.0% 0.0%
MFIs 20 0 0
100.0% 0.0% 0.0%
14 Software
Banks 10 0 0
100.0% 0.0% 0.0%
MFIs 17 2 1
85.0% 10.0% 5.0%
Source: Primary Survey
The organization status regarding the technology use could also be a major parameter to judge
how far the technology usage was beneficial for those financial organizations. In case of MFIs,
the technology usage was comparatively less. This could be the area to work on and increase its
usage. All the banks and MFI officials said that they are already using computers for the day to
day functioning. The other major technology which was in use in almost all the organization
surveyed was software. 100% of the bank surveyed and 85% of the MFIs were already using
Impact Assessment of Technology Adoption in Microfinance in India Page 83
software. MFIs have not started yet with the ATM. Only 15% of the MFI official surveyed said
they are using the biometric cards. Charge cards were not used in the most of the banks. Only 3
out of 10 bank officials surveyed said that their banks were using charge cards. Canara Bank, and
Syndicate Bank staff were the banks already using the charge card. None of the MFIs were using
the charge card. Few technologies like E-payment of utility bills and taxes, credit scoring was on
the planning stage in some of the banks and MFIs.
It may be concluded that there is need for improvement in geographic branch penetration, ATM
penetration. Staff cost ratio has to be reduced. Technology may be one of the solution to reduce
the staff cost. Demographic branch penetration in India is very low as compared to OECD
standard. It has to be increased. It is not possible to open brick and mortar branch offices at
every place. Banking correspondence and banking facilitator model would be solution to reach in
unreached areas and clients.
Organisation wise details are presented in annexure V
Impact Assessment of Technology Adoption in Microfinance in India Page 84
CHAPTER IV
FACTORS AFFECTING TECHNOLOGY
ADOPTION IN MICROFINANCE
4.1: Factors affecting adoption of technologies
The data were collected from 10 banks officials and 20 mFIs officials to understand factors
affecting technology. The responses of banks were taken from regional and local headquarters
from Bihar as banking operation are uniform through out the country. Microfinance institutions
were selected from Bihar, West Bengal, Andhra Pradesh, Karnataka, and Uttar Pradesh keeping
the various regions into mind. More representation from South India was due to more
concentration of microfinance institutions and most of the microfinance institutions operating in
various parts of India has headquarter in south India eg Andhra Pradesh, Karnataka and Tamil
Nadu. The officials from sampled microfinance institutions were interviewed. The purpose of
this section is to analyze the factors influencing the use of technology in microfinance in India.
Major factors were availability of finance/Capital, Technological Awareness, Availability of
technology, Timely acquisition of technology, Degree of diffusion of technologies, Demand of
customer, Competition in market, Availability of qualified human resources and Government
Regulation.
Table 4.1.1: Factors that affect the adoption of technologies
Factors Banks/
MFIs
Officials
First Second Third Fourth Fifth Sixth Seventh Eighth Ninth weighted
average
Availability of Finance/Capital
Banks 4 2 3 1 0 0 0 0 0 1.65 (II)
40.0% 20.0% 30.0% 10.0% 0.0% 0.0% 0.0% 0.0% 0.0%
MFIs 10 5 2 2 1 0 0 0 0 3.35 (I)
50.0% 25.0% 10.0% 10.0% 5.0% 0.0% 0.0% 0.0% 0.0%
Technological
Awareness
Banks 3 5 1 1 0 0 0 0 0 1.67 (I)
30.0% 50.0% 10.0% 10.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Impact Assessment of Technology Adoption in Microfinance in India Page 85
MFIs 4 3 3 4 2 3 1 0 0 2.78 (II)
20.0% 15.0% 15.0% 20.0% 10.0% 15.0% 5.0% 0.0% 0.0%
Availability of technology
Banks 1 0 4 2 2 1 0 0 0 1.35 (III)
10.0% 0.0% 40.0% 20.0% 20.0% 10.0% 0.0% 0.0% 0.0%
MFIs 4 3 2 4 3 3 1 0 0 2.74 (III)
20.0% 15.0% 10.0% 20.0% 15.0% 15.0% 5.0% 0.0% 0.0%
Timely
acquisition of technology
Banks 0 0 0 2 2 3 2 0 1 0.94( Vi)
0.0% 0.0% 0.0% 20.0% 20.0% 30.0% 20.0% 0.0% 10.0%
MFIs 1 2 2 3 4 3 3 2 0 2.26 (IV)
5.0% 10.0% 10.0% 15.0% 20.0% 15.0% 15.0% 10.0% 0.0%
Degree of diffusion of
technologies
Banks 0 1 0 2 1 1 2 3 0 0.94 (Vii)
0.0% 10.0% 0.0% 20.0% 10.0% 10.0% 20.0% 30.0% 0.0%
MFIs 0 1 1 2 2 3 3 5 3 1.69
(VIII)
0.0% 5.0% 5.0% 10.0% 10.0% 15.0% 15.0% 25.0% 15.0%
Demand of customer
Banks 0 1 1 0 1 4 2 1 0 1.00 (Iv)
0.0% 10.0% 10.0% 0.0% 10.0% 40.0% 20.0% 10.0% 0.0%
MFIs 0 2 2 2 1 3 4 2 4 1.83 (VII)
0.0% 10.0% 10.0% 10.0% 5.0% 15.0% 20.0% 10.0% 20.0%
Competition in
market
Banks 1 1 1 0 1 1 1 3 1 0.98 (V)
10.0% 10.0% 10.0% 0.0% 10.0% 10.0% 10.0% 30.0% 10.0%
MFIs 0 1 3 1 3 3 2 5 2 1.85 (VI)
0.0% 5.0% 15.0% 5.0% 15.0% 15.0% 10.0% 25.0% 10.0%
Availability of
qualified human
resources
Banks 1 0 0 1 2 0 1 3 2 0.85
(VIII)
10.0% 0.0% 0.0% 10.0% 20.0% 0.0% 10.0% 30.0% 20.0%
MFIs 1 2 4 1 2 1 4 2 3 2.07 (V)
5.0% 10.0% 20.0% 5.0% 10.0% 5.0% 20.0% 10.0% 15.0%
Government
Regulation
Banks 0 0 0 1 1 0 2 0 6 0.61
0.0% 0.0% 0.0% 10.0% 10.0% 0.0% 20.0% 0.0% 60.0%
MFIs 0 1 1 1 2 1 2 4 8 1.43
0.0% 5.0% 5.0% 5.0% 10.0% 5.0% 10.0% 20.0% 40.0%
Weights assigned (for first =10, second =9, ..........................Ninth =2,)
Source: Primary Survey,
The factors that affect the adoption of technology were many. The officials were asked to rate
the 9 major factors according to their preference. Availability of finance/capital and
technological awareness were the major factors that affected the adoption of technology in their
organization. 40% of the bank officials and 50% of the MFI officials ranked availability of
finance/capital as the main factor affecting the adoption of technology. The factors which were
Impact Assessment of Technology Adoption in Microfinance in India Page 86
least important according to the officials were Government regulation, demand of customer and
degree of diffusion of technology. Availability of qualified human resources, timely acquisition
of technology, and availability of technology were having mixed response. Technology
awareness among staff was ranked overall first by bank staff whereas availability of fund was the
first ranked by mFIs staff.
4.1.2: Officials response on reasons for not using the technology
Responses on reasons for not using various technologies were collected from banks and mFIs
officials and are presented in table 4.1.2.
Table 4.1.2: Reasons for not using the following technologies
Sl. No. Name of Technology Reasons
1 24 hour on call service Connectivity, Cost, Not needed/not
ready by mFIs
2 Automated Teller Machine (ATMs) Lack of electricity, High establishment
cost, Lack of knowledge, not needed by
mFIs
3 Biometric Card lack of awareness, high cost, After sale
service/support service limitation,
4 Charge Card High cost, lack of connectivity
5 Credit Cards High cost, financial illiteracy,
6 Credit Scoring Not aware
8 E-Payment of utility bills and taxes illiteracy of customers,
9 Interactive Voice Response
Technology (IVR)
Cost/Implementation problem, rural
client base, lack of knowledge, not
needed
10 Internet Banking High establishment cost, borrowers are
not literate
Impact Assessment of Technology Adoption in Microfinance in India Page 87
11 Mobile Banking Borrowers are not literate enough, lack
of connectivity, poor knowledge of
technology, not needed at present,
12 Personal Digital Assistant (PDA) Cost and lack of trained staff, not
needed/not aware
13 Point of Sale (POS) Terminals lack of Competency of Staff to use
technology, connectivity problem, not
needed
14 Computerisation of branch Lack of skilled staff, lack of funds
15 Software Lack of fund, lack of awareness
Source: primary survey
Several technologies were not still used by these organizations. The problems which are common
to most of the organizations are high establishment/implementation cost, lack of electricity, lack
of technical knowledge, low literacy level of the clients.
Moreover, one of the reasons stated by them was also that the technologies like Automated
Teller Machine (ATMs), biometric card, Charge card, credit cards, e-payment of utility bills,
IVR, PDA, POS terminals were not needed yet or they were not ready for it.
Impact Assessment of Technology Adoption in Microfinance in India Page 88
CHAPTER V
AWARENESS AND IMPACT OF MODERN
TECHNOLOGY IN MICROFINANCE
The data were collected from 10 banks officials and 20 mFIs officials to understand factors
affecting technology. The responses of banks were taken from regional and local headquarters
from Bihar as banking operation are uniform through out the country. Microfinance institutions
were selected from Bihar, West Bengal, Andhra Pradesh, Karnanatka, and Uttar Pradesh keeping
the various regions into mind. More representation from South India was due to more
concecntartion of microfinance institutions and most of the microfinance institutions operating in
various parts of India has headquarter in south India eg Andhra Pradesh, Karnataka and
Tamilnadu. The officials from sampled microfinance institutions were interviewed. The purpose
of this section is to analyze the awareness about modern technology among MFIs and bankers,
compare the impact of use of technology on cost structure, outreach and delivery efficiency,
adaptability etc for banks and MFIs.
5.1: Awareness, use, cost of various technology
Awareness, use, cost of various technology, reasons for non adoption, factors affecting adoption
were collected from banks and mFIs and are presented below.
5.1.1: Awareness of technology
The data on awareness of different technology used in microfinance and banking were collected
and presented in table below:
Impact Assessment of Technology Adoption in Microfinance in India Page 89
Table 5.1.1: Awareness regarding following technology
Sl. No. Name of Technology Banks MFIs
1 24 hour on call service 8 13
80.0% 65.0%
2 Automated Teller Machine (ATMs) 10 20
100.0% 100.0%
3 Biometric Card 10 15
100.0% 75.0%
4 Charge Card 5 13
50.0% 65.0%
5 Credit Cards 10 16
100.0% 80.0%
6 Credit Scoring 8 13
80.0% 65.0%
7 E-Payment of utility bills and taxes 10 14
100.0% 70.0%
8 Interactive Voice Response Technology
(IVR)
8 15
80.0% 75.0%
9 Internet Banking 10 15
100.0% 75.0%
10 Mobile Banking 9 17
90.0% 85.0%
11 Personal Digital Assistant (PDA) 7 14
70.0% 70.0%
12 Point of Sale (POS) Terminals 8 13
80.0% 65.0%
13 Computer 10 20
100.0% 100.0%
14 Software 10 20
100.0% 100.0%
Source: primary survey
The awareness level of Banks and MFI officials regarding the various technologies were
collected. Banks officials were generally more aware about the various technologies than the
MFI officials. ATMs, Biometric Card, Credit Card, E-payment of utility bills and taxes, internet
banking, computer and software have 100% awareness among Bank officials. While the new
technology like charge card had just 50% awareness among the Bank officials.
Impact Assessment of Technology Adoption in Microfinance in India Page 90
Among the MFI officials, 24 hour on call service (65%), charge card (65%), credit scoring
(65%), point of sale (65%) terminals have low awareness level in comparison to ATMs (100%),
Computer (100%) and software (100%). The other relatively new technology like E-payment of
utility bills and taxes (70%) and Personal Digital Assistant (PDA) (70%) were also less known.
5.1.2: Changes on cost structure they have experienced after incorporating technology.
According to officials, the changes on cost structure they have experienced after incorporating
technology are presented below.
Table 5.1.2: Changes on cost structure they have experienced after incorporating
technology
Sl.
No. Parameter
Officia
ls
Before adoption After adoption
High Medium low Reduce
d
Increas
ed
Non –
response /not
clear
1 Transaction
cost
Bank 8 2 0 8 0 2
MFI 12 6 7 10
2 Return on fund Bank 3 6 1 0 8 2
MFI 4 3 13 0 11 9
3 Productivity
per employee
Bank 3 6 1 0 6 4
MFI 1 7 12 1 11 8
4 Productivity
per branch
Bank 3 5 2 2 7 1
MFI 4 5 11 4 13 3
6 Adaptability Bank 4 3 3 0 8 2
MFI 3 5 12 0 12 8
Source: primary survey
When it comes to proper utilization of resources and effective cost structure, usage of technology
plays an important role. Majority of the officials surveyed, were of the view that usage of
technology have reduced the transaction cost, total cost and bad debts. While most of them also
said that after adoption of technology they have experienced increased return on fund,
productivity per employee and productivity per branch. Therefore, overall there has been
favourable response to the technology adoption in terms of cost structure. This in turn increases
the performance of the financial institutions significantly. Actual estimation of increase was
Impact Assessment of Technology Adoption in Microfinance in India Page 91
difficult as lot of other factors like human resource management, competition, and demand for
credit affects the above variables other than technology.
5.1.3: Official’s response regarding change in outreach delivery after incorporating
technology.
View from officials regarding change in outreach, delivery efficiency, recovery and adaptability
after incorporating technology were collected and presented below in table 5.1.3.
Table 5.1.3: Changes on outreach delivery after incorporating technology
Source: primary survey
It is obvious from the table that most of the officials stated that number of clients/ borrowers
have increased after technology adoption. Technology has helped them to satisfy their clients in
better manner through providing quick transaction, loan amount assessment, processing of loan,
transfer of funds and other financial services. There was improvement in disbursement, average
debt per borrower, recovery % because monitoring of borrowers became faster than earlier.
Officials were not able to quantify the impact and some were not clear about actual impact.
Delivery efficiency and adaptability also increased in most of the cases.
Sl.
No. Parameter Officials
After adoption
Reduced Increased Non response /not
clear
1 No of
borrowers
Bank 0 6 4
MFI 0 13 7
2 Disbursement Bank 0 4 6
MFI 0 14 6
3 Average debt
per borrower
Bank 0 5 5
MFI 0 11 9
4 Amount
recovered
Bank 0 4 6
MFI 0 6 4
5 Recovery % Bank 0 5 5
MFI 3 12 5
6 % growth in
business
Bank 0 7 3
MFI 0 10 5
7 Delivery
efficiency
Bank 0 8 2
MFI 0 10 10
8 Adaptability Bank 0 6 4
MFI 0 12 8
Impact Assessment of Technology Adoption in Microfinance in India Page 92
5.1.4: Benefits of technology
The ranking of benefits of various technologies were collected from officials of mFIs and banks
are presented in table 5.1.4. Weighted average of their responses was also calculated.
Table 5.1.4: Ranking for the following Benefits of Technology
Sl.
No. Benefits
Banks/MFIs
Officials First Second Third Fourth
Weighted
average
1 Productivity
Banks 4 2 4 0 2.86
40.0% 20.0% 40.0% 0.0%
MFIs 12 3 3 2 5.93
60.0% 15.0% 15.0% 10.0%
2 Profitability
Banks 3 4 2 1 2.71
30.0% 40.0% 20.0% 10.0%
MFIs 3 5 7 5 4.36
15.0% 25.0% 35.0% 25.0%
3 Competitiveness
Banks 2 2 2 4 2.00
20.0% 20.0% 20.0% 40.0%
MFIs 3 3 5 9 3.64
15.0% 15.0% 25.0% 45.0%
4 Safety/ Security
Banks 1 2 2 5 1.71
10.0% 20.0% 20.0% 50.0%
MFIs 2 9 5 4 4.64
10.0% 45.0% 25.0% 20.0%
Source: Primary survey
It is obvious from the above table that mFis and banks get number of benefits of technology use.
Although it remains to be seen how the officials working with it rate the benefit coming out of
the technology usage. Most of the bank (40%) and MFI officials (60%) said that technology was
beneficial in enhancing the productivity. While some said that profitability was also major
benefit of the technology. While very less official surveyed ranked safety and security as the
Impact Assessment of Technology Adoption in Microfinance in India Page 93
benefit of the technology. Competitiveness had mixed response from the officials. Most of the
officials (40% of Banks and 45% of MFI) placed this at 4th
position.
5.1.5: Costs of adoption of various technologies
According to officials, the cost of adopting following technologies is as follows:
Table 5.1.5: Cost of adoption of different technologies
Sl.
