Microfinance services available to the poorest people,
especially investment loans for micro-business
development,
are recognized as
an important part
of poverty reduction
strategies. As the
industry matures, MFIs face a
competitive environment, forcing
them to balance
the goals of
outreach and sustainability. However,
in spite of
its successes, microfinance
has not been
able to reach
to the poorest of
the poor particularly
in the low
density population areas
of upper and lower dzekwa, Nkum subdivision etc.
The
main reason behind
this gap is
the cost of
credit delivery.
Information and communication technology (ICT) is an
important driver and the great hope, although
it brings with
it fundamental changes
to the microfinance
delivery mechanisms that
have become almost sacred for the
microfinance sector. This research is
at the
intersection of inquiry on ICT
for development and the digital
divide, the impact of microfinance, and
the use of ICT in the
financial services industry. I discuss the role and impact of ICT on
outreach and sustainability at the industry levels.
The
Consultative Group to Assist the
Poor (CGAP), a
coalition of public
and private development organizations working to expand
access to microfinance for the poor, developed a set of key principles
meant to guide the
implementation of effective, accessible and equitable microfinance services. The principles, presented bellow,
were endorsed by Group of Eight leaders at the G8 summit in 2004.
i) Poor people
need a variety of financial services, not just loans.
ii) Microfinance
is a powerful tool to fight poverty.
iii) Microfinance
means building financial systems that serve the poor.
iv) Microfinance
can pay for itself, and must do so if it is to reach very large numbers of poor
people.
v) Microfinance is
about building permanent local financial institutions
vi) Microcredit is
not always the answer.
vii) Interest rate
ceiling hurt poor people by making it harder for them to get credit.
viii) The job of
the government is to enable financial services, not to provide them directly.
ix) Donor funds
should complement private capital, not compete with it.
x) The key
bottleneck is the shortage of strong institutions and managers.
xi) Microfinance
works best when it measures – and discloses – its performance.
The continuous
and growing penetration
and implication of
information and communication technologies (ICT) into the
financial services industry during these last decades are a well documented
and undisputable reality.
Nevertheless, different categories
of financial service
providers have obtained very
distinctive results concerning
the expected increase
in productivity and in business performance due to large investments
in ICT. In one side of the spectrum, institutions like investment banks and
insurance companies have successfully capitalized over their ICT expenditures
contrasting with retail banks that have not
fared so well. The retail bank
sector, studied by Harris (2001)
as an example of the IT productivity paradox, faces the consequences of
a banking technology that becomes onstantly more affordable allied with the
broad erosion on entry barriers into banking business.
Many
microfinance practitioners see ICT innovation as a key strategy to take
microfinance to the next level in terms of outreach and sustainability. The
most fundamental ICT application is the back-office MIS. A suitably
sophisticated MIS is
prerequisite for the MFP
to monitor the quality, sustainability and efficiency
of its loan
portfolio, to monitor
development impact, and
to manage general administrative tasks.
It is not possible for an
MFP to upscale significantly without an MIS
that can grow with the
institution. The larger MFPs have sophisticated back-office systems based on
the same
In order to fully understand the effects of information
systems on MFIs several sub-
questions have been formulated to support the main
problem statement. First of all, the
concept of microfinance will be studied in depth to
determine the purpose of it and the
needs of its customers.
Furthermore, the needs and requirements of MFIs with regards to
information management will be considered. The following sub-questions hope to
provide a solid foundation for the rest of the paper:
v What are the purpose and needs of customers of MFIs?
v What are the general needs of MFIs with regards to IS?
v Can Free Open Source Software (FOSS) be a viable and
feasible solution to the
IT needs of MFIs?
In addition
to research into the needs and requirements of MFIs, the theoretical
framework regarding the antecedents of the usage of
information management on
technology acceptance will be presented. This will help determine the effects and use
of
information management on clients, staff, and business
processes of MFIs. The
following sub-questions address these issues:
v- What are the antecedents of the usage of information
management on technology
acceptance?
v - What are the effects and use of information management
on clients, staff and
business processes of MFIs?
It
is clear that information and communication technology can play a crucial role
in the
development of microfinance and help extend the reach of
MFIs in relation to the poor.
The potential issues which could present obstacles to the
implementation of an IS system
have already been discussed, nonetheless it is also
important to understand what factors
influence technology adoption. FOSS cannot help improve an MFI’s
organizational
performance if there is resistance by end-users and
therefore is not being used. It is for
this reason that this section will be dedicated to
understanding the antecedents of
information management on technology acceptance. This will help determine the effects
and use of information management on clients, staff and
business processes of MFIs.
This
study proposes that technology will lead to:
v Higher overall satisfaction of
employees/management. It is posited that
an IS
would increase an employee’s/ manager’s experience with
the MFI in a positive
way by instilling more faith in the MFI and possibly
providing an incentive to
work for this particular MFI. The IS should make impact effectiveness and
efficiency positively so this should leader to higher
satisfaction.
v -Higher job satisfaction for employees/management. This
study suggests that the
implementation of an IS will also lead specifically to
higher job satisfaction as it
should make the work more enjoyable and satisfying. This is as it should make
the business processes easier to carry out and also in a
more effective and efficient
manner.
v -Higher efficiency/productivity gains. It is believed that the implementation of an
IS will lead to higher efficiency/productivity gains by
ensuring less effort and
time is required to carry out tasks and that operations
can be streamlined to avoid
duplicate work.
This allows employees to manage more products, customers, and
transactions in less time.
v -Higher growth rates. It is also posited that the
implementation of an IS will lead
to higher growth rates.
The processes of automation, informatization, and
transformation will lead to improved transparency and the
capability to increase
capacity to accommodate more clients as an IS should
decrease information
turnaround times and increase each credit officer’s
portfolio while reducing
transaction cost allowing them to serve more clients and
deal with more
transactions.
v -Higher performance levels. It is also suggested that implementing an IS
will lead
to higher performance levels. An IS should lead to a more favorable
composition
of clients and projects so that the credit risk reduces
and that there is more
accurate information readily available to support
strategic objectives.
v -More time for training and development. It is also
suggested that an IS will lead
to more time for training and development of employees
and managers so that
they can help improve business processes and increase
their knowledge pool.
v -Higher customer satisfaction. Higher customer satisfaction
is also expected upon
implementation of an IS within an MFI. Although clients do not usually directly
make use of an IS they should notice the benefits. Benefits such as shorter
turnaround times, increased flexibility, less human
error, better protection of
personal, historical and current client information, and
better overall service
quality should increase customer satisfaction. More specifically, quality of
services in service organizations can be measured through
SERVQUAL, a multi-
dimensional scale to capture service quality. SERVQUAL is based on five main
service quality dimensions, namely; reliability,
responsiveness, assurance,
empathy and tangibles (Zeithaml & Bitner, 2003).
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