Sustaining and scaling financial services ask for a MIS which serves to boost productivity, transparency and ensures quality.
The development of a microfinance instrument combining financial and non-financial services, which involves partners from the public, private and banking sector, needs standardized and efficient processes to ensure quality of services. This includes reporting, portfolio and risk management, interventions and communication between partners and stakeholders. In the German context, only banks are allowed to disburse loans and the software used by them is heavily protected. As a consequence, the banking infrastructure cannot be used by MFIs. Therefore, to establish a sustainable and scalable microfinance sector in Germany, technology was essential. MFIs needed a Management Information System (MIS) to provide access to loan related data, to have efficient risk assessment of loans and to enable MFIs’ management to evaluate potential risks and allow for immediate intervention. In addition, German MFIs were bound by contract to monitor their borrowers closely and intervene immediately in case of late payments. In order to efficiently fulfil these tasks, an MIS was needed that would also allow for individual adjustments and functionality.
The MIS “Inthepro” was developed according to the needs of MFIs and allowed MFIs that needed additional functionality to pay for programming and implementation. This process created an atmosphere of cooperation among German MFIs where each MFI incurred a small investment while greatly benefiting from new developments.
The MIS “Inthepro” was developed and constantly improved over a period of 10 years with an investment of some 180.000€. Costs were shared among partners. Each partner could ask (and pay) for individual features which were made available for all other participating partners afterwards.
Evidence of success
The MIS “Inthepro” has proven its effectiveness and efficiency. More than 15.000 loans were managed with the MIS by over 45 MFIs across Germany. Moreover, it allowed for lean and effective processes, which reduced costs at the MFI level significantly. Each loan officers was able to handle 200 – 250 active borrowers whereas before the MIS was available, a loan officer could only handle 40-80 borrowers.
The development of an IT-system requires a high degree of standardized processes and procedures. Standardisation needs to be carefully developed to ensure further development of the support mechanism and allow for creativity developing more suitable services for specific needs of the target group.
Potential for learning or transfer
The MIS was developed with the German market in mind. However, its maturity and success in reaching the intended target groups and objectives made it interesting for other regions and countries as well. The design of any microfinance programme in Europe makes use of existing support mechanisms provided by the E.C. (e.g. EaSI Guarantee instruments) and standard banking technology. While there is a difference in the design of microfinance programmes the underlying technological principles are very similar. It is fait to say that investing in the adaptation of existing technology is more cost-efficient than developing individual solutions for different regions.
Avoiding large investments in technology for same purpose in different regions and countries should be a priority. Existing tools and technologies should and could be used more effectively.