No.
Name of Technology Average
Establishment
cost
Average yearly
operational cost
Average yearly
Maintenance
Cost
1 24 hour on call service 35000 20000 10000
2 Automated Teller Machine
(ATMs)
117500 12000 15000
3 Biometric Card 50000 NA 10000
4 Charge Card NA NA NA
5 Credit Cards NA NA NA
6 Credit Scoring Score board
development
$10000
NA NA
7 Debit Cards NA NA NA
8 E-Payment of utlity bills and
taxes
NA NA NA
9 Interactive Voice Response
Technology (IVR)
$ 10,000 for in
house system
NA NA
10 Internet Banking NA 100000 NA
11 Mobile Banking 2000000 200000 200000
12 Personal Digital Assistant (PDA) 25000 3000 NA
13 Point of Sale (POS) Terminals 16000 NA NA
14 MIS software 3-5 lakhs 50000 to 100000 50000 to 100000
Source: Primary Survey
It is obvious from the table that establishment of MIS software, mobile banking is costly for
small mFIs. ATM establishment also costs high. For RRBs and mFIs the client base is so
scattered that establishment of ATM was not profitable. Rural ATM run by solar or battery
which is comparatively cheaper can be installed in rural areas by banks.
5.1.6: Problems faced by mFIs and banks in adoption of technology
Problems faced by officials of mFis and Bank officials were collected and presented in table
5.1.6.
Table 5.1.:6 Problems faced by mFIs and banks in adoption of technology
Impact Assessment of Technology Adoption in Microfinance in India Page 94
Sl.
No. Problems Banks Percentage MFIs Percentage
1 High Maintenance Cost 2 10.0% 12 60.0%
2
Unavailability of spare
parts
2 10.0% 6 30.0%
3
Vendor's capacity to
provide technical support
2 10.0% 9 45.0%
4
After sales service/Local
service centre
2 10.0% 5 25.0%
5
Capacity building of
employees
4 20.0% 13 65.0%
6
Financial illiteracy of
client
3 15.0% 16 80.0%
7 Infrastructure problems 3 15.0% 15 75.0%
8 Availability of electricity 3 15.0% 18 90.0%
9
Financial problem of
acquiring technologies
4 20.0% 16 80.0%
Source: Primary survey
There were various problems faced by officials related to other supporting system of the existing
software in smooth running of day to day operations. The most common problems faced by MFIs
were financial illiteracy of the clients (80%), financial problem of acquiring technologies (80%)
and non availability of electricity (90%). The other major problems of MFIs were infrastructure
problems (75%) and capacity building of employees (65%). High maintenance cost (60%) was
also one of the major concerns with mFIs.
While in case of banks, the problems were not concentrated to one single issue. They didn‘t find
the problems associated with the supporting system of the existing software to be so severe that
could hinder the smooth functioning of day-to-day operations. Capacity building of the
employees (20%) and financial problem of acquiring technologies (20%) were the few concerns.
Impact Assessment of Technology Adoption in Microfinance in India Page 95
5.1.8: Assistance required in adoption of technology
Response regarding assistance required by banks and mFIs officials were collected and presented
below
Table 5.1.8: Assistance required in adoption of technology
Sl.
No. Items
Banks Percentage MFIs Percentage
1 Financial help for
acquiring technology
4 40.0% 15 75.0%
2 Assistance for
Computerization of the
organization
2 20.0% 8 40.0%
3 Capacity building of
the organization head
7 70.0% 16 80.0%
4 Capacity building of
staff
6 60.0% 16 80.0%
5 Capacity building of
client
6 60.0% 14 70.0%
Source: Primary survey
There were problems in adoption of technologies and those needed to be solved as well. Some
help which are required in adoption of technology are mentioned in the above table. The bank
officials pointed out that staffs should be trained on technology. Capacity building of the
organization (70%) staff (60%) and clients (60%) were most important help required by banks.
About 40% of the bank officials said that financial assistance should be provided for acquiring
technology. MFI officials also were of the same view as bank officials. The help needed by the
MFI officials in adopting technology were capacity building of the organization head (80%),
staff (80%) and clients (70%). Connectivity and infrastructure support are the other major help
required by the officials to adopt technologies.
5.1.9: Vision for technology for Microfinance after 5 years:
In order to understand the aspiration of the institutions with regard to technology, the officials of
both banks and MFIs were asked to point out the vision for technology for Microfinance after 5
years.
Few of the responses are as mentioned below:
Impact Assessment of Technology Adoption in Microfinance in India Page 96
Core banking solution of each and ICT based delivery channel to serve the rural customers.
-Samastipur Kshetriya Gramin Bank
“100% financial inclusion through Technology intervention”- - UBI
―Inclusion of young and technology trained people to implement modern banking technology”.
-UCO Bank, zonal Patna
“There would be no use of paper for any kind of financial transaction; mobile banking will beat
all other technology”- PNB, Chanakya Tower, Patna
“Technology which can help the organizations with comprehensive solution for all their
departments to increase productivity, profitability with a user friendly approach and which
reduces human work while maintaining flexibility. Adoption of technology at branch level will
help to reach millions of poor people. ”
-Disha Microfinance Pvt. Ltd.
“All the branches should computerize Mobile and web based technology”-
-Nav Achetana Microfin Services Private Limited
“Our vision for technology for microfinance after five years is to work with 20 branches at an
outstanding of Rs. 60 crores with web based software with tailor system. All branches should be
computerized”.
-Mahashakti Foundation, M. Rampur Kalahandi, Orissa
“Technology in Bihar Development Trust is generally limited to Computers and MIS/Accounting
Software, but should use non-traditional delivery technologies, such as automated teller
machines (ATMs), point-of-sale (POS) networks or other devices in retail outlets which use
debit/credit cards to facilitate electronic payments and transactions and mobile phone banking”.
-Bihar Development Trust
―The cost of the technology is high. It should be made available in less cost and technology
should be such that every aspect of Microfinance should get digitalized and all should come in
one package”. -Agricultural Science Foundation, Hyderabad
“Technology adoption at Sambandh at branch level will reduce the cost of Micro Financial
Services and thus creating a win-win situation for both the clients and the organization”.
-Sambandh Finserve Pvt. Ltd.
―Technology should be available at low cost with high efficiency/performance. User friendly for
all level of users. Also help in company security and productivity”.
-Sarvodaya Nano Financial Services India Private Limited Chennai
Impact Assessment of Technology Adoption in Microfinance in India Page 97
“All the information would be available online and data entry would be done in the field itself
using sophisticated mobile phones/PDA's etc”. -BFSPL
“Training to a vibrant system, it takes case of day-to-day operations and should support the
campus growth with accuracy”- -Spandan Sphoorty finance limited Hyderabad.
“Computerization of all branches, adoption of mobile banking in most of the branches”.
-Basix, Hyderabad
“Organization would be fully computerized with CBS, Rural ATM at branch level, and Full
implementation of mobile technology”.
- IDF Financial service Pvt. Ltd.
“Reach customer door step with technology. HHBM/POS/Mobile banking, Easy access to their
funds and Banking transaction, Cashless transaction using magnetic card like biometric, debit
card, CBS, Rural ATM”. -Ujjivan Finance Service Pvt. Ltd
Impact Assessment of Technology Adoption in Microfinance in India Page 98
5.2: Awareness and impact of modern on microfinance and
bank clients
Awareness and impact assessment of technology were analysed by collecting data from clients of
10 banks banks and 10 mFIs. 20 clients each from selected banks and microfinance institutions
were selected. Clients were selected randomly.
5.2.1: Client’s profile
Clients profile of banks and microfinance institutions were collected with respect to age,
education, gender, marital status, income and occupation and presented in different tables below.
5.2.1.1: Age wise classification of clients
Age wise classifications of clients are presented below.
Table 5.2.1.1: Age- wise classification of clients
Sl. No. Age-Group Bank MFI Total
1 16-25 31 28 59
15.5% 14.0% 14.8%
2 26-35 85 112 197
42.5% 56.0% 49.3%
3 36-45 52 43 96
26.0% 21.5% 24.0%
4 46-55 24 14 38
12.0% 7.0% 9.5%
5 56-65 8 3 11
4.0% 1.5% 2.8%
Total 200 200 400
Source: Primary Survey
Most of the clients associated with either the banks or MFIs are in the young age group. 70% of
the clients associated with MFIs and 58% clients associated with banks are below 35 years of
age. This shows the growing awareness level of younger population towards MFIs. They are now
open to get benefits from the institutions like MFI and make their future bright.
Impact Assessment of Technology Adoption in Microfinance in India Page 99
5.2.1.2: Educational classification of clients
Educational classification of clients of banks and mFIs clients were collected and presented
below.
Table 5.2.1.2: Education received by clients
Sl. No. Education Bank MFI Total
1 Illiterate 12 32 44
6.0% 16.0% 11.0%
2 1 to 5th
class 9 68 77
4.5% 34.0% 19.3%
3 6 to 10th
class 23 86 109
11.5% 43.0% 27.3%
4 12th
class 42 14 56
21.0% 7.0% 14.0%
5 Graduation 114 0 114
57.0% 0.0% 28.5%
Total 200 200 400
Source: Primary survey
Clients associated with the MFIs are not so educated. They usually come from rural background
and don‘t have enough facilities as well as money to attend school and gain education. They
were mainly labourers or farmers. 11% of the clients associated with MFIs were illiterate,
whereas 6% of the clients of banks mostly from RRBs were found illiterate. One third of the
clients of mFIs were educated from class 1 to fifth.
However, the situation is very different in case of clients associated with banks. Around 57% of
the clients associated with banks are graduates. This can also be seen with respect to the target
groups MFIs are targeting. The major clients of MFIs are the unskilled people and the ones who
are not so literate and unemployed.
5.2.1.3: Gender wise classification
Gender wise classifications of the clients are presented below.
Impact Assessment of Technology Adoption in Microfinance in India Page 100
Table 5.2.1.3: Gender-wise classification of the clients
Sl No Gender Bank MFI Total
1 Male 134 44 178
67.0% 22.0% 44.5%
2 Female 66 156 222
33.0% 78.0% 55.5%
Total 200 200 400
Source: Primary survey
Gender wise classification of the clients is quite interesting as well. Clients associated with MFIs
are mostly women (78%), whereas the ones associated with banks are dominated by men (67%).
These showed those females were getting more involved in the financial matters through MFI.
This is actually benefitting the family at large and would help them in being financially strong
through proper utilization of funds received from MFIs.
5.2.1.3: Marital status of the clients
Marital status of the clients of mFIs and banks were collected and presented below in table
5.2.1.3.
Table 5.2.1.3: Marital Status of the clients
Sl No
Marital
Status
Bank MFI Total
1 Married 161 178 339
80.5% 89.0% 84.8%
2 Unmarried 39 22 61
19.5% 11.0% 15.3%
Total 200 200 400
Source: Primary Survey
Around 85% of the clients surveyed, were married. Out of these, 89% of the clients associated
with MFIs were married and 80.5% of the clients associated with banks were married.
Impact Assessment of Technology Adoption in Microfinance in India Page 101
5.2.1.4: Social group wise classification of clients
Social group wise classification of clients of mFIs and banks were collected and presented in
table 5.2.1.4:
Table 5.2.1.4: Social group wise classification of clients
Sl. No. Caste Bank MFI Total
1 SC 35 64 99
17.5% 32.0% 24.8%
2 ST 6 5 11
3.0% 2.5% 2.8%
3 OBC 49 94 143
24.5% 47.0% 35.8%
4 Minority 6 19 25
3.0% 9.5% 6.3%
5 General 104 18 122
52.0% 9.0% 30.5%
6 Total 200 200 400
Primary Survey
When we observed the social group wise classification of clients, we saw that clients associated
with MFIs were mostly from the Scheduled caste (32%) and OBC (47%) category. General
category only composed 9% of the total clients associated with the MFIs. While the clients
associated with banks were predominantly from General (52%) category. OBC and SC category
formed 24.5% and 17.5% respectively.
Therefore, it can be implied that the MFIs are the major sources of fund for the under privileged
class and they are now finding it easy to interact with MFIs and improve their socio-economic
condition. It could be the hassle free path for the not so educated and poor people to coordinate
with MFIs rather than banks.
5.2.1.5: Family Size of the clients
Impact Assessment of Technology Adoption in Microfinance in India Page 102
Table 5.2.1.5: Family Size of the clients
Sl. No. Family Size Bank MFI Total
1 2 to 4 98 67 165
49.0% 33.5% 41.3%
2 5 to 7 94 106 200
47.0% 53.0% 50.0%
3 8 to 10 8 25 33
4.0% 12.5% 8.3%
4 11 to 14 0 2 2
0.0% 1.0% 0.5%
Total 200 200 400 Source: Primary Survey
In the rural area the family size are generally larger than the urban society. It can be seen here
that the clients associated with the MFIs have larger family compared to the ones associated with
banks. Majority of the clients associated with MFIs had a family of 5 to 7 (53%) and 2 to 4
(33.5%) members. Some were also having family of 8 to 10 (12.5%) members. Whereas the
clients associated with banks had mainly nuclear family structure. Families with 2 to 4 members
and 5 to 7 members comprised 49% and 47% respectively of the total clients associated with
banks.
5.2.1.6: Income wise classification of clients
Table 5.2.1.6: Income wise classification of clients
Sl. No. Monthly Income (Rs.) Bank MFI Total
1 No income 17 4 21
8.5% 2.0% 5.3%
2 till 1500 1 44 45
0.5% 22.0% 11.3%
3 1501 to 5000 37 104 141
18.5% 52.0% 35.3%
4 5001 to 10000 27 43 70
13.5% 21.5% 17.5%
5 10001 to 15000 20 5 25
10.0% 2.5% 6.3%
6 15001 to 20000 46 0 46
23.0% 0.0% 11.5%
7 20001 to 25000 13 0 13
6.5% 0.0% 3.3%
Impact Assessment of Technology Adoption in Microfinance in India Page 103
8 More than 25000 39 0 39
19.5% 0.0% 9.8%
Total 200 200 400
Source: Primary Survey
Majority of the clients associated with the MFIs were from the low income group. 76% of the clients
associated with the MFIs had monthly income less than Rs. 5000. They were mainly engaged in
agriculture, labour work or having small shops. They are the ones who need loans for their small
businesses or agriculture and can get it without much problem from MFIs even in small amount. The no
income group people are the ones who are either students or the housewives. The clients associated with
the banks were mostly earning between 15000 to more than 25000 a month (49%). They were mainly in
the profession of banking, Govt. jobs, CA or running private business.
5.2.1.7: Occupation wise distribution of clients
Occupation wise distribution of clients were collected and presented in table below.
Table 5.2.1.7: Occupation wise distribution of clients
Sl. No. Occupation Bank MFI Total
1 Agriculture 7 28 35
3.5% 14.0% 8.8%
2 Accountant 3 0 3
1.5% 0.0% 0.8%
3 Banking Services 15 5 20
7.5% 2.5% 5.0%
4 Labourer 20 30 50
10.0% 15.0% 12.5%
5 Private Business- small shops 65 88 153
32.5% 44.0% 38.3%
6 Job-Teaching, Private firm, Govt. sector 78 24 102
39.0% 12.0% 25.5%
7 Student 6 10 16
3.0% 5.0% 4.0%
8 Housewife 6 15 21
3.0% 7.5% 5.3%
Total 200 200 400
Source: Primary survey
Impact Assessment of Technology Adoption in Microfinance in India Page 104
The clients associated with MFIs were mainly labourers or run small shops of bidis, tea etc. Some of them
were also farmers. While the clients associated with the banks were mostly in govt. sector (39%) or doing
job in private sector organization (32.5%), banking services (7.5%) etc.
5.2.2: Clients response on Awareness and Impact Analysis of Technology
Knowledge of technology is also very essential for the clients so that they can easily understand
the procedure of the financial institutions with which they are associated. The basic motive of
adapting technology in an organization is to increase its efficiency and provide best services to
the customers. Therefore, unless the clients are not aware of the technologies and its benefit, it is
difficult to attain proper utilization of the modern technology. For this purpose, the awareness
level of the clients regarding the various technologies was examined. Twenty clients each from
10 banks and 10 mFIs was taken for interview. Their responses are presented below.
