Microfinance and Automation

This paper argues that microfinance is a transaction-intensive activity that calls for automation. However, most microfinance institutions (MFIs) have either not computerized their operations at all or have used consumer software tools that are not specifically designed for MFI activity.

The paper begins by listing various characteristics that differentiate MFIs from commercial banks. Some of them are:

• Small transaction amounts;
• The target clientele;
• Large number of transactions per account.

The paper lists the following advantages of the computerization of MFI operations:

• Easier and more complete access to information, contributing to better decision-making and improved customer-service;
• Higher staff productivity and lower cost;
• Reduced number of errors, improved reliability of reports, greater confidence from customers;
• Increased transparency of operations;
• Faster growth of the institution.

The paper notes that computerization is only an after thought for most MFIs, and states that computerization is most effective when the MFI:

• Includes it in the plan from the very beginning;
• Selects the software system before it designs rules, procedures, forms, products and job descriptions;
• Designs branch operation manuals to fully integrate computer-based operations with non-computer-based ones;
• Tests the system prior to the start of live operations.