Breadth and Depth:The Impact of ICT Adoption on Outreach Capabilities of Microfinance Institutions

A decade ago, the microfinance industry prided itself on its trends toward financial and operational sustainability. Recently, investors, donors, lenders, regulators, and microfinance institutions have been more concerned with social and outreach performance. Transactions cost and distance theories inform a new ICT-enabled microfinance institution (MFI) outreach theory positing that information and communication technology (ICT) adoption among MFIs will result in direct improvements to MFI operations and a greater capacity for poverty and geographic outreach. These propositions are modeled using a case study methodology with primary research materials collected from 14 microfinance institutions in 8 countries. Using a pattern-matching mode of analysis, we find that different ICTs impact two types of outreach: geographic and poverty. Policy, database, and software-related ICT adoption activities impact poverty outreach due to their support of flexibility and information. Infrastructure, networking, hardware, and telephony ICT adoption activities impact geographic outreach since these areas support connectivity

The Role of Mobile Banking in Fostering Microfinance Performance – A Case Study of Urwego Opportunity Bank in Rwanda

Microfinance Institutions (MFIs) have the potential to alleviate poverty across the world. However, they face many challenges before they can grow to meet set objectives. In Rwanda, high costs and loan defaults are the biggest threat to microfinance profitability and sustainability. The use of Information and Communication Technologies (ICTs), particularly mobile banking (m-banking), holds promise to enable such profitability and sustainability. Some MFIs in Rwanda had already tried to develop this opportunity by launching m-banking projects and small-scale experiments across the country. But though these initiatives exist–so far with limited achievements –there is no clear indication that integrating mobile technology banking into MFIs has contributed to the greatest challenges faced by MFIs in Rwanda. This qualitative study examines the possibilities for MFIs being more efficient by introducing m-banking. The case study was applied to Urwego Opportunity Bank (UOB), a Rwandan microfinance bank that had launched m-banking. The analysis focused on two major dimensions including transaction costs and loan defaults. Those dimensions were found restricting the Rwandan’s MFIs from achieving profitability and sustainability. The analysis results indicate that the adoption of m-banking could contributes towards efficiency in operation that allows for lowering the transaction costs and higher repayment rates in microfinance industry in Rwanda

Putting technology into context

Into(context) is a design research project developed by the design for sustainability group of Delft Univesity of Technology, Kiva.Org and funded by Microsoft Research's Digital inclusion initiative. The initiative had as its goal to fund investigations of the role information & communication technology (ICT) can play in creating solutions for overcoming the myriad barriers facing the devolpment world. During six months design researchers worked directly with Kiva.Org and four of its existing microfinance partners in Uganda and Kenya to develop an appropriate technology solution to facilitate the use of their online lending platform. The solution needed to meet the needs of their users and be congruous with the context of east Africa. This project has demonstrated the strength of a people centered approach to technology and the potential of the cellphone to serve as a legitimate platform to faclitate web based activities

BANCOSOL: THE CHALLENGE OF GROWTH FOR MICROFINANCE ORGANIZATIONS

This paper focuses on the difficulties inherent in the prudent management of growth of microfinance organizations and on potential limits to the increased efficiency, profitability, and sustainability expected from growth and large size. The paper addresses both positive and negative implications of rapid growth for microfinance organizations. The experience of BancoSol in Bolivia is used to illustrate these questions. Building upon the successful experience of PRODEM, BancoSol was chartered as a private commercial bank in 1992. The paper discusses the intangible assets inherited from PRODEM that gave BancoSol a head start and the additional advantages that resulted from formalization as a bank, in particular from the authorization to mobilize deposits. BancoSol shows outstanding success in terms of breadth, depth, and quality of outreach and in terms of sustainability. It is the microfinance organization with the largest number of clients in Latin America and it reaches poor clients who could never expect to gain access to conventional financial institutions. The paper discusses the incentive structure associated with a lending technology that has resulted in low loan arrears and the cost- effective supply of small loans. Success is explained by a strong concern with financial viability, development of a lending technology appropriate for the market niche, a long learning period, and upgrading into a formal intermediary. As it grew, BancoSol had to face a reduction of revenues as a proportion of productive assets and an increase in the average cost of funds, which combined reduced its operating margin by 13 percentage points. This challenge was fully met by reducing operating expenses as a proportion of productive assets. While growth of PRODEM had been mostly constrained by too rigid access to donor funds, growth of BancoSol has been constrained by threats on asset quality and by diminishing marginal economies of size. Portfolio efficiency has grown steadily. This growth has been the net outcome, however, of reductions in transactions efficiency and of increases in average loan size after transformation into BancoSol. The paper explores the sources of increases in average loan size and it concludes that mission drift has not occurred at BancoSol, which continues to focus on small loans to microentrepreneurs. The evolution in transactions efficiency is related, in turn, to sources of extensive (installed capacity) and intensive (productivity) growth. Extensive growth has been rapid at BancoSol and it tends to dampen productivity increases. Finally, the paper reviews the pressures from growth on the original informal culture of the organization and the gradual establishment of more formal structures.Agricultural Finance,

Financing sustainable energy for all: pay-as-you-go vs. traditional solar finance approaches in Kenya