Table 5.2.2.1: Clients response on Awareness regarding following technology
Sl. No. Name of Technology Bank MFI Total
1 24 hour on call service 61 65 126
30.5% 32.5% 31.5%
2 Automated Teller Machine (ATMs) 179 130 309
89.5% 65.0% 77.3%
3 Biometric Card 9 13 22
4.5% 6.5% 5.5%
4 Charge Card 2 7 9
1.0% 3.5% 2.3%
5 Credit Cards 70 79 149
35.0% 39.5% 37.3%
6 Credit Scoring 18 53 71
9.0% 26.5% 17.8%
7 Debit Cards 165 50 215
82.5% 25.0% 53.8%
8 E-Payment of utility bills and taxes 20 17 37
10.0% 8.5% 9.3%
9 Interactive Voice Response Technology
(IVR)
8 3 11
4.0% 1.5% 2.8%
10 Internet Banking 43 23 66
21.5% 11.5% 16.5%
11 Mobile Banking 39 18 57
Impact Assessment of Technology Adoption in Microfinance in India Page 105
19.5% 9.0% 14.3%
12 Personal Digital Assistant (PDA) 6 12 18
3.0% 6.0% 4.5%
13 Point of Sale (POS) Terminals 13 7 20
6.5% 3.5% 5.0%
14 Computer 180 131 311
90.0% 65.5% 77.8%
15 Software 40 10 50
20.0% 5.0% 12.5%
Source: primary survey
It can be seen from the above table that the well established technologies like ATMs and debit
cards are known to the people in general but there is considerable difference in awareness level
of both of these with respect to the clients associated with and banks and MFIs. Clients
associated with banks are more aware of these technologies than the ones associated with the
MFIs. For example, ATMs are known to 89.5% of the clients associated with banks, whereas it is
just 65% for the clients associated with MFIs. Similar is the case with debit cards (82.5% for
banks and 25% for MFIs). The highest level of awareness is for computers. About 77.8% of the
clients are aware of computers. Here also, same pattern was observed. Awareness level was 90%
for the clients associated with the banks and 65.5% for the clients associated with MFIs. This can
be contributed to the socio economic condition of the general public at large. Moreover, lack of
electricity, infrastructure are also other factors for the less use of these technologies contributing
to lower awareness level. Other relatively new technologies (like, PDA, POS, IVR, charge card,
credit scoring, biometric card) are not so popular among clients and therefore, they are not aware
of them.
Table 5.2.2.2: Clients response about the use of technology
Sl. No. Name of Technology Bank MFI Total
1 24 hour on call service 29 51 80
14.5% 25.5% 20.0%
2 Automated Teller Machine (ATMs) 147 0 147
73.5% 0% 73.5%
3 Biometric Card 9 13 1
4.00 6.5%
4 Charge Card 2 4 6
1.0% 2.0% 1.5%
Impact Assessment of Technology Adoption in Microfinance in India Page 106
5 Credit Cards 29 0 77
14.5% 0% 19.3%
6 Credit Scoring 8 48 56
4.0% 24.0% 14.0%
8 E-Payment of utility bills and taxes 3 2 5
1.5% 1.0% 1.3%
9 Interactive Voice Response
Technology (IVR)
4 1 5
2.0% 0.5% 1.3%
10 Internet Banking 13 2 15
6.5% 1.0% 3.8%
11 Mobile Banking 6 6 12
3.0% 3.0% 3.0%
12 Personal Digital Assistant (PDA) 0 6 6
0.0% 3.0% 1.5%
13 Point of Sale (POS) Terminals 11 2 13
5.5% 1.0% 3.3%
14 Computer 68 33 101
34.0% 16.5% 25.3%
15 Software 21 40 25
10.5% 2.0% 6.3%
Source: Primary Survey
Presence of technologies in an organization is important to get its benefit and pass that on to the
customers. However, the clients were not in the best position to answer about the presence of all
the above mentioned technologies in the financial institutions they were attached with. ATMs,
debit cards and computers are the only three technologies about which they were aware to a great
extent and also knew about their existence in the organization they were attached with.
According to the 73.5% of the clients associated with banks, ATMs are already present in their
organizations. And 69% of the clients associated with the banks said that their organizations
were already using debit card facility. Clients‘ associated with MFIs were not so aware about the
use of technology in the MFIs. However, there are number of technologies which are relatively
new and they are not in the knowledge of clients. Those included biometric card, charge card, E-
payment of bills, IVR, PDA, POS etc.
Impact Assessment of Technology Adoption in Microfinance in India Page 107
5.2.2.3: Facilities for which the above mentioned technology are used
Different facilities for which technology was used were collected and presented below.
Table 5.2.2.3: Facilities for which the above mentioned technology are being used
Sl. No. Facilities Bank MFI Total
1 Cash requirement 147 46 193
73.50% 23.0% 48.25%
2 Insurance 27 59 86
13.5% 29.5% 21.5%
3 Savings 42 69 113
21.0% 34.5% 28.3%
4 Remittance 43 17 60
21.5% 8.5% 15.0%
5 Financial Literacy 23 25 48
11.5% 12.5% 12.0%
Source: Primary Survey
The technologies which were used in the financial institutions were useful for various purposes.
According to the clients, cash requirement is the main facility for which the technologies are of
great use. 58% of the clients (73% associated with banks and 43% associated with MFIs)
expressed the view that technology is useful mostly for the purpose of cash requirement. They
use ATMs, debit cards etc to procure cash easily. The other facilities for which the technologies
are useful to the clients were insurance (21.5%), savings (28.3%), remittance (15%), and
financial literacy (12%). They also found technologies useful for shopping, to gain knowledge
about MFIs, banking procedures etc. The clients were definitely benefitted by the technologies
and were finding it to be much effective.
Table 5.2.2.4: Clients response on benefits of use of technology
Sl. No. Benefits of Technology use Banks MFIs Total
1 Easy Accessibility 140 35 185
70.0% 17.500 % 46.25%
2 Cashless transaction 174 51 225
87.0% 25.5% 56.3%
3 Timeliness 185 59 244
92.5% 29.5% 61.0%
Impact Assessment of Technology Adoption in Microfinance in India Page 108
4
Less expensive to open bank
account in remote area 40 42 82
20.0% 21.0% 20.5%
5 Less transaction cost 63 64 127
31.5% 32.0% 31.8%
6 Flexibility 141 99 240
70.5% 49.5% 60.0%
7 Accuracy 178 110 288
89.0% 55.0% 72.0%
8 Acceptability 175 108 283
87.5% 54.0% 70.8%
9 Fund Transfer 63 51 114
31.5% 25.5% 28.5%
10 Remote chance of fraud 72 56 128
36.0% 28.0% 32.0%
Source: primary survey
The clients were also a strong medium to know about the benefits gained by the technology use
in the financial organization. Easy accessibility, accuracy, acceptability were the major benefit
gained from the use of technology.
Impact Assessment of Technology Adoption in Microfinance in India Page 109
CHAPTER VI
MANAGEMENT INFORMATION SYSTEM IN
MICROFINANCE
Management information system has become an essential part of microfinance institutions.
Major task of manager in microfinance institutions is to create a system that shapes the
transformation of data into information. The MIS involves all aspects of gathering, storing,
tracking, retrieving and using information within a business or organization. A microfinance
institution has to prepare filed reports, operational reports, financial reports, and general reports.
These MIS reports are needed to the funding agencies like rating agencies, banks and other donor
agencies
Information Channel in microfinance
Information Channel in microfinance
The purpose of the selection these technology providers were to understand description of the
various technology, its uses and different microfinance institutions adopting their technologies.
They were interviewed to understand technology solution in microfinance.
Secondary data were also collected to know about the various technology providers around the
world.
Impact Assessment of Technology Adoption in Microfinance in India Page 110
Technology providers
1. RM IT solution, Hyderabad
2. Jayam Solution, Hyderabad
3. BASIX /Sathguru, Hyderbad
4. Elitser IT Solutions, Hyderabad
5. Force ten Technology, Kolkata
6. Graditum IT Bangalore
7. Craft Silikan, Bangalore
8. Surya Software Solution, Bangalore
9. EKO financial services, Delhi
10. Zero Mass foundation, Delhi
Impact Assessment of Technology Adoption in Microfinance in India Page 111
Figure 6.1: MIS technologies employed worldwide
Source: C Gap Survey
Worldwide, 46% of MFIs still have very low-tech systems, either manual or spreadsheet-based
MIS. The remaining 56% have more advanced systems, either custom outsourced systems (24%
of the institutions surveyed), systems built in-house (20%), or applications purchased off the
shelf (10%).
Impact Assessment of Technology Adoption in Microfinance in India Page 112
6.2: Microfinance and Banking technology providers in India
Both primary and secondary data were collected by interviewing different MIS technology
providers
Table 6.2: Microfinance and Banking technology providers in India
Software Technology
providers
Institution size Clients
Centralised web based
application
Craft Silikan,
Bangaluru
Small mFIs CEFI Delhi, Sahayaga
Microfinance Jaipur, Lok
Birdari Trust Indore, Vista
livelihood Finance Bangalore,
MIMO Finance Delhi, India
shelter finance Gurgaon,
FIMO Jayam
Solution,
Hyderabad
Small and
Medium mFIs
Saadhana Microfin Society,
Kurnool, AP
AMMACTS, V.Kota, AP
Sharadha's Women's
Association for weaker section,
Hyderabad, AP
Star Microfin Service Society,
Velugodu, AP
CReSA, Rajahmundry, AP and
others
Delphix – Nano
Enterprise Solution for
Micro Finance
BASIX
/Sathguru
Large, medium
and small mFIs
Basix, Chaitnya microfinance
MicroFinancerTM
2.0 Elitser IT
Solutions,
Hyderabad
Small and
medium mFIs
ECLOF - CHENNAI, Chennai
Swayam Shree Micro Credit
Society, Bhubaneshwar
Pragathi Mutually Aided
Cooperative Credit and
Marketing Federation Ltd.,
Warangal, (Elitser has given
hand held device to Pragati)
Business Information
Justified and Logically
Integrated (BIJLI)
Force ten
Technology,
Kolkata
Small and
medium mFIs
Life bank inc ilio phillipines,
Village welfare society, West
Bengal, Sree Ma Mahila
Samity, West Bengal and others
―mf Expert‖ RM IT
solution,
Hyderabad
Large mFIs
Ashmita, Micro -support, Share
Microfinance
MF resolve Graditum, IT
Banglore
Large Bank Axis Bank, PNB – Rural
Software Technology Institution size Clients
Impact Assessment of Technology Adoption in Microfinance in India Page 113
providers
BALM (Bank Asset &
liability Management)
Surya Software
Solution,
Banglore
Large Banks Axis Bank, OBC, United Bank
of India, Sri Sudha Co-operative
Bank
SimpliBank Banking
Platform
EKO financial
Services
Banking
Correspondence
BC of SBI, ICICI
Smart card
Zero Mass
foundation
Banking
Correspondence
BC of SBI
Source: Primary Survey
Brief description of technology providers are presented below.
6.2.1: ―mf Expert‖
RM IT has implemented a sound information system ―mf Expert‖ to help MFIs to make
informed decisions. RMIT solution has domain expertise, in system utility software, CRM,
Micro Finance, Insurance, Loyalty, Education and Accounting among others.
Benefits of using mf expert
Swift development of business.
Thrive to have a better economic organization.
Reduce operating cost.
Reduce unnecessary work.
Help restructure the work force proficiently.
To boost the development and performance of the business.
Extremely portable, adaptable, flexible, scalable and customizable.
Improve Field Level and Branch Level Operational Efficiency.
Help provide better service to clients.
Offer high level of authorization, data security and integrity.
Key Features - Administrative Level
Role Based Access for various Management Levels.
User Management with Enhanced Security Features
Impact Assessment of Technology Adoption in Microfinance in India Page 114
Scheduling and Auto E-Mail
Alert Management System
Portfolio Aging & Quality Analysis
Integrity with Accounting Software
Consolidate Reports from H.O.
Data Access through Online and/or Offline Network
Data Maintenance (Accessing, Storing) through H.O.
Key Features – User Level
Multi-Level Branch Creations
Handling all required financial transactions
Unlimited ‗Branch Group‘ creation
Auto consolidation of all financial statements
Column wise comparative statements
Unlimited templates provision for each financial statement
Branch specific Account Ledger creation
Clients: Ashmita, Micro -support, Share Microfinance
Customisation and set up of MIS package for head office and 5 branches: Rs. 3lakh
Annual maintenance cost – Rs. 1 lakh.
―mf Expert‖ opens the doors to micro finance institutions to operate modern information
technology with the capabilities and the power which was previously only available for larger
banks. Mf-Expert software with window based application software having client-server based
architecture with Microsoft.Net Framework 3.5 as Front end and MS SQL Server 2005/2008 as
the back end. The software uses StimulSoft as reporting tool. The software integrates portfolio
management, HR and Accounting and is flexible to customization of any new product
development. Networking the branches and Head Office server to have real time data with the
service providers like Reliance, Tata Tele Services.
6.2.2 : FIMO
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FIMO software for microfinance institutions has been developed by Jayam Solution. FIMO is a
software package purely designed for the complete needs of the micro finance organizations.
The full form of FIMO ―Financial Information and Monitoring Organizer‖ Package provides
MIS, HRM, Financial Accounting. Micro Finance Organizations can use FIMO to maintain and
update the day-to-day information of their operational activities. The information is analyzed
and the MIS information is provided by FIMO automatically. Progress and the performance will
be checked continuously. It has also have the well-furnished support of the integrated Accounts
module and the HRM module, FIMO supports the Micro Finance Organizations to maintain
Baseline information, Loan Information, Savings Information, Insurance Information, HRM
Information, MIS Information, & Accounts Information through this project. Currently it is
available in English & Telugu languages. Hindi version will be available soon. We are also
providing ‗Help‘, in English & Telugu languages presently.
Hardware requirement:
• Pentium 3 processor or above
• 256 MB RAM
• 1 GB of Free Hard Disk Space (Additional space based on data base size)
• 48 x or higher CD ROM
• 56 K Modem Software
Software:
• Operating System Windows XP with service pack 2
• Development Environment VB
• Reporting Tools Crystal Reports, Text Reports
• Database MS-SQL server
It has the following features:
Baseline and Client Information: Users can record the primary information of their
clients and the baseline information of the hierarchy of the organization such as Area,
Center etc.
Loan Information: Loan system is tracked entirely with loan issues, accurate interest
calculations and automatic generation of the instalment demand.
Impact Assessment of Technology Adoption in Microfinance in India Page 116
Savings Information: FIMO supports both the Voluntary savings and the compulsory
savings that are being used in the MF sector.
Insurance Information: In FIMO, Insurance can be linked with the Loan system.
Insurance amounts can be deducted at the time of Loan Disbursements. Users can
maintain the following information of the Insurance: Insurance Policy numbers of the
members.
HRM Information: Relating to these users can maintain the human resource
information.
MIS Information: MIS is proved compulsory for MFIs. FIMO stands as a source for the
demand of MIS in MFIs. The demand for MIS is driven by the outputs - performance
reports for the funding agencies, analytic reports for management, and operational reports
for the staff and the clients. MIS in FIMO is generated automatically and is automatically
updated with the operational information recorded in the project daily.
FIMO provides the following MIS information.
a. Progress of the organization - such as, how many Members joined newly, how many
loans are sanctioned, how much loan amount distributed, amount collected as on selected
date, etc.
b. Performance of various portfolios of the organization - such as No of Areas in a
Branch, No of Centres in an Area, and No of Groups in a Centre, No of Loans disbursed
per Area or Centre etc.
c. Ageing Analysis reports that gives clear idea on the Loan outstanding status, Portfolio
risk, and Loan Loss reserve to maintain etc.
Partial list of Clients
i. Saadhana Microfin Society, Kurnool, AP
ii. AMMACTS, V.Kota, AP
iii. Sharadha's Women's Association for weaker section, Hyderabad, AP
iv. Star Microfin Service Society, Velugodu, AP
v. CReSA, Rajahmundry, AP
vi. Sharadha MACTS Ltd, Hyderabad, AP
Impact Assessment of Technology Adoption in Microfinance in India Page 117
vii. AWARE MACTS Ltd, Hyderabad, AP
viii. The Max Wealth Trust, Hyderabad, AP
ix. Sagar MACTS ltd, Chittor, AP
x. SEWA federation, Hyderabad, AP
xi. Bhagya nagar MACTS Ltd, Hydrerabad, AP
xii. Sai Ram MACTS Ltd, Hyderabad, AP
xiii. SIRI MACTS Ltd, Kurnool, AP
xiv. Ushodaya Macts, Hyderabad, AP
xv. SKC Macs, Vizag, AP
xvi. Partner Macts, Kadapa, AP
Karnatka
i. Nirantara Community Services, Bidar, Karnatakas
ii. Pravardha, Bidar, Karnataka
Orissa
i. Gramoddan, Orissa
ii. Bhoomika, Orissa
iii. ADIKAR, Bhubaneswar, ORISSA
Uttaranchal
i. MIMO, Dehradoon, Uttaranchal
Assam
i. IIRM, Tejpur, Assam
Customisation and set up of MIS package for head office and 5 branches: Rs. 3.5 lakh
Annual maintenance cost – Rs. 1 lakh.
