Open Source, SaaS to drive future of microfinance IT: Grameen Technology Center

By Matthew Fuchs,

Craig Chelius

Microfinance Focus, Nov. 28, 2009: Open Source software and SaaS are emerging as the key Management Information Systems (MIS) software for MFIs, according to Craig Chelius from the Grameen Technology Center (GTC). These products, he argues, can offer MFIs fully customisable, secure software that they can own without the need to pay expensive licensing fee.

Mr. Chelius is the Global Sales Advisor for MIFOS — an open source, web-based “SaaS” system developed by GTC which MFIs can download and modify for free. Work on MIFOS began in 2006, and GTC has worked Grameen Koota in Bangalore, India, since 2007 to develop and implement the software. MIFOS is now used by 20 MFIs in India, Nepal, the Philippines, Kenya, Senegal, Tunisia and Ghana.

MIS are the systems MFIs use to record and track financial information. It is here that loan officers record money given to clients for loans services as well as cash received from repayments. This information is then available to management and the back office for accounting and compliance purposes. As an essential part of MFI operations, MIS is an important factor to the operational efficiency of MFIs.

According to the Grameen Technology Center, the lack of flexible and cost-effective MIS infrastructure is limiting the ability of MFIs to grow. A MIX/CGAP study on MIS in microfinance found that 41% of MFIs use a manual MIS — either Excel-spreadsheets or paper-based systems to track payments. These methods are time-consuming and vulnerable to data loss, limiting the ability of MFIs to grow their client base.

Of the 59% of MFIs who utilise MIS software, only 17% use packaged software. This is because there are few choices in the market, and what is available often does not suit the needs of an MFI, argues Mr. Chelius. “Often software vendors are pushing entire banking suites and usually the MFI does not need that”, he said. Other common concerns he found were licensing costs and, for those using customised systems, ownership and control of software code. According to the MIX/CGAP data, 48% of MFIs are using customised systems built by themselves or a software company.
Open Source MIS provides a cheaper and a more flexible alternative, according to Mr. Chelius. “The desire for MFIs to own and control their own code, to customise it to fit their needs exactly without having to pay for it, goes hand in glove with open source,” he said.

The full potential of Open Source systems such as MIFOS will not be realised unless MFIs, collaborate on software development to avoid costly repetition, Mr. Chelius emphasised. “It will be a terrible waste of money if 20 or 50 MFIs build 20 or 50 separate MIS systems. They are not software companies, they are financial service providers. How are you going to keep up with growth if are writing your own software?” To encourage this, the GTC has fostered a “MIFOS community”, where experiences and software code can be shared online and via RSS feeds.

Another major limitation of traditional MIS models, Mr. Chelius stated, is that they are usually PC-based. He believes the future lies with web-based systems called SaaS, or “Software as a Service”. Clients access these services through the internet and use them to store data on a remote server, which for many MFIs offers greater security compared to storage on a local server. It was for this reason SECDEP, an NGO MFI in a remote rural district of the Philippines, chose to adopt this system when they made the transition from an Excel-based manual MIS in May 2008.

The Grameen Technology Center is not-for-profit center within the Grameen Foundation, which develops technology to improve the operational efficiency and lower costs for MFIs. Established in 1997 and based in Seattle, the Center is also developing telecommunications projects to expand financial access to the poor.

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