This paper focuses on finance for Solar Home Systems (SHSs) in Kenya and asks to what extent emerging new finance approaches are likely to address the shortcomings of past approaches. Drawing on the STEPS Pathways Approach we adopt a framing that understands finance within a broader socio-technical context as a necessary but not sufficient component of achieving alternative pathways to sustainable energy access. The paper contributes in four ways. Firstly, it presents a comprehensive overview of past and new emerging approaches to financing SHSs in Kenya and their relative strengths and weaknesses. Secondly, it represents one of the first attempts in the literature to analyse the potential of new, real time monitoring technologies and pay as you go finance models to overcome the barriers faced by conventional consumer finance models for off-grid renewable energy technologies (RETs). Thirdly, by applying for the first time we are aware of a socio-technical approach, via the application of Strategic Niche Management (SNM) theory, to analyse the finance of RETs in developing countries, the analysis considers finance in the context of the social practices poor people seek to fulfil via access to the energy services that off-grid RETs provide, and the ways in which people previously paid for these services (e.g. via kerosene for lighting). This also situates the analysis within the understanding of SHSs as a niche that has to compete with the established regime of energy service provision and its attendant social and political institutional support. The paper therefore also contributes to the small but expanding body of literature that seeks to operationalise socio-technical transitions thinking and SNM within a developing country context

Assessing Microfinance for Water and Sanitation: Exploring Opportunities for Sustainable Scaling Up

The objective of this study, commissioned by the Bill & Melinda Gates Foundation, is to assess the potential market for using microfinance in the water and sanitation sector, and to identify specific opportunities for potential learning, investment, and support. This report focuses on these opportunities and suggests measures that are needed for sustainable scaling up, which can be supported by the Bill & Melinda Gates Foundation and other development institutions

The Impact of Social Media on the Performance of Microfinance Institutions in Developing Countries:A Quantitative Approach

PurposeOver the last few decades, microfinance industry is argued to have played a constructive role in alleviating poverty level and providing the underprivileged with access to financial services. Statistics from the World Bank reveal that, currently, only 4% of the underprivileged have been served out of the 3 billion+ potential clients. Such results are due to several claims, particularly the operational and financial challenges faced by microfinance institutions (MFIs) in the constant flux inviting more attentions towards its performance. While explicit attention is given by many researchers towards mobile banking and information and communication technology (ICT) in improving the MFIs’ performance, the study on how social media, as a rapidly growing online phenomenon, can impact on the MFIs’ performance remains scarce. As such, this study aims to investigate this impact based on four dimensional performance indicators: efficiency, financial sustainability, portfolio quality and outreach.Design/methodology/approachA model is proposed and tested to ascertain the relationship between social media applications and organisational performance. In so doing, web-based questionnaires have been used to collect data from MFI employees in developing countries. Results reveal a significant influence of the social media over the MFIs’ performance, offering valuable insights into both researchers and practitioners in the domain of microfinance, as well as social media—conforming that the adoption of social media as marketing, advertising and communication tools may significantly improve the MFIs’ performance.FindingsThe results demonstrate that there is a positive and significant impact of social media use within microfinance on the key indicators of MFIs. They also show that the highest impact of social media usage within the microfinance is on the portfolio quality. In addition, it was found that marketing and advertising; communication and sales and distribution are the main areas where social media is able to support while social networking websites are the most popular platforms employed in MFIs.Originality/valueThis study adds to the existing literature few theoretical and practical aspects. First, this study developed a model for assessing the value of social media as a new phenomenon within this type of organisation. Second, it offers microfinance sponsors, managers and policy makers with a frame of reference to understand what social media platform can be deployed for each purpose. Third, with the identification of the main MFIs’ performance indicators, this research provided a reference of performance measurement guide for microfinance industry when assessing different technological employment

Funding Business Development Services for Women Microentrepreneurs in the Philippines

After lending small sums of money to poor people in Bangladesh in the 1970s, economics professor Muhammad Yunus was onto a new way to finance the poor and fight poverty: through microfinance. Since then, many approaches have been taken to lend to those in poverty, help them save money, and help them start businesses. Microfinance organizations provide loans, business advisory services, marketing help, insurance, and more. Business development services especially complement loan assistance because they provide nonfinancial help essential to running a business, such as accounting skills, product development, supply chain management, and more. In 2017, I traveled to San Pablo City, Laguna, Philippines to research at the Center for Agriculture and Rural Development (CARD), a global leader in microfinance. With funding from a Summer Undergraduate Research Fellowship (SURF), I studied at one of CARD’s institutions, the Business Development Service Foundation, Inc. (BDSFI), to research financially sustainable business models for providing high-quality business development services to microentrepreneurs. After reviewing literature in the field and interviewing clients, I found that a market facilitation model that incorporates fees or a percentage of sales would be the most feasible model. This validated BDSFI’s existing practices and affirmed that they could charge clients for business development services. I also presented the organization with several other models as options

Catalog of Approaches to Impact Measurement: Assessing Social Impact in Private Ventures

To inform action impact investors could take to measure impact in a coordinated manner, The Rockefeller Foundation commissioned the study of impact assessment approaches presented here.It is natural to hope to find a single, turnkey solution that can address all measurement needs. In this study we conducted a survey of impact investors and complemented it with seven years of experience in the field of impact investing to discover what these investors want from impact measurement, and conducted in-depth interviews with over twenty entities that have developed and implemented approaches to measuring impact. Our survey of existing approaches was thorough but surely is not comprehensive; however the approaches are a good representation of the current state of play. What we found is that there is not one single measurement answer. Instead the answer depends on what solution is most appropriate for a particular investor's "impact profile" defined as the investor's level of risk tolerance and desired financial return, the particular sector in which the investor operates, geography, and credibility level of information about impact that the investor requires

A sustainable village phone model to serve the rural developing world

Wireless technologies have created an unprecedented opportunity for rural customers in the developing world to solve their communication and information problems in an instantaneous, interactive and customized way. The framework of the study focuses on existing mobile village phone model in Bangladesh and suggests ways to make it sustainable through mobile information services marketing. The study has treated ‘village phone’ as a cost effective and interactive channel through which various time befitting information can be marketed to serve customers in the rural settings