6.2.3: Nano Enterprise Solution for Micro Finance Industries
An integrated enterprise resource solution for Micro Finance Industry, dovetailing all critical
business process unique to that industry and incorporating some of the best practices adopted in
that industry. BASIX in collaboration with technology service provider, Sathguru Management
Consultants, a software named ―FAMIS: (Financial Accounting and Management Information
Systems) was designed with FOXPRO as a database. It is used as a bridge to transfer all business
Impact Assessment of Technology Adoption in Microfinance in India Page 118
transactions during the day to financial accounting, resulting in scrolls like any other bank. Later
in 2000, inspiration came from our team visit to Desjardins, Canada, where it harnessed their IT
capabilities, in particular their MIS called an ―Alerte‖ system. Inspired by this BASIX launched
its own Core Livelihood Solutions called ―Delphix,‖ Enterprise-wide Resource Planning
software with Developer 2000 as a front-end form on Oracle database. Delphix outputs were
superior due to the adoption of new processes to overcome certain deficiencies in FAMIS. In the
year 2001, RBI gave a banking license to BASIX, and it was decided to buy banking software
and Banksoft of Processware Systems Pvt. Ltd., Bangalore.
The application has the following five modules:
1. Operations
2. Financial Management
3. Human Resources Management
4. Payroll
5. Head Office Consolidation
Operations Module: It covers entire spectrum of lending and borrower management of the
enterprise from the stage of identification to loan closure.
Financial Management Module: It covers entire spectrum of accounting, budgeting, investment
management and financial management.
Business Functionality
Based on industry standard based practices and supports all microfinance models such as
individual, JLG, Grameen, and SHG including institutional lending.
Highly flexible
Multi user and multi- functional solution.
Registration of a Beneficiary
Application for loan request
Recommendation and sanction of loan
Documentation and loan collateral control
Disbursement of loan, direct and through hand held device integration
Managing loan portfolio
Impact Assessment of Technology Adoption in Microfinance in India Page 119
Managing repayment, direct as well as receipt through hand held devices
Auto classification of Non-performing assets, monitoring and reversal thereof
Loan linked and non-linked insurance delivery
Life and Non-life insurance product integration
Portfolio analysis and recovery
Loan closure and release of collaterals
Managing Customer relationship
Portfolio split and merge facility
Variety of control, analysis, review and regulatory reports
Installation charge: 4 lakh (for headquarter + 3 branches)
It has Expert technical support available at Ranchi, Bhubneshwar, Bhopal, Calcutta, Hyderabad.
Execution support team available at Hyderabad.
Hand held device at KBS Branch, Mahboobnagar in Andhra Pradesh, and Jaipur in Rajasthan 17
branches. Basix uses mobile version BASIX 1.5.0M. It is compatible with NOKIA, 3110 and
NOKIA 2710 model. Hand held device had battery backup and online configuration. In mobile
banking HOLOGRAM is pasted in clients pass book. Through this paper consumption was less.
6.2.4: MicroFinancerTM
2.0,
Elitser‘s solutions combine latest technologies, training, consulting and technical support in
microfinance and banking. Elitser IT Solutions India Pvt Ltd‘s has developed MicroFinancerTM
2.0, an integrated software system exclusively designed and developed for Management of
Information and Financial Accounting for Micro Finance Credit Societies. MicroFinancerTM
2.0
provides powerful tools to customers need to succeed in the modern Micro Finance environment.
Microfinancer 2.0 is custom built for Micro Finance Institutions. It caters to large and medium
credit societies where the membership is more than 5000 with large transactions. It can
incorporate various Micro Finance models like Grameen, MACTS, SHG, and Federation. It can
incorporate the latest CGAP ratios and standard Accounting formats. Its Graphical User Interface
(GUI) offers screens in the familiar Microsoft Windows format. It offers customized MIS as per
the requirement of the client and fully supported by a strong after sales Technical Support Team.
Technology Partners: it has technology partners ILITSER ILHA consulting private limited,
Cethar consultancy, Image point, Nova Terra. It has Innovative Solutions for Microfinance
Impact Assessment of Technology Adoption in Microfinance in India Page 120
Operations & General Accounting Solutions and Livelihoods Operations & Monitoring
Software.
Micro Financer - A comprehensive Financial Accounting & MIS software solution
eLOMS - Livelihoods Operation Information System – for Livelihoods promoting funding
agencies and Government Agencies
eGAP - General Accounting Software Solution for all types of Business
Establishment cost: Rs. 3-5 lakh on the basis of specification.
Annual maintenance cost = Rs. 50000 to 1 lakh.
National Clients
i. ECLOF - CHENNAI, Chennai
ii. Swayam Shree Micro Credit Society, Bhubaneshwar
iii. Pragathi Mutually Aided Cooperative Credit and Marketing Federation Ltd.,
Warangal, (Elitser has given hand held device to Pragati)
iv. Sangatitha Federation, Warangal
v. OAZOANE, Aranthangi
vi. Youth For Action, Hyderabad
vii. Krushi AP - , Karimnagar
International Clients
i. Federal Capital Investment and Finance Ltd, Kingston, Jamaica
ii. Life Bank - Philippines
iii. ECLOF - Philippines
iv. Sun Rise Bank – Philippines
v. Golden Bough Inc – Philippines
vi. Bangko – Kabayan – Philippines
vii. Cooperative Rural bank of Bulacan, Bulacan – Philippines
viii. G7 Bank, Naga City – Philippines
ix. Malasiqui Rural Bank – Malasiqui, Philippines
x. Dian Mandiri – Indonesia
xi. Permodalam Nasional Madani Bank – Indonesia
Impact Assessment of Technology Adoption in Microfinance in India Page 121
6.2.5: Business Information Justified and Logically Integrated (BIJLI)
It provides range of services like corporate training, System integration and consultancy,
Software development, Data Processing on any platform and digitization of Engineering
Drawings. The software uses RDBMS development tools, SQL server, Visual basic, and
ASP.net. It helps in Production Plan, Accounts, HR (Payrole and ADMIN), Sales, purchase,
inventory, Microfinance, Insurance, Supply chain
mFIs -Clients
1. Life bank inc ilio Phillipines
2. Village welfare society- West Bengal
3. Sree Ma Mahila Samity - West Bengal
4. Sahara Uttarayan- West Bengal
5. Disari Finnacial services -West Bengal
6. Sahara Utsarga- West Bengal
7. Gram Vikas Kendra – West Bengal
8. Kalighat society- West Bengal
9. Ajiwika- West Bengal
10. Vedika Credit capital- Jharkhand
11. Nav Bharat Jagriti Kendra
12. YUV – Manipur
13. PANI – Faizabad
14. RGVN – CSP – Assam
15. RFVN – Main- Assam
16. Grameen Sahara- Assam
17. NER fin service – Assam
18. NERCOP project Shillong – Meghalaya
19. UNACO- Assam
20. Satin credit care network – Delhi
21. Sikhar Development foundation Delhi
22. Fusion microcredit – Delhi
Impact Assessment of Technology Adoption in Microfinance in India Page 122
23. Sulaxmi Private Limited – Delhi
24. ODC- Orissa
25. Access Foundation – Orissa
26. PSMS- Indore ‗
27. Kamal Auto finance- JAIPUR
28. Disha Finance - Ahmedabad
29. PRAYAS – Ahmedabad
Installation charges: 5-8 lakh depending upon size and features and customization.
Maintenance cost = 1.25 lakh to 2 Lakh.
One of the very interesting about the fore ten technologies is that the company is proving
technology solution not only to Indian Microfinance institutions but also country like
Philippines.
6.2.6: MF Resolve
Gradatim, an international provider of technology services to microfinance institutions and
insurers. Gradatim, which has operations in India, Australia and Singapore, offers which is a
credit and savings management platform for microfinance institutions. Its MFInsure product
offers insurance providers tools for deploying new products, expanding distribution networks
and managing policies in real time.
Component of technology:
MF resolve for banks, mF resolve for mFI,
MF- insurer for insurance
Cost of each component
Hand held devices connected with internet- Rs. 7000 each.
PC- Rs. 40000 to 50000
Internet – Rs. 15000 to Rs. 18000
Establishment cost-Nil
No need to buy hardware/ software
Impact Assessment of Technology Adoption in Microfinance in India Page 123
Working as software as service model on demand platform
Model for 1 lakh clients with 5 branches- hard net – 5, computer 5
Operational cost: Rs. 4 lakh per year.
Charges for managing account Gramin model: Rs. 30 per clients
Asha model – Rs. 40 clients
Individual/ JLG / SHG clients – Rs. 29 clients
Clients: Axis Bank, PNB – Rural
Impact Assessment of Technology Adoption in Microfinance in India Page 124
6.2.7 : Bankers Realm Software developed by Craft Silikan, Bangaluru
Banker‘s realm MFO is full fledged software offering solution for microfinance institutions.
Craft Silicon, in recognition of the bright prospects and the opportunities, has developed BRmfs
(Bankers Realm Core Microfinance Solution) that helps manage small to large customer records,
volumes of transactions, portfolios, profits and also analyze the risk factors. BR MFS Solution is
now running on our high end web platform - BR .Net.
Craft Silicon's MFI offering also provides its partners with alternate channels such as POS and
mobile banking that allows businesses to provide online, real time and secure services to
customers even in remote areas. The limitless scope and convenience offered could be testified
by over 200 satisfied Micro Finance Institutions (MFIs), in over 32 countries around the world.
It is providing integrated solution Using our BR Electronic Fund Switch solution and other
switch vendors as well as bridges, our BR MFS solution has been tested and proven to integrate
on financial inclusion with ATM, POS , Internet Banking, Mobile Banking and Other Vendor
solutions.
The software has the following features:
Multi currency/ multilingual user definable
CRM module: captures all customer information
Custom fields and forms
More than 100 standard reports
Regulatory bank reporting
Credit scoring module
Group meetings and schedules synchronization
Client group exits tracking â€― reinstatement and savings refunds
Recurring deposits
Salaried loans eligibility set up
Detailed loan management (from application â€― write off / pay off)
Loan repayment performance highlights
Insurance details tracking
Rescheduling / restructuring loans
Refinancing loans / top-ups
Batch disbursements / rescheduling / pay offs
Impact Assessment of Technology Adoption in Microfinance in India Page 125
Loan history tracking
Customizable Event Driven Interest Procedure (EDIP)
It has following benefits to customers
With easy integration to alternate channels, customers can access the financial services at
their convenience
Faster and convenient processing of transactions, loans and member registration
Flexible interest rates and rescheduling of loans for individual customer
Provides friendly integration of group meetings with group loan schedule for repayments
To Businesses
With a user friendly customer query and dash board, users can view variety of business
and customer information all in one screen
Increased customer margin with easy integration to alternate channels such as POS, ATM
and Mobile banking
Increased customer service efficiency, with faster transaction, loan and group processing
Very fast and easy to import and export data in any format
Customizable interest procedure that allows customers and businesses to enjoy the
changing interest rates in the market.
Accurate and efficient MIS Reports for analysis of profits and loss for the business.
Consolidatable balance sheet for different branches.
Component of technology
Service Model- Servor, Operating System Window Microsoft, data base, connectivity,
Web based solution, Users-computer, connectivity, Software
Cost of each component
Service model: Signup cost----certain portion of portfolio subject to a minimum of
Rs. 2.5 lakh, Monthly subscription-0.05 % of outstanding
Establishment cost of the technology-
Service model Sign up cost based on model and portfolio size -0.5% of Monthly
subscription and profit or non-profit based company outstanding
Maintenance cost/year
Service model-Nil
Impact Assessment of Technology Adoption in Microfinance in India Page 126
Software model-18% of cost
Software: Centralized web based application -BR.Net-
Detailed description of technology
Software as service model-hosted site
All back end is maintained by craft silicon
Maintained at tier IV data centre
Offer to MFI on monthly subscription
1. Problems being faced by users in adopting your technology
Cost effectiveness- use of technology is not cost effective
Awareness and mindset of decision makers
Availability of technical staff-problem in data entry, benefit of it
Clients : CEFI Delhi, Sahayaga Microfinance Jaipur, Lok Birdari Trust Indore, Vista
livelihood Finance Bangalore, MIMO Finance Delhi, India shelter finance Gurgaon, Land
T finance, IASC Coimbatore, Rores microfinance Srinivaspur Kolar, Midland
Microfinance Jalandhar, Ujjivan, Fultron Chennai, India, Swadhar Microfinance Mumbai.
In abroad also it has clients like ACSI Ethiopia, Afribank Nigeria, Asusu Niger, Bimas
Kenya, Eclof Kenya, EZI Nigeria, FBN Nigeria, Fides Namibia, Harambee Kenya.
6.2.8: BALM (Bank Asset & liability Management)
This was developed by Surya Software Solution, Bangalore
Technical Specification: Visual Basic 6.0, SQL Server, MSDE, SQL Scripts
Features: BALM provides a comprehensive set of analytical tools to analyze maturity profile of
a bank‘s cash flows. With its graphical interfaces and what-if‘s facilitates dynamic pricing by
providing complete visibility to market and liquidity risk and reward, at a bank level. Key in
built tools are data extraction, Rule based product definition, Structural liquidity, Interest Rate
analysis, Duration gap, Generalized trend, Scenario and present value analysis.
It has two Component of technology
Impact Assessment of Technology Adoption in Microfinance in India Page 127
a. Not the web based technology- BALM-Bank asset and liability Management
system
b. Web based technology- CARE-Capital adequacy and risk evaluation
Cost of each component
35 lakhs for software development
Initial Establishment need Computer, Server, Internet and Software
Maintenance cost is Rs 5 lakhs per year
Detailed description of technology
Microsoft Platform, CARE is web based, BALM-not on web based
Problem being faced by users in adopting your technology was reluctance to change from
manual system.
Clients
i. Axis Bank
ii. OBC
iii. United Bank of India
iv. Sri Sudha Co-operaive Bank
Impact Assessment of Technology Adoption in Microfinance in India Page 128
6.2.9: Mobiles and biometric card by Zero Mass foundation
ZERO mass is using Mobiles and Biometrics card for Micro Banking.Zero Microfinance and
Savings Support Foundation, a Section 25 Company closely affiliated to ALW, has been
appointed as a Business Correspondent by 15 Banks, and provides field operations for the ZERO
platforms. ZMF manages the field force, account creation, appointment of Customer Service
Points (CSPs), management of cash and other logistics at the last mile. ZMF in turn collaborates
with strongly placed local organizations, district and state administration to ensure smooth
deployment and operations. ZMF creates the last mile operations network in villages, under pre-
defined service agreements with Banks and front-ends the delivery of full-featured transactional
services on behalf of Banks for Financial Inclusion on the ground.
Agreement between ZMF and a bank, ZMF’s scope of services includes
a. Enrolment of customers for no-frills zero-balance savings accounts and other account types
that may be specified by the Bank.
b. Enrolling, training and equipping of Customer Service Points (CSPs) in villages to provide
various kinds of transaction services including but not limited to cash deposit, cash
withdrawal, transfer of money, payment of utility bills, disbursal of loans, collection of loan
instalments, and cashless payments at local and remote merchant establishments.
c. Engaging the CSPs to provide enrolment services for opening no-frills account.
d. Engaging the CSPs to provide various kinds of transaction services including but not limited
to cash deposit, cash withdrawal, transfer of money, payment of utility bills, and disbursal of
loans and collection of loan instalments.
e. Cashless payments at local and remote merchant establishments.
Lending activities on behalf of the Bank (as an MFI) Other service as may be advised by the
Bank in writing to ZMF, and which ZMF agrees to perform
Impact Assessment of Technology Adoption in Microfinance in India Page 129
Features
It is simple enough to be used by woman operator in a village. It uses NFC Mobile with
hardware SAM as application control device instead of PC. Wired or bluetooth serial connection
to one or more peripherals They have utilized serial peripherals Printer; fingerprint scanner; GPS
module; barcode readers; full size keypads; contact, contact-less and mag-strip card readers.
• Offline + Online usage. More storage than most PoS devices is available.
• Local language: Voice prompts. Full graphics allows any language display.
• Very low cost direct mode of GPRS usage (not as modem)
• Color display for customer photo-display. 4 hrs video for training + adds.
• Eliminates need of smart cards for EBT: High security level allows use as store for
fingerprints, photos. They serve multiple banks simultaneously.
• Used for enrollment instead of PC. Limitation: it cannot be used for text entry. Advantage:
Permanent station within the investment of txn device. It is easy to use and portable. It
consumes low power. It has self-contained including network.
• Used for transactions instead of PoS: No limitation.
Advantages: Easy to use, portable, Low power requirement and Self-contained on network.
Clients : SBI, PNB
6.2.10: SimpliBank Banking Platform
It is developed by Eko India Financial Services Pvt. Ltd, New Delhi.
