In order to understand the potential use of client-focused technologies for creating new distribution channels and lowering transaction costs in microfinance, this study examines three technologies, which are defining the current technological efforts in the industry: personal digital assistants (PDAs), point-of-sale (POS) devices, and cell phones. Through a series of examples from different parts of the world, t the study outlines approaches to consider when examining the adoption of client-focused technologies in the daily operations of MFIs.
Furthermore, the study aims to address five key questions related to the use of the client-focused technologies for microfinance purposes:
1. Does client-focused technology help MFIs reach scale and efficiency?
2. Were the institutions’ expectations of these client-focused technologies met?
3. What are the reasons for success or failure of the different business models used to deploy these client-focused technologies?
4. Do MFIs have a quantifiable return on investment from implementing these technologies?
5. What are the technical and non-technical prerequisites that an MFI will need to consider to start using one of these technologies?
The practical examples included in this study are as follows:
1. Banco Solidario’s experience with PDA applications in Ecuador
2. Colombian and Peruvian experience with the correspondent agent (CA) model using point-of-sale devices
3. Remote transaction system (RTS) At Uganda Microfinance Limited
4. Biometrics at Opportunity International