MIS product name: SimpliBank Banking Platform
Technical Specification: J2EE, MySQL, Linux Servers
Features:
It is built on using J2EE framework. Accounting and Portfolio tracking are integrated. Backup
levels RAID 1 applicable for banking correspondents. It has weekly full and daily incremental
EOD reconciliation with the Core Banking platform of the bank. Mobile phones used to carry out
transactions in the field.
Other software are Financial Information Network & Operations Ltd (FINO) using Biometric
Enabled multi-Application Smart Cards and Terminals, Coromandel Infotech India Limited,
Impact Assessment of Technology Adoption in Microfinance in India Page 130
Chennai using Smart Connect, Zero of A Little World, Mumbai, Loan and saving information
management by Kredits, USA, Bangalore, safalFin3.0 (MFI Model)/SafalFin2.0 (SHG Model)
of Safal Solutions, Hyderabad, MFASYS by Snowwood, Chennai, Ganaseva by Atyati
Technologies, Bangalore
Apart from this there is open source software. Open source packages are MIFOS by Grameen
Foundation Octopus Microfinance. ASOMI, an microfinance institutions in Assam using
MIFOS.
6.3: Management information system software used by sampled mFIs & Banks
Software used by mFIs and Banks was collected and presented below in table.
Table 6.3: Software used in the various Banking and MFI institutions
Sl.
No.
Name of the
software
Organization
Banks
1 B@ncs24 Samastipur Kshetriya Gramin Bank
2 CBS by IBM Canara Bank
3 Finware RIG, HDFC Ranchi
4 CBS State Bank of India
5 Provided by
HCL
Uttar Bihar Gramin Bank
6 FINO UBI
7 FLEX – Q Syndicate Bank
8 Finacle
UCO Bank, Zonal Patna
9 PNB, Patna
10 ICICI Bank Patna
Microfinance institutions
11 Bijli, Tally Disha Microfinance Pvt. Ltd.
12 FIMO, Jayam
Solutions
FIMO
Nav Achetana Microfin Services Private Limited
13 Mahashakti Foundation, M. Rampur Kalahandi, Orissa
14 FIMO, MIFOS Ushodaya Integrated Urban and Rural Development
Impact Assessment of Technology Adoption in Microfinance in India Page 131
15 FIMO developed
by Jayam
Solution
Agricultural Science Foundation, Hyderabad
16 FIMO, Tally erp
9.0
Sambandh Finserve Pvt. Ltd.
17 FIMO developed
by Jayam
Solution
Nano Financial Services India Private Limited Chennai
18 FIMO & Tally
erp 9.0
Star Microfin Service Society (SMSS)
19 FAMIS, Tally Bihar Development Trust
20 Rm IT Solution Spandan Sphoorty Finance ltd.
21 Micro vision SRFS
22 Delphix Nano Basix
23 Mf Expert by RM
IT solution
Share Microfinance
24 FINO, Tally Janlaxmi
25 Tally, FINO Gramin Koota
26 Micro Financer IDF financial service Pvt. Ltd.
27 Banker Relm Ujjivan Finance Service Pvt. Ltd.
28 LMS Version 2 Trust Microfinance Services, Muzaffarpur
29 In house
developed
SKS
30 In house
developed
BFSPL
Source: Primary survey
It is obvious from the table that different mFIs uses different software according to their need
and availability of software. Most of the banks except few RRBs have CBS system. Major MIS
software used by Banks was Finacle. Other MIS software was provided by HCL in case of Uttar
Bihar Grammeen Bank, CBS by IBM in case of Canara Bank, FINO used by Union bank of
India, FLEX –Q used by Syndicate bank and B@NCS24 by Samastipur Grameen Bank.
Different mFIs used different MIS softwares. FIMO developed by Jayam Solution was major
MIS software used by different mFIs. Other software were FAMIS developed by BASIX and
Impact Assessment of Technology Adoption in Microfinance in India Page 132
Sathguru, Hyderabad, BIJLI developed by Force ten Technology, Kolkata, mf Expert
developed by RM IT solution,
Other MIS softwares were Banker Realm used by Ujjivan, by LMS version by TMS. Grameen
Koota and Jan Laxmi use Tally and FINO for their MIS management. Basix has developed
Delphix Nano as their MIS application software. SKS and Bandhan Financial services have
developed their own MIS software.
SKS has designed and deployed a web-based Business Intelligence portal using state-of-art
technology and a highly flexible and scalable platform to support the business growth and
operations. SKS Microfinance has also built an integrated and encrypted MPLS communication
network encompassing a world class Data Centre delivering mission critical services and
enhancing collaboration across the organisation, thus ensuring superior service quality to its
customers. SKS has entered into strategic partnerships with various technology leaders and
innovators like Microsoft, Wipro, Reliance, HCL and Sify to establish an agile and scalable
technology architecture that is capable of handling the challenges specific to the microfinance
sector.
6.4: Software used by big microfinance institutions
Secondary Data were collected to understand to study the various Software used by large
microfinance institutions.
Table 6.4: Software used in big mFIs > 50 crores
Organization Name State (HQ) MIS Product
Name
IT Vendor Name
Krishna Bhima Samrudhhi Local Area
Bank Ltd.
AP BALM Surya Software,
Bangalore
Asmitha Microfin Ltd. Bangalore AP Bankers Realm
mfo
Cranes Software
Bharat Integrated Social Welfare Agency
(BISWA)
AP BALM Surya Software,
Knowledgeware,
Noida
Impact Assessment of Technology Adoption in Microfinance in India Page 133
BASIX AP Delphix Co-developed with
sathguru
Management &
Consultant,
Hyderabad
Sarvodaya Nano Finance Ltd Tamil Nadu Delphix Co-developed by
BASIX and
Sathguru
Management &
Consultant,
Hyderabad
BWDA Finance Ltd Tamil Nadu FAXFRO Software Solutions,
Chennai
AMMACTS AP FIMO Jayam Solutions,
Hyderabad
S E Investments Ltd UP Finsoft In-House
KAS Foundation Orissa Flexcube FINO, Mumbai
Bandhan Financial Services (P) Ltd West Bengal In-house MIS NA
SKS Microfinance AP In-house MIS NA
Spandana Sphoorty Financial Ltd AP In-house MIS NA
Bharatha Swamukti Samasthe Karnataka KREDITS Kredits, Bangalore
Mahila Arthik Vikas Mahamandal Maharashtra Manual\Excel
Sheet
NA
SMILE Tamil Nadu Manual\Excel
Sheet
NA
Share Microfin Ltd. AP Microfin In-House
Evangelical Social Action Forum Kerala MiFi Soft In-House software
Grameen Koota Karnataka MIFOs In house handling of
open source package
SMILE Tamil Nadu Manual\Excel
Sheet
NA
Share Microfin Ltd. AP Microfin In-House
ASA Grama Vidiyal Tamil Nadu NA Paripoorna Software
SKDRDP Karnataka NA In-House
Cashpor Micro Credit Ltd UP TR Account In house software
It is clear from the above that there is no uniformity of use of software in different microfinance
institutions. The MIS requirement of microfinance varied widely. There is no uniform reporting
system in India. Due to various natures of microfinance institutions they report to various
agencies. NBFC has to report to RBI and Society has to register with state society registration
act. The other legal form like Co-opeartive and trust has different kinds of compliance system.
Impact Assessment of Technology Adoption in Microfinance in India Page 134
There is need of some uniformity and transparency in various microfinance institutions. This
would help in technology adoption.
6.5 : MIS software used in various countries
Secondary data were also collected to study about the software used by various microfinance
institutions across world. This has been categorised by regions.
6.5 : Software used by mFIs in different countries
Name Client Installation
Location
Institution Size Features
South Asia
Apparent
Microfinance
Manager
South Asia Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Insurance
Collection and Accounting
Common Cents 101
Micro Finance
Software
South Asia
East Asia and the
Pacific
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Southtech Ascend
Banking®
Europe and Central Asia
South Asia
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
Impact Assessment of Technology Adoption in Microfinance in India Page 135
BEACON South Asia Small (less than
5,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Payroll
Insurance
IMP@CT South Asia Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Payroll
Insurance
BankSoft South Asia
East Asia and the
Pacific
Australia
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
Savings Bank,
Term Deposit, Current
Account, Clearing Module,
Share Account, Investments,
Loans & Advances ,Bills ,
Discounting, Cash
Management, Statutory
Reports, Locker Accounts,
Pass Book Printer Interface,
Signature & Photograph,
Retrieval Management
Information Systems, Pigmy
Account, Overdraft Module,
Cash Credit Module, Demand
Draft/ Purchase Order, Inter
branch Reconciliation, Head
Office Automation System,
Financial Reports , RBI
Impact Assessment of Technology Adoption in Microfinance in India Page 136
Reports ,Security Aspects
W-Bank South Asia
East Asia and the
Pacific
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
MFASYS-Mobile
Enabled Micro
Finance...
South Asia Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Payroll
Insurance
Mobile Enabled
Micro Financer
Standard Edition
South Asia Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
ThemeproTM
Universal Micro
Finance Solution
(UMFS)
South Asia Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Insurance
Finance Solutions South Asia
Sub-Saharan Africa
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Impact Assessment of Technology Adoption in Microfinance in India Page 137
McFinancier South Asia Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Insurance
Microfin360 South Asia Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Medium-Large
(25,000-
50,000),Medium-
Large (25,000-
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Insurance
Micromate South Asia Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Meetings, Loan/Field Officer
Targets, MFI Reports, IEMD,
PDA, Branchless Banking,
WebServices
MiFI - A Complete
Microcredit Finance
Software
South Asia Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Payroll
MMFS South Asia Small (less than
5,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Europe and central Asia
Impact Assessment of Technology Adoption in Microfinance in India Page 138
AchidBanker2 Europe and Central Asia Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Afropack Financial
Enterprise Manager
East Asia and the
Pacific
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
DolFin 1.0 Europe and Central Asia Medium (5,000-
25,000)
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Europe and central Asia
Aspekt Microfinance
Software Solution
Europe and Central Asia Small (less than
5,000)
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
eMerge G103.1. Europe and Central Asia Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Impact Assessment of Technology Adoption in Microfinance in India Page 139
MF RESOLVE from
Gradatim IT ventures
(I) Pte Ltd.
East Asia and the
Pacific
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
BancMate Europe and Central Asia Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Small Bank Manager
2.10
Europe and Central Asia Small (less than
5,000)
Accounting
KastellBanker Europe and Central Asia Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Impact Assessment of Technology Adoption in Microfinance in India Page 140
African countries
Delta-Bank Europe and Central Asia
Sub-Saharan Africa
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
e-Finance Sub-Saharan Africa Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
El Mohassil 1.3 Middle East and North
Africa
Medium-Large
(25,000-50,000)
Loan Portfolio
Client
Information/Relationship
Management
ELOGE BANK Sub-Saharan Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Insurance
Delta Loan Tracking
System
Middle East and North
Africa
Large (more than
50,000)
Loan Portfolio
eMerge 1.0 Europe and Central Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Sub-Saharan Africa
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Impact Assessment of Technology Adoption in Microfinance in India Page 141
EVOLAN PACK for
Financial Companies
Europe and Central Asia
Latin America and the
Caribbean
Sub-Saharan Africa
Large (more than
50,000)
Accounting
Loan Portfolio
Client
Information/Relationship
Management
Fin@ncia Sub-Saharan Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Medium (5,000-
25,000),Medium-
Large (25,000-
50,000),Large (more
than 50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
FINCORESOFT Sub-Saharan Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
User Management
FinnOne Loans Europe and Central Asia
South Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Middle East and North
Africa
North America
Sub-Saharan Africa
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Impact Assessment of Technology Adoption in Microfinance in India Page 142
GLOBAL BANK Sub-Saharan Africa Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Kredits 5.5503 Europe and Central Asia
South Asia
East Asia and the
Pacific
Latin America and the
Caribbean
North America
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Insurance
Kredits 5.5539 Europe and Central Asia
South Asia
East Asia and the
Pacific
Latin America and the
Caribbean
North America
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Insurance
LMS (Loan
Management System)
Europe and Central Asia
Middle East and North
Africa
North America
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Impact Assessment of Technology Adoption in Microfinance in India Page 143
Loan Performer Europe and Central Asia
South Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Middle East and North
Africa
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Insurance
Loan Tracker Europe and Central Asia
Middle East and North
Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Client
Information/Relationship
Management
Insurance
Loan Traking System
(LTS)
Middle East and North
Africa
Small (less than
5,000)
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
M2 Europe and Central Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Impact Assessment of Technology Adoption in Microfinance in India Page 144
Margill Loan
Manager (MLM)
Europe and Central Asia
South Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Middle East and North
Africa
North America
Sub-Saharan Africa
Margill products, used
in over 25 countries
Small (less than
5,000)
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
MaxiSoftCB Banking
Software
East Asia and the
Pacific
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Medium (5,000-
25,000),Medium-
Large (25,000-
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
MBWin - FAO-GTZ
MicroBanking
System
Europe and Central Asia
South Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Middle East and North
Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Microbank
Information System
2.00
Latin America and the
Caribbean
Sub-Saharan Africa
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Impact Assessment of Technology Adoption in Microfinance in India Page 145
MICROFINA Sub-Saharan Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Microfins Europe and Central Asia
South Asia
Middle East and North
Africa
Sub-Saharan Africa
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Payroll
Insurance
Mifos South Asia
East Asia and the
Pacific
Middle East and North
Africa
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
MLAS (Microloans
Administration
System)
Sub-Saharan Africa Small (less than
5,000)
Accounting
Loan Portfolio
Client
Information/Relationship
Management
Octopus Micro
Finance Suite
Europe and Central Asia
South Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium (5,000-
25,000),Medium
(5,000-25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Impact Assessment of Technology Adoption in Microfinance in India Page 146
OMNIEnterprise
Microfinance
Solution
Europe and Central Asia
South Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Middle East and North
Africa
North America
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Orbit Middle East and North
Africa
Sub-Saharan Africa
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Orbit-R Europe and Central Asia
Sub-Saharan Africa
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
ORCHID
Microfinance
Sub-Saharan Africa Small (less than
5,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
PERFECT Sub-Saharan Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Impact Assessment of Technology Adoption in Microfinance in India Page 147
Perfeczion
Microfinance
Software
West Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
PharaFinance Sub-Saharan Africa Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
PowerFinance Sub-Saharan Africa Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
SASA-PRO VISION
SQ212
Sub-Saharan Africa Medium (5,000-
25,000)
Accounting
Deposits/Savings
Management
SAVCO Sub-Saharan Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Savings Plus Sub-Saharan Africa Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
SIM.net - Sistema
Informático para
Microfinanzas
N/A N/A N/A
Impact Assessment of Technology Adoption in Microfinance in India Page 148
SML VISION SQ212 Sub-Saharan Africa Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
SYSDE SAF Latin America and the
Caribbean
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
The Exceptional
Assistant (TEA)
North America
Sub-Saharan Africa
Small (less than
5,000)
Loan Portfolio
Client
Information/Relationship
Management
Total
Microfinancing...
Sub-Saharan Africa Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
UMVA Bank Sub-Saharan Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
remittances,
international transfers,
HTM process
Impact Assessment of Technology Adoption in Microfinance in India Page 149
Xpertek Loan
Administration
System
Latin America and the
Caribbean
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Client
Information/Relationship
Management
ADbanking Sub-Saharan Africa Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Insurance
Abacus OneWorld Europe and Central Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Sub-Saharan Africa
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Insurance
AICHA Sub-Saharan Africa Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
Bankers Realm Europe and Central Asia
Middle East and North
Africa
Sub-Saharan Africa
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Payroll
Impact Assessment of Technology Adoption in Microfinance in India Page 150
Bankers Realm MFO Sub-Saharan Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Medium (5,000-
25,000),Medium-
Large (25,000-
50,000),Large (more
than 50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Bankers Realm
SACCO
Sub-Saharan Africa Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Bank Micro Europe and Central Asia
Sub-Saharan Africa
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
CorePlus Europe and Central Asia
East Asia and the
Pacific
North America
Sub-Saharan Africa
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Payroll
Fixed Asset
Management,Central Bank
Reporting, Internet Banking,
Mobile Teller, Document
Management, Photo and
Signature verification
Impact Assessment of Technology Adoption in Microfinance in India Page 151
Cubis 8 Europe and Central Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Sub-Saharan Africa
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
Datafinance Sub-Saharan Africa Small (less than
5,000)
Medium (5,000-
25,000)
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Share Management
Insurance
Delphix Europe and Central Asia
South Asia
East Asia and the
Pacific
Latin America and the
Caribbean
Middle East and North
Africa
North America
Sub-Saharan Africa
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Payroll
Insurance
Latin America and Caribbean
BANTOTAL Latin America and the
Caribbean
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Impact Assessment of Technology Adoption in Microfinance in India Page 152
COBIS Latin America and the
Caribbean
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Conexus Latin America and the
Caribbean
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
CoopLeader Latin America and the
Caribbean
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Insurance
eSIACOM Latin America and the
Caribbean
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
eConx Latin America and the
Caribbean
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
investment
Impact Assessment of Technology Adoption in Microfinance in India Page 153
Emortelle [Formerly
CUMIS Plus]
Latin America and the
Caribbean
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
Human Resource
SIFCO Latin America and the
Caribbean
Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Insurance
Topaz Microfinance Latin America and the
Caribbean
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Orion Latin America and the
Caribbean
Small (less than
5,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Payroll
Impact Assessment of Technology Adoption in Microfinance in India Page 154
SIMCO PLUS Latin America and the
Caribbean
Medium (5,000-
25,000)
Insurance
eConx Latin America and the
Caribbean
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
investment
SIFC Net Latin America and the
Caribbean
Small (less than
5,000)
Medium (5,000-
25,000)
Medium-Large
(25,000-50,000)
Large (more than
50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
North America
Mercury Latin America and the
Caribbean
North America
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Impact Assessment of Technology Adoption in Microfinance in India Page 155
DownHome Loan
Manager 2.05
North America Small (less than
5,000)
Loan Portfolio
SYSDE BANCA Europe and Central Asia
South Asia
East Asia and the
Pacific
North America
Medium-Large
(25,000-50,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Payroll
Mimota North America Medium (5,000-
25,000)
Accounting
Loan Portfolio
Deposits/Savings
Management
Client
Information/Relationship
Management
Share Management
Source: CGAP
When we analysed the various software‘s found in South Asia major Apparent Microfinance
Manager, Common Cents 101 Micro Finance Software, Southtech Ascend Banking, BEACON
IMP@CT, BankSoft, W-Bank, MFASYS-Mobile Enabled Micro Finance, Micro Financer
Standard Edition, ThemeproTM Universal Micro Finance Solution (UMFS), Finance Solutions
McFinancier, Microfin360.
The various software used in Africa are Delta-Bank, e-Finance, El Mohassil 1.3, ELOGE
BANK, Delta Loan Tracking System, eMerge 1.0, EVOLAN PACK for Financial Companies,
Fin@ncia, FINCORESOFT, FinnOne Loans, GLOBAL BANK, Kredits 5.5503, Kredits 5.5539,
LMS (Loan Management System, Loan Performer, Loan Tracker, Loan Traking System (LTS),
M2, Margill Loan Manager (MLM), MaxiSoftCB Banking Software, MBWin - FAO-GTZ
MicroBanking System, Microbank Information System 2.00, MICROFINA, Microfins, Mifos,
MLAS (Microloans Administration System), Octopus Micro Finance Suite, OMNIEnterprise
Impact Assessment of Technology Adoption in Microfinance in India Page 156
Microfinance Solution, Orbit, Orbit-R, ORCHID Microfinance, PERFECT, Perfeczion
Microfinance Software, PharaFinance, PowerFinance, SASA-PRO VISION SQ212, SAVCO,.
Savings Plus,. SIM.net – Sistema, Informático para Microfinanzas, SML VISION SQ212,
SYSDE SAF, The Exceptional Assistant (TEA), Total Microfinancing, UMVA Bank, Xpertek
Loan Administration System, ADbanking, Abacus OneWorld, AICHA, Bankers Realm, Bankers
Realm MFO, Bankers Realm SACCO, Bank Micro, CorePlus, Cubis 8, Datafinance, Delphix.
In Europe and central Asia also various MIS software are used. Major software is AchidBanker2,
Afropack Financial Enterprise Manager. In Latin America major softwares used are
BANTOTAL COBIS, Conexus, CoopLeader, eSIACOM, eConx, Emortelle, SIFCO, Topaz
Microfinance, Orion, SIMCO PLUS, eConx, SIFC Net etc. In North America the various
microfinance institutions were using various kinds of software. Major software used are
Mercury, Down Home Loan Manager 2.05, SYSDE BANCA, Mimota etc. These software are
suitable for various sizes of microfinance institutions. These MIS software help microfinance
institutions in Accounting, Loan Portfolio management, Deposits/Savings Management, Client
information, Relationship Management, pay roll preparation etc.
It may be concluded that there are various types of management information software used in
various microfinance institutions in India and abroad. There is no uniformity of the software.
These are location specific and designed according to need of its local and regional customers.
Impact Assessment of Technology Adoption in Microfinance in India Page 157
CHAPTER VII
STRATEGY FOR PENETRATION OF
TECHNOLOGY
Technology innovation in microfinance institutions including banks have shown that it is
possible to provide viable financial services to in rural areas especially to the poor. Micro
financial institutions use technology for delivery mechanisms to reduce costs. Technological
innovation is needed in financial institutions to extend the benefits of financial services to wider
rural areas. Despite the fact that the cost of hardware and connectivity is falling, successful use
of technology in microfinance is still the exception rather than the rule. Microfinance institutions
face several challenges that inhibit the widespread adoption of technology to extend financial
service delivery. The information regarding various strategies for adoption of technology was
discussed with various stakeholders eg. Microfinance institutions, banks, technology providers
and clients are summarized below:
Technology awareness: As discussed under factor affecting technology adoption the lack of
awareness about technology among various stakeholders in banks and microfinance institutions
was the major hurdle adoption. The awareness about technology, its benefits in data transmission
and reporting should be emphasised. Awareness creation programme should be organised for
microfinance institutions and banks.
Recruitment of technical staff: Less availability of qualified human resources is one of the
major hurdles in adoption of technology. Recruitment of staff should be done by the mFIs to
handle latest technology.
Availability of finance: The establishment cost of technology is very high. That needs costly
hardware and software‘s. Costs can be shared by assisting technology provider with financial
support which will reduce the cost by scaling up of technology. MFIs may get technology at
Impact Assessment of Technology Adoption in Microfinance in India Page 158
subsidized/ reduced costs. Financial support should be provided to microfinance institution for
technology adoption. NABARD is assisting microfinance institutions through technology fund.
Development of Rural Connectivity: MFIs operate in remote and difficult areas where
communication and power infrastructure do not Microfinance institutions that lack strong
communications and electric infrastructure may have a hard time implementing technology
solutions that rely on internet connectivity—or even electricity. Infrastructure should be provided
in the rural areas to improve connectivity.
Selection of technology providers: Most of the technology providers were from south India
where the concentration of microfinance institutions is high. Microfinance institutions which are
operating in north India faced problem of availability of technology in nearby market. They have
to dependent on supplier who is far from their operation. If any operation problem arises then it
becomes difficult to rectify immediately. mFIs can also share MIS software with other mFis.
Repairs and maintenance of software is one of the area concerns of microfinance organization.
Technology providers should provide repairs and maintenance facilities. In selection of
technology providers, an MFI should make sure that it has complete requirements and
specifications. More research of mFIs who have successfully introduced new technologies and
share the finding with others will help in penetration of technology.
Transparent Reporting System: Many of the microfinance institutions do not have transport
reporting system. The Microfinance sector is still evolving and lacks standardization in its
procedures, methodologies, customer characteristics, type of transactions and reporting. By
introduction of microfinance bill 2010, microfinance institutions have to comply with regular
and transparent reporting. Systems should be introduced for microfinance institutions to make
for transparent reporting regarding their loan portfolio and produce reports. It will help in
technology adoption.
Need based technology solution: Due to variations in size of mFIs, legal structure, financial
capabilities they adopt different types of technology. In India there is regulation in microfinance
sector. Requirement of mFIs differ amongst MFIs according to size, organizational form,
Impact Assessment of Technology Adoption in Microfinance in India Page 159
technical competency and adequacy of the technical staff. Need based solution should be
provided according to the need of mFIs.
Technical support to microfinance Institutions: Capacity of microfinance institution has to be
increased by technical and financial support. There is need of strong partnership with
technology service provider and mFIs staff. Incentive should be provided to mFIs who adopt
technology. It will help them to scale up their business and help in transparency.
Regular Feed back of different stakeholders: Regular feedback should be provided to the
service provider regarding functioning of the software and other technology tools. Technology
provider should address the problem of mFIs promptly.
Viable BC Model: Business viability of the different business correspondents should be given
proper attention. Linking business correspondents and SHGs/JLGs will give a boost to
microfinance programme. Village Panchayat, Community Centre, Vasudha Kendra etc can act
as Business correspondence of the banks.
System of portability: Portability has become one of the issues in microfinance institutions.
Mostly BC (Eko financial Services) does not work with on other than NOKIA mobile. Mobile
user of other than NOKIA faces problem while dealing with BC. System of portability should be
addressed amongst various service providers.
Technology awareness programme for clients: As discussed earlier one of the major problems
in technology adoption is illiteracy of clients of microfinance institutions. They have very poor
knowledge about technology. It is suggested by various stakeholders that technology solutions
should be physically accessible and affordable. Technology should be user-friendly, and should
address cultural sensitivities around gender, class, and privacy. It should be secured for the
clients. Clients trust is major issue in microfinance. Technology should enhance the trust among
the clients. Trust can be enhanced by issuing printed receipts to their clients. By providing
awareness training to clients there will be trust building among clients.
Clients perceive a benefit from the technology, such as easy access, reduced risk of carrying
cash, or the ability to transfer funds from one person to another. Clients should be comfortable
Impact Assessment of Technology Adoption in Microfinance in India Page 160
with, and educated about technology. It may be concluded that technology does have the
potential to transform the microfinance industry, but whether this actually happens will depend
on a number of factors, namely the extent to which MFIs take advantage of the opportunities that
IT provides and integrate technology into an overall business strategy that is creative,
collaborative and keenly focused on clients‘ needs. Consumer protection should be provided to
evade fraud made by microfinance agents.
Government Policy environment: As technology adoption in banks and microfinance expands,
governments and regulators struggle to sort out the implications, for instance, of neighborhood
shops taking deposits from the public without a formal license to do so. Appropriate regulatory
space for the issuance of e-money and other stored-value instruments should be formulated.
Inclusive payment system regulation and effective payment system should reach to proper scale.
Legal and regulatory constraints that impede an MFI‘s ability to implement technology solutions
should be removed. Governments can help expand access by issuing national identification
systems (numerical- or biometric-based) or by distributing welfare payments, pensions, and
salaries through electronic networks. Some of the experiments like project Shakti for MNREGA
project in Bihar has started.
Impact Assessment of Technology Adoption in Microfinance in India Page 161
CHAPTER VIII
SUGGESTIONS AND RECCOMONDATIONS
There are only few studies explaining impact of technology adoption in microfinance institutions
in India. The need remains, however, to examine the use of various technology products and
channels in the delivery of micro finance in India. In Bihar there is hardly any study to
understand local technological and socioeconomic environment to understand the adoption
processes of modern technology. The current study ―Impact Assessment of Technology
Adoption in Microfinance in India‖ is an attempt in this direction.
Major finding of the study are follows
95.7% of public sector banks branches were fully computerized of which 81.4% branches
were under core banking solution and 14.3% were already fully computerized.
Remaining 4.3% branches were partially computerized.
Branches of 17 banks belonging to SBI groups and nationalized banks, viz. Andhra Bank,
Corporation bank, Indian Bank, Oriental Bank of Commerce, Punjab National Bank,
Syndicate Bank, Union Bank of India, Vijaya Bank were fully computerized. Branches of
other nationalized banks (10) were at varied stage of computerization. The branches of
Punjab and Sind Bank and UCO Bank were least computerized.
95 banks out of 171 banks in the country did using NEFT mechanism for transfer of
funds which constituted 55.56% of the entire banking system. Huge sum of 438.97
billion was remitted through this facility involving enormous number of 8.28 million
transactions. Higher number of transactions were undertaken by HDFC Bank (1331411),
followed by CITI Bank (1294726), ICICI Bank (938038) and SBI (653670).
NEFT facility is still out of reach of the vast section of economy as only 55.56% of
banks using this mechanism and out of these banks very few had undertaken transactions
through this facility to their full capacity.
43651 ATMs were installed out of which 24645 were on site and 19006 were offsite all
over the country set up by all scheduled commercial banks. Out of 43651 ATMs, public
Impact Assessment of Technology Adoption in Microfinance in India Page 162
sector banks had set up 17379 on-site and 9898 off-side ATMs all over the country
forming 62.5% of total ATMs installed in the country.
Among public sector banks SBI and its associates had set up 16062 ATMs in the country
out of which there were 7146 on site and 4193 off site ATMs forming 36.8% of total
ATMs in the country.
Among nationalized banks, IDBI Bank Ltd, Corporation Bank, Canara Bank, Union
Bank of India, Oriental Bank of Commerce were leading banks in setting up ATMs
forming 176.5%, 99.7%, 73.2%, 69.6% and 59.4% of their total branches respectively.
Other nationalized banks were laggard in setting up ATMs in proportion to their branches
which ranged between 9.55 minimum (Allahabad Bank) and 50.9% maximum (Andhra
Bank).
Amongst private banks, ICICI bank has largest number of ATMs (4713) followed by
Axis bank (3595) and Federal Bank (616). The private banks were having least number
of ATMs which were installed by International bank (2) and Ratnakar Bank (9).
International bank has only 2 branches which were 100% computerised.
Private sector banks have more ATMs in terms of percent of ATMs to branches. 172.6 %
ATMs were found per branch in case of private sector banks that means 1.7 ATM per
branch which is three times as compared to public sector banks. There was large
variation amongst private banks in terms of percent of ATMs to branches. Highest
percent of ATMs to branches was found in case of Axis bank (457.4%) followed by
ICICI bank (334.5%) and HDFC bank (234%).
In India ATM penetration was rising at a faster rate and had gone up from 5.93 during
2005 to 12.68 during 2008. However, it was too low from OECD higher range
(benchmark) at 437.
In India various experiments of technology use in micro financing and financial inclusion
has been attempted. Few examples are ICICI Bank‘s partnership with FINO, Business
Correspondent (BC) model- ICICI, ICICI Bank - I-Express, HDFC Bank financial
inclusion programme, SBI ties up with OXIGEN, Financial inclusion by Axis Bank,
Transfer2Home tie up with Standard Chartered Bank for money transfer, Kisosk
Banking of SBI with 3i Infotech Foundation, Solar Powered ATM for Rural India by
Vortex Engineering, GPRS technology by Sanghmitra Rural Financial Services,
Impact Assessment of Technology Adoption in Microfinance in India Page 163
Bangaluru, hand-held service by PUSHTIKAR -a low-cost model, Andhra Pradesh
model of opening no frill account, STEMS— technology pilot from BASIX, Banking
Correspondent for KBS Bank in Chincholi, Technology Assisted Financial Inclusion- by
BASIX, Dhanna X, E-Docs and real time monitoring by Equitas, mobile banking by Eko
financial services as business correspondents of SBI and ICICI, Tata Indicom Green
Money fund Transfer, iwaymedia - SMS based payment solution, ItzCash ties up with Tata
DoCoMo, Mobile banking Cashpor Microfinance, Varanasi and Glodyne Technoserve.
These organizations use various types of technology which had helped micro financing
and financial inclusion.
Only about one-third of the MFIs in Southeast Asia and Africa are computerized,
compared to more than three-quarters of the MFIs in Latin America, Eastern Europe and
Central Asia. Worldwide, 46% of MFIs still have very low-tech systems, either manual or
spreadsheet-based MIS. The remaining 56% have more advanced systems, either custom
outsourced systems (24% of the institutions surveyed), systems built in-house (20%), or
applications purchased off the shelf (10%).
In many countries Palm Pilots, or Personal Digital Assistants (PDAs), are in use in a
growing number of MFIs.
The partnership between Globe Telecom, through its G-Cash mobile banking solution,
and the Rural Bankers Association of the Philippines (RBAP) tries to fill this gap by
offering an effective solution for the repayment of microfinance loans with the use of cell
phones.
ATM networks are being rolled out by a number of banks and have been tested by a
handful of microfinance institutions as well. MFI clients in the Dominican Republic can
even access international ATM networks.
Prodem, a Bolivian mFI, has conducted a pilot project using Smart Cards to replace much
of the paperwork previously needed for transactions.
Asociación Programa Compartamos an MFI, targeting very low-income women in
Mexico is experimenting with Palm Pilot (a brand of PDA).
In Korea Mobile Banking is the hottest area of development in the banking sector and is
expected to replace the credit/debit card system in future.
Impact Assessment of Technology Adoption in Microfinance in India Page 164
Banco Solidario, with support from ACCION International, implemented a PDA-based
application for microfinance purposes. This first generation of ACCION‘s Porta Credit
application was called Credi Palm.
The Correspondent agents (CA) model allows financial institutions to reach remote areas
by using a combination of POS terminals and magnetic strip cards. This model is
currently implemented in several Latin American institutions, including
BANCOLOMBIA-CONAVI in Colombia and Interbank in Peru.
The RTS is a solution that currently allows clients to make savings deposits and
payments of microfinance loans through a network of agents. This system is at the final
stages of its pilot phase at Uganda Microfinance Limited (UML).
OIBM has effectively combined biometric-enabled POS devices and smart cards to
provide banking services to Malawi‘s low- income population. OIBM‘s biometrics and
smart card model overcome the identification problem by using fingerprints.
The K-Rep experience with the use of the mobile phones was brief and did not prove
successful. By implementing a mobile banking system, K-rep wanted to offer services to
its clients through money transfer between accounts and Account balance inquiries, and
Mobile real-time transfers between accounts.
Bank officials were generally more aware about the various technologies than the MFI
officials. ATMs, Biometric Card, Credit Card, E-payment of utility bills and taxes,
internet banking, computer and software have 100% awareness among Bank officials.
While the new technology like charge card had just 50% awareness among the Bank
officials.
Among the MFI officials, 24 hour on call service (65%), charge card (65%), credit
scoring (65%), point of sale (65%) terminals have low awareness level in comparison to
ATMs (100%), Computer (100%) and software (100%). The other relatively new
technology like E-payment of utility bills and taxes (70%) and Personal Digital Assistant
(PDA) (70%) were also less known.
100% of the bank and 85% of the MFIs surveyed were already using software. MFIs have
not started yet with the ATM. Only 15% of the MFI officials were using the biometric
cards. Charge cards were not used in the most of the banks.
Impact Assessment of Technology Adoption in Microfinance in India Page 165
Majority of the officials surveyed, were of the view that usage of technology have
reduced the transaction cost, total cost and bad debts. While most of them also said that
after adoption of technology they have experienced increased return on fund, productivity
per employee and productivity per branch.
Technology has helped them to satisfy their clients in better manner through providing
quick transaction, loan amount assessment, processing of loan, transfer of funds and other
financial services. There was improvement in disbursement, average debt per borrower,
recovery % because monitoring of borrowers became faster than earlier. Officials were
not able to quantify the impact and some were not clear about actual impact. Delivery
efficiency and adaptability also increased in most of the cases.
Most of the bank (40%) and MFI officials (60%) said that technology was beneficial in
enhancing the productivity. While some said that profitability was also major benefit of
the technology. While very less official surveyed ranked safety and security as the benefit
of the technology. Competitiveness had mixed response from the officials. Most of the
officials (40% of Banks and 45% of MFI) placed this at 4th
position.
Availability of finance/capital and technological awareness were the major factors that
affected the adoption of technology in their organization. 40% of the bank officials and
50% of the MFI officials ranked availability of finance/capital as the main factor
affecting the adoption of technology.
The factors which were least important according to the officials were Government
regulation, demand of customer and degree of diffusion of technology.
Major technology provider to microfinance institutions are RM IT solution, Hyderabad,
Jayam Solution, Hyderabad, BASIX /Sathguru Hyderabad, Elitser IT Solutions,
Hyderabad, Force ten Technology, Kolkata, Graditum IT, Bangluru, Craft Silikan,
Bangluru, Surya Software Solution, Bangluru, Financial Information Network &
Operations Ltd, Zero Mass foundation, Kredits, USA, Bangalore (In India), Snowwood,
Chennai, Surya Software Systems, FINO, Mumbai, Eko India Financial Services Pvt.
Ltd, New Delhi, Eko India Financial Services Pvt. Ltd, New Delhi, ClassifEye's solution
etc.
Most of the banks except few RRBs have CBS system. Major MIS software used by
Banks was Finacle. Other MIS software was provided by HCL in case of Uttar Bihar
Impact Assessment of Technology Adoption in Microfinance in India Page 166
Grammeen Bank, CBS by IBM in case of Canara Bank, FINO used by Union bank of
India, FLEX –Q used by Syndicate bank and B@NCS24 by Samastipur Grameen Bank.
Different mFIs used different MIS software‘s. FIMO developed by Jayam Solution was
major MIS software used by different mFIs. Other software were FAMIS developed by
BASIX and Sathguru, Hyderabad, BIJLI developed by Force ten Technology, Kolkata,
mf expert developed by RM IT solution. Other MIS softwares were Banker Realm used
by Ujjivan, by LMS version by TMS. Grameen Koota and Jan Laxmi use Tally and
FINO for their MIS management. Basix has developed Delphix Nano as their MIS
application software. Big mFis like SKS and Bandhan Financial services have developed
their own MIS software.
Recommendations
Infrastructure support like increasing power supply and increasing connectivity may be
adequately provided for increasing use of technology. Capacity of micro financial
institutions has to be increase by providing them technical and financial support.
Awareness about technology should be increased by capacity building of different
stakeholders.
Due to high initial cost micro financing institutions were not able to adopt latest
technology. Costs can be shared by assisting technology provider with financial support
which will reduce the cost by scaling up of technology. mFIs may get technology at
subsidized/ reduced costs. Incentive should be provided to mFIs who adopts technology.
It will help them in to scale up their business.
Appropriately staffing should be done by the mFIs to handle latest technology.
Recruitment of technical staff and their regular training on updates of latest technology
would help in adoption of technology.
Regular feedback should be provided to the service provider regarding functioning of the
software and other technology tools.
Requirement of mFIs differ amongst MFIs according to size, organizational form,
technical competency and adequacy of the technical staff. Tailor made solution should
be provided according to the need of mFIs.
Impact Assessment of Technology Adoption in Microfinance in India Page 167
Systems should be introduced to make for transparent reporting regarding their loan
portfolio and produce reports. It will help mFIs in timely and appropriate decision
making.
In choosing an appropriate technology, it is highly recommended that MFIs get their core
MIS right first before building any kind of delivery system on top of it. Technology
provider should address the problem of mFIs promptly.
mFIs should set realistic expectations with respect to what technology will do and cost.
mFIs should manage the nature and pace of change associated with technology solutions.
Legal and regulatory constraints that impede an MFI‘s ability to implement technology
solutions; should be removed.
Research done on mFIs about those who have successfully introduced new technologies
should share the finding with others which will help in penetration of technology.
mFIs should choose the option that gives them the most cost effective access to their
chosen technology solution.
mFIs should consider kind of quality of software and its price.
In banks one problem with technology like ATM is non-functioning of ATM and very
irregular services in different banks. The improvement in service will help adoption of
technology faster.
Some people feared fraud in banking sector like unauthorised withdrawal of money from
others account is a great concern. Security system should be build-up while handling
technology in banking sector.
It may be concluded that technology does have the potential to transform the microfinance
industry, but whether this actually happens will depend on a number of factors, namely the
extent to which MFIs take advantage of the opportunities that IT provides and integrate
technology into an overall business strategy that is creative, collaborative and keenly focused on
clients‘ needs.
Impact Assessment of Technology Adoption in Microfinance in India Page 168
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Annexure 1
Legal status of the institutions
Sl.No. Organization Type of
organization
1 Samastipur Kshetriya Gramin Bank Bank
2 Canara Bank Bank
3 RIG, HDFC Ranchi Bank
4 State Bank of India Bank
5 Uttar Bihar Gramin Bank Bank
6 UBI Bank
7 Syndicate Bank Bank
8 Ucobank, zonal patna Bank
9 PNB, Chanakya Tower, Patna Bank
10 ICICI Bank
11 Disha Microfinance Pvt. Ltd. MFI
12 Nav Achetana Microfin Services Private Limited MFI
13 Mahashakti Foundation, M. Rampur Kalahandi,
Orissa MFI
14 Star Microfin Service Society (SMSS) MFI
15 Bihar Development Trust MFI
16 Ushodaya Integrated Urban and Rural
Development MFI
17 Agricultural Science Foundation, Hyderabad MFI
18 Sambandh Finserve Pvt. Ltd. MFI
19 Nano Financial Services India Private Limited
Chennai MFI
20 SKS MFI
21 BFSPL MFI
22 Spandan Sphoorty Finance Limited MFI
23 SRFS MFI
24 Basix MFI
25 Share Microfinance MFI
26 Janlaxmi MFI
27 Gramin Koota MFI
28 IDF financial service Pvt. Ltd. MFI
29 Ujjivan Finance Service Pvt. Ltd. MFI
30 Trust Microfinance Services, Muzaffarpur MFI
Impact Assessment of Technology Adoption in Microfinance in India Page 175
Annexure II
Sources of Fund
Organization Source of Fund
Disha Microfinance Pvt. Ltd. Own equity and Debt.
Nav Achetana Microfin Services Private
Limited
Banks and financial institutions
Samastipur Kshetriya Gramin Bank Deposits & Refinance borrowings
Mahashakti Foundation, M. Rampur
Kalahandi, Orissa
Ananya, SIDBI, AXIS, DCB, NABARD, SMCS,
MANABEEYA HOLDING PVT. LTD. FWWB
Star Microfin Service Society (SMSS) Axis Bank Ltd., Ananya Finance, Maanaveeya
Holding and Investment Pvt. Ltd., SIDBI, Reliance
Capital Limited, Star Microfinance India Ltd.,
Bihar Development Trust PNB, Indian Bank, FWWB, TWN, RGVN, BASIX
Ushodaya Integrated Urban and Rural
Development
Own funds, IOB, ICICI Bank, Lord Krishna Bank
Agricultural Science Foundation, Hyderabad State Bank of India, Gadag
Sambandh Finserve Pvt. Ltd. FWWB, ABN, AMBRO, AXIS, DCB, ANNANYA,
SBI, DIA, VIKAS
Nano Financial Services India Private
Limited Chennai
Manaviya, Ananya, SIDBI, HDFC, Aadarsha
Canara Bank Deposit
SKS Multiple
BFSPL SIDBI, Banks ,
RIG, HDFC Ranchi Deposits, loan
Spandana sphoorty financial ltd. Bank loans, equity
SRFS Multiple
Basix Banks, equity
Impact Assessment of Technology Adoption in Microfinance in India Page 176
Annexure ii
Sources of find of financial/ micro financial institutions
Organization Source of Fund
Uttar Bihar Gramin Bank Sponsor Bank, NABARD, Own fund
Share Microfinance Multiple
Janlaxmi loans from different funders including banks, own
fund
UBI Public deposits
Gramin Koota Public deposits
IDF financial service Pvt. Ltd. NABARD, SIDBI, SBI, IOB, RRB, Canara Bank,
Syndicate bank, Corporation Bank
Ujjivan Finance Service Pvt. Ltd. Bank loan, equity
Syndicate Bank Public deposits
Ucobank, zonal Patna Bank lendable funds
WDC Govt. of Bihar
Trust Microfinance Services, Muzzffarpur loans from different funders including banks
Impact Assessment of Technology Adoption in Microfinance in India Page 177
Annexure III
No. of staff in banks and mFIs
Organization Total numbers of Staff
Disha Microfinance Pvt. Ltd. 120
Nav Achetana Microfin Services Private Limited 87
Samastipur Kshetriya Gramin Bank 294
Mahashakti Foundation, M. Rampur Kalahandi, Orissa 102
Star Microfin Service Society (SMSS) 104
Bihar Development Trust 19
Ushodaya Integrated Urban and Rural Development 12
Agricultural Science Foundation, Hyderabad 55
Sambandh Finserve Pvt. Ltd. 50
Nano Financial Services India Private Limited Chennai 100
Canara Bank 1077
SKS 21154
BFSPL 8500
RIG, HDFC Ranchi 2 in Jharkhand
Spandana Sphoorty financial ltd. 12000
SRFS 150
Basix 5058
State Bank of India NA
Uttar Bihar Gramin Bank 3229
Share Microfinance 5408
Janlaxmi 400
UBI 42
Gramin Koota 1800
IDF financial service Pvt. Ltd. 436
Ujjivan Finance Service Pvt. Ltd. 2830
WDC 78
Trust Microfinance Services, Muzzffarpur 16
Impact Assessment of Technology Adoption in Microfinance in India Page 178
Annexure IV: Outreach of the institutions
Sl.
No.
Organization Number of
borrowers
financed
during 09-10
Number of
borrowers
financed
upto 31-03-
10
Total loan
disbursed
during 09-
10
Total loan
disbursed
upto 31-03-
10
(crores)
No. of
Accounts
outstanding
as on 31-03-
2010
Amount
outstanding
as on 31-03-
2010
1 Disha Microfinance
Pvt. Ltd.
5865 5865 7. 2.4 7. 24 5837 51. 3
2 Nav Achetana
Microfin Services
Private Limited
10581 29668 11. 97 27. 69 9804 7.28
3 Samastipur Kshetriya
Gramin Bank
- - - 124. 95 213. 25
4 Mahashakti
Foundation, M.
Rampur Kalahandi,
Orissa
15384 56138 1.60 3.51 24,835 1.43
5 Star Microfin Service
Society (SMSS)
30576 168883 3.87 1 5.6 29,614 2.14
6 Bihar Development
Trust
2033 3117 1.86 2.65 1962 1.13
7 Ushodaya Integrated
Urban and Rural
Development
2295 21482 3.130 12.89 2295 2.07
8 Agricultural Science
Foundation,
Hyderabad
6957 37981 11.29 28.72 932 8.66
9 Sambandh Finserve
Pvt. Ltd.
4560 11400 0.53 1.23 4,504 3.18
10 Sarvodaya Nano
Financial Services
India Private Limited
Chennai
24390 21561 - - 14722 76.15
11 Canara Bank 17393 48009 122.43 303.96 48009 303.96
12 SKS 4,242,946 14387 4242946 2936.17
13 BFSPL 2301,433
1495.08
14 RIG, HDFC Ranchi 1800 2000 N.A. - N.A. -
15 Spandana sphoorty
financial ltd.
41.640 - 3540.5 11799.8 4.77 million 4205
16 SRFS 4432 7462 9.76 63.89 7462 SHG 69.25
17 Basix 1114468 100,3.86 - -
18 State Bank of India - - - - - -
19 Uttar Bihar Gramin
Bank
Impact Assessment of Technology Adoption in Microfinance in India Page 179
Annexure V: Various technologies used by banks and mFIs
Sl.
No. Organization
24 hour on call
service
Automated Teller
Machine (ATMs) Biometric Card Charge Card Credit Cards
Used Planning
Stage Used
Planning
Stage Used
Planning
Stage Used
Planning
Stage Used
Planning
Stage
1 Disha Microfinance Pvt. Ltd.
2 Nav Achetana Microfin Services Private
Limited
✔
✔
3 Samastipur Kshetriya Gramin Bank
4 Mahashakti Foundation, M. Rampur
Kalahandi, Orissa
5 Star Microfin Service Society (SMSS)
6 Bihar Development Trust
7 Ushodaya Integrated Urban and Rural
Development ✔
✔
✔
✔
8 Agricultural Science Foundation,
Hyderabad
✔
✔
✔
9 Sambandh Finserve Pvt. Ltd. ✔ ✔ ✔
10 Nano Financial Services India Private
Limited Chennai
✔ ✔
✔
✔
11 Canara Bank ✔ ✔ ✔ ✔ ✔
12 SKS
13 BFSPL
14 RIG, HDFC Ranchi ✔ ✔ ✔
15 Spandawe sphcorty finance
16 SRFS
17 Basix ✔ ✔
18 State Bank of India ✔ ✔ ✔ ✔
19 Uttar Bihar Gramin Bank ✔ ✔ ✔ ✔ ✔
20 Share Microfinance
21 Janlaxmi ✔
22 UBI ✔
23 Gramin Koota ✔
24 IDF financial service Pvt. Ltd.
25 Ujjivan Finance Service Pvt. Ltd. ✔
27 Syndicate Bank ✔ ✔
28 UCO Bank, zonal Patna ✔ ✔ ✔
29 Trust Microfinance Services, Muzaffarpur
30 PNB, Chanakya Tower, Patna ✔ ✔
ICICI ✔ ✔ ✔
Source: primary survey
Impact Assessment of Technology Adoption in Microfinance in India Page 180
Annexure V (continued)
Organization
Credit Scoring Debit Cards
E-Payment of
utility bills and
taxes
Interactive Voice
Response
Technology (IVR)
Internet
Banking
Used Planning
Stage Used
Planning
Stage Used
Plannin
g Stage Used
Planning
Stage
Use
d
Plannin
g Stage
Disha Microfinance Pvt. Ltd. ✔ ✔
Nav Achetana Microfin Services
Private Limited
✔
Samastipur Kshetriya Gramin
Bank
Mahashakti Foundation, M.
Rampur Kalahandi, Orissa
Star Microfin Service Society
(SMSS)
Bihar Development Trust ✔ ✔ ✔
Ushodaya Integrated Urban and
Rural Development
✔
✔
✔
Agricultural Science Foundation,
Hyderabad ✔
✔
✔
✔
Sambandh Finserve Pvt. Ltd,
Hyderabad
✔
✔
✔
Nano Financial Services India
Private Limited Chennai ✔
✔
✔
✔ ✔
Canara Bank ✔ ✔ ✔ ✔
SKS
BFSPL
RIG, HDFC Ranchi ✔ ✔ ✔
Spandawe sphcorty finance ltd.
SRFS ✔
Basix ✔
State Bank of India ✔ ✔ ✔ ✔ ✔
Uttar Bihar Gramin Bank ✔ ✔ ✔ ✔ ✔
Share Microfinance
Janlaxmi
UBI
Gramin Koota ✔ ✔ ✔
IDF financial service Pvt. Ltd.
Ujjivan Finance Service Pvt. Ltd. ✔ ✔
Syndicate Bank ✔ ✔ ✔ ✔ ✔
UCO Bank, zonal Patna ✔ ✔ ✔ ✔
Trust Microfinance Services,
Muzaffarpur
PNB, Patna ✔ ✔ ✔ ✔
ICICI bank Patna ✔ ✔ ✔
Source: Primary survey
Impact Assessment of Technology Adoption in Microfinance in India Page 181
Annexure V (continued)
Organization
Mobile Banking Personal Digital
Assistant (PDA)
Point of Sale
(POS) Terminals Computer Software
Used Planning
Stage Used
Planning
Stage Used
Planning
Stage Used
Planning
Stage Used
Planning
Stage
Disha Microfinance Pvt.
Ltd.
✔
✔ ✔
✔
Nav Achetana Microfin
Services Private Limited
✔
✔
Samastipur Kshetriya
Gramin Bank
✔
✔
Mahashakti Foundation,
M. Rampur Kalahandi,
Orissa
Star Microfin Service
Society (SMSS)
✔
✔
Bihar Development Trust ✔ ✔ ✔
Ushodaya Integrated
Urban and Rural
Development
✔
✔
Agricultural Science
Foundation, Hyderabad ✔
✔
✔
Sambandh Finserve Pvt.
Ltd.
✔
✔
✔
Nano Financial Services
India Private Limited
Chennai ✔
✔
✔
Canara Bank ✔ ✔ ✔ ✔ ✔
SKS
BFSPL ✔ ✔
RIG, HDFC Ranchi ✔ ✔ ✔ ✔
Spandawe sphcorty
finance ltd.
✔
SRFS ✔ ✔
Basix ✔ ✔ ✔
State Bank of India ✔ ✔ ✔ ✔
Uttar Bihar Gramin Bank ✔ ✔ ✔ ✔ ✔
Share Microfinance ✔ ✔ ✔ ✔ ✔
Janlaxmi ✔ ✔ ✔
UBI ✔ ✔
Gramin Koota ✔ ✔ ✔
IDF financial service Pvt.
Ltd.
✔
✔
Ujjivan Finance Service
Pvt. Ltd. ✔
✔
✔
✔
Syndicate Bank ✔ ✔ ✔
UCO Bank, zonal Patna ✔ ✔ ✔
Trust Microfinance ✔ ✔
Impact Assessment of Technology Adoption in Microfinance in India Page 182
Services, MuzAffarpur
PNB, Chanakya Tower,
Patna ✔
✔
✔
✔
✔
ICICI ✔ ✔
Impact Assessment of Technology Adoption in Microfinance in India Page 183
Annexure VI
OFFICES OF COMMERCIAL BANKS IN INDIA from 2005 TO 2009
Bank Group 2005 2006 2007 2008 2009
% change in
2009 over 2005
State Bank of India and its Associates 14006 14294 14651 15814 16731 19.46%
Nationalised Banks $ 35096 35848 37413 39204 40766 16.16%
Foreign Banks 242 259 272 279 295 21.90%
Regional Rural Banks 14763 14776 14812 15029 15384 4.21%
Other Scheduled Commercial Banks 6462 6828 7415 8294 9186 42.15%
Non-Scheduled Commercial Banks 37 41 46 46 46 24.32%
Total 70606 72046 74609 78666 82408 16.72%
Notes: No. of offices includes administrative offices.
$ Includes IDBI Bank Ltd.
Data for 2005 to 2008 have been revised and data for 2009 are provisional.
Source: Master Office File (latest updated version) on commercial banks, Department of Statistics and
Information Management, RBI.
Impact Assessment of Technology Adoption in Microfinance in India Page 184
Annexure VII
STATE AND POPULATION GROUP-WISE DISTRIUTION OF OFFICES OPENED BY COMMERCIAL
BANKS as on March, 31, 2009
State / Union
Territory
Rural Semi-Urban Urban Metropolitan Total % of total
branches
Andaman &
Nicobar
17 20 - - 37 0.04
Andhra Pradesh 2388 1537 1696 1077 6698 8.13
Arunachal
Pradesh
50 27 - - 77 0.09
Assam 788 334 307 - 1429 1.73
Bihar 2356 846 433 281 3916 4.75
Chandigarh 24 1 287 - 312 0.38
Chhattisgarh 654 254 346 - 1254 1.52
Dadra & Nagar
Haveli
5 19 - - 24 0.03
Daman & Diu - 18 - - 18 0.02
Delhi 56 36 - 2219 2311 2.80
Goa 159 265 - - 424 0.51
Gujarat 1486 989 649 1357 4481 5.44
Haryana 691 468 924 118 2201 2.67
Himachal
Pradesh
729 160 72 - 961 1.17
Jammu &
Kashmir
547 192 268 - 1007 1.22
Jharkhand 974 366 410 - 1750 2.12
Karnataka 2166 1208 1343 1274 5991 7.27
Kerala 332 2712 1142 - 4186 5.08
Lakshadweep 8 3 - - 11 0.01
Madhya Pradesh 1756 977 787 569 4089 4.96
Maharashtra 2143 1415 1171 3147 7876 9.56
Manipur 35 21 25 - 81 0.10
Meghalaya 124 30 51 - 205 0.25
Mizoram 55 14 26 - 95 0.12
Nagaland 35 51 - - 86 0.10
Orissa 1654 514 588 - 2756 3.34
Punducherry 28 33 67 - 128 0.16
Punjab 1123 965 743 526 3357 4.07
Rajasthan 1756 993 861 431 4041 4.90
Sikkim 46 25 - - 71 0.09
Tamil Nadu 1709 1839 1445 1140 6133 7.44
Tripura 110 58 51 - 219 0.27
Uttar Pradesh 4806 1776 1731 1568 9881 11.99
Uttarakhand 570 290 246 - 1106 1.34
West Bengal 2319 626 945 1306 5196 6.31
TOTAL 31699 19082 16614 15013 82408 100.00
Source: RBI report, 2009
Impact Assessment of Technology Adoption in Microfinance in India Page 185
Annexure VIII: Various banks in different states in India
Source: RBI data
States and UT
SBI & its
associates
Nationalis
ed banks
Foreign
banks RRBs
Other
schedules
banks
Non –
scheduled
banks
All
commercial
banks
Andaman &
Nicobar Islands 1 10 — — 1 — 12
Andhra Pradesh 7 20 8 5 19 2 61
Arunachal
Pradesh 1 10 — 1 2 — 14
Assam 2 20 1 2 11 — 36
Bihar 3 20 2 4 10 — 39
Chandigarh 6 20 3 — 15 — 44
Chhattisgarh 3 20 1 3 12 — 39
Dadra & Nagar
Haveli 1 6 — — 9 — 16
Daman & Diu 1 7 — — 4 — 12
Delhi 7 20 19 — 21 — 67
Goa 4 20 — — 15 — 39
Gujarat 7 20 8 3 20 — 58
Haryana 7 20 6 2 17 — 52
Himachal
Pradesh 2 19 — 2 8 — 31
Jammu &
Kashmir 2 20 — 3 8 — 33
Jharkhand 3 20 — 2 13 — 38
Karnataka 7 20 12 6 20 2 67
Kerala 6 20 4 2 18 — 50
Lakshadweep 1 1 — — — — 2
Madhya Pradesh 7 20 3 8 14 — 52
Maharashtra 7 20 26 4 21 1 79
Manipur 1 9 — 1 2 — 13
Meghalaya 1 17 — 1 4 — 23
Mizoram 1 8 — 1 3 — 13
Nagaland 1 11 — 1 3 — 16
Orissa 5 20 2 5 15 — 47
Puducherry 4 19 1 1 13 — 38
Punjab 5 20 3 3 15 1 47
Rajasthan 7 20 4 6 18 — 55
Sikkim 1 17 — — 4 — 22
Tamil Nadu 7 20 14 2 19 — 62
Tripura 1 15 — 1 4 — 21
Uttar Pradesh 7 20 6 12 18 — 63
Uttarakhand 3 20 — 3 13 — 39
West Bengal 7 20 9 3 19 — 58
All-india 7 20 32 86 22 4 171
Impact Assessment of Technology Adoption in Microfinance in India Page 186
Annexure IX: Status of National Electronic Fund Transfer (NEFT)
BANK
TOTAL OUTWARD DEBITS RECEIVED INWARD
CREDITS
NO. OF
TRANSACTION
S
AMOUNT
(Rs. Crore)
NO. OF
TRANSACTI
ONS
AMOUNT
(Rs. Crore)
ABHYUDAYA CO-OP BANK
LTD 2341 9.34 8379 26.60
THE ROYAL BANK OF
SCOTLAND N.V 119941 803.62 95470 642.66
ABU DHABI COMMERCIAL
BANK 390 0.97 228 1.48
AHMEDABAD
MERCANTILE COOP BANK 228 1.06 901 2.23
ALLAHABAD BANK 15418 72.57 34762 152.83
ANDHRA BANK 37904 258.94 104624 533.43
AXIS BANK 462383 1620.13 488859 2185.64
B N PARIBAS 25807 131.11 18025 443.05
BANK OF AMERICA 86974 1070.74 5956 221.58
BANK OF BAHARIEN AND
KUWAIT 31664 91.01 586 2.31
BANK OF BARODA 80714 321.82 199523 969.62
BANK OF CEYLON 137 0.27 51 0.14
BANK OF INDIA 63599 231.81 216929 959.03
BANK OF MAHARASHTRA 14749 56.76 63028 322.68
BANK OF NOVA SCOTIA 1871 7.37 417 11.08
BANK OF RAJASTHAN 7288 30.86 19425 75.67
BANK OF TOKYO AND
MITSUBISHI 880 4.34 457 29.62
BARCLAYS BANK 3115 8.33 4641 10.00
BHARAT CO-OP BANK LTD 2047 3.57 5885 23.97
CALYON BANK 545 6.96 264 17.67
CANARA BANK 151548 544.10 223239 1023.14
CATHOLIC SYRIAN BANK
LTD. 8329 46.67 13044 56.01
CENTRAL BANK OF INDIA 17871 66.35 69776 338.71
CHINATRUST
COMMERCIAL BANK 20 0.10 17 0.68
CITI BANK 1294726 8106.53 309270 2617.34
CITIZEN CREDIT
COOPERATIVE BANK LTD 387 2.36 2109 7.74
CITY UNION BANK LTD 8301 24.75 19553 70.77
CORPORATION BANK 55101 174.46 96862 659.07
COSMOS COOPERATIVE
BANK 1281 19.70 11916 53.24
DENA BANK 10771 38.17 38670 209.12
DEUSTCHE BANK 283384 2244.23 71575 795.65
DEVELOPMENT BANK OF
SINGAPORE 3199 18.70 352 8.80
DEVELOPMENT CREDIT 5776 14.95 13413 67.11
Impact Assessment of Technology Adoption in Microfinance in India Page 187
BANK
DHANALAKSHMI BANK
LTD 6467 17.70 11458 37.70
DICGC 1 0.05 6 0.02
DOMBIVLI NAGRIK
SAHAKARI BANK 754 2.32 2488 7.11
FEDERAL BANK 54091 192.38 77301 283.31
GREATER BOMBAY CO-OP
BANK 562 1.14 2708 5.43
HDFC BANK 1331411 5858.16 1086883 6515.38
HSBC BANK 411654 3203.53 151655 1297.49
ICICI BANK LTD 938035 2606.14 1158719 4015.36
IDBI BANK 210463 763.12 140138 967.27
INDIAN BANK 82570 246.71 199907 611.57
INDIAN OVERSEAS BANK 72703 998.93 138584 685.86
INDUSIND BANK 132883 707.76 34559 198.07
ING VYSYA BANK 58617 150.50 63096 329.14
JAMMU AND KASHMIR
BANK LTD 4516 19.98 10488 58.31
JANAKALYAN SAHAKARI
BANK LTD 407 1.30 2695 8.54
JP MORGAN BANK 13456 494.07 366 44.38
KALUPUR COMM
COOPERATIVE BANK 429 1.95 1636 6.36
KALYAN JANATA
SAHAKARI BANK 159 0.45 543 0.97
KAPOLE BANK 52 0.23 453 1.59
KARNATAKA BANK LTD 22508 58.91 37431 138.47
KARNATAKA STATE COOP
APEX BANK 23 0.03 13 0.06
KARUR VYSYA BANK 12422 46.35 56173 178.42
KOTAK MAHINDRA BANK
LTD 121679 389.84 89507 583.55
LAKSHMI VILAS BANK LTD 24145 51.03 10660 40.77
MAHANAGAR COOP BANK
LTD 309 1.40 515 1.59
MAHARASHTRA STATE CO-
OP BANK LTD 193 0.66 1434 6.22
MASHREQ BANK 432 48.80 35 1.05
MIZUHO CORPORATE
BANK LTD 771 2.38 51 0.32
NEW INDIA CO-OP BANK 337 0.68 2177 6.94
NKGSB BANK 439 1.76 3479 14.88
NUTAN NAGARIK
SAHAKARI BANK LTD 131 0.54 1024 2.39
OMAN INTERNATIONAL
BANK 1286 12.34 76 0.83
ORIENTAL BANK OF
COMMERCE 40174 150.51 93050 459.72
PARSIK JANATA
SAHAKARI BANK 114 0.43 1128 2.68
PUNJAB AND 608 1.43 4772 14.16
Impact Assessment of Technology Adoption in Microfinance in India Page 188
MAHARASHTRA CO BANK
PUNJAB AND SIND BANK 1191 23.83 6890 40.82
PUNJAB NATIONAL BANK 78286 348.74 258021 1800.99
RATNAKAR BANK LTD 345 3.15 1100 6.91
RBI,PAD 4068 2347.43 173 4.06
SARASWAT CO-OP BANK
LTD. 2265 13.12 20517 154.75
SBBJ 28932 158.24 52123 231.56
SHAMRAO VITHAL CO-OP
BANK LTD 2100 12.73 6852 58.20
SHINHAN BANK 1781 17.94 126 9.69
SOCIETE GENERALE 125 0.65 68 0.96
SOUTH INDIAN BANK 23982 121.58 38311 151.20
STANDARD CHARTERED
BANK 498182 3138.78 149959 1852.23
STATE BANK OF
HYDERABAD 71715 374.91 121321 514.53
STATE BANK OF INDIA 653670 3429.34 1328914 6296.39
STATE BANK OF INDORE 15310 62.77 31824 240.80
STATE BANK OF
MAURITIUS 88 0.76 137 3.01
STATE BANK OF MYSORE 29876 114.17 60524 222.30
STATE BANK OF PATIALA 16876 84.67 39396 200.05
STATE BANK OF
TRAVANCORE 91649 443.10 112449 345.21
SYNDICATE BANK 38791 136.31 141350 609.87
TAMIL NADU STATE APEX
COOP BANK 230 0.39 466 1.22
TAMILNADU MERCANTILE
BANK 7613 29.33 23374 103.54
THANE JANATA SAHAKARI
BANK LTD 1244 3.17 5624 31.26
UCO BANK 11132 63.34 36546 172.23
UNION BANK OF INDIA 57806 199.67 200546 1245.35
UNITED BANK OF INDIA 14795 60.58 31928 127.06
VIJAYA BANK 25415 105.43 69106 283.60
YES BANK 256127 537.12 16025 125.09
TOTAL 8277084 43897.45 8277084 43897.45
Total in Million & Billion 8.28 million 438.97 billion 8.28 million 438.97 billion
Total Outwrd Debits = Total Outward transactions accepted by NEFT System.
Received Inward Credits = Accounted Inward + Return Inward
Impact Assessment of Technology Adoption in Microfinance in India Page 189
Annexure XI: Banking Infrastructure in Bihar
Particulars Position as on
2009
Position as on
March 2010
% change
Branch network 3809 4173 9.56%
Rural branches 2482 2554 2.90%
Semi urban branches 683 889 30.16%
No of unbanked blocks 4 0 -100.00%
No of no frill accounts 6636571 7123212 7.33%
Amount deposited
( in crores )
331.62 427.39
28.88%
No of BC 17 17 0
No of account open 12979 79649 513.68%
No of villages covered by banks 75 255 240.00%
No of SHG groups linked to bank
credit
148172 178413
20.41%
Amount of credit outstanding
(crores)
655.41 950.46
45.02%
Agricultural credit flow (crores) 8923.39 11915.98 33.54%
CD ratio 31.23 32.13 0.9% NABARD State Credit Focus, 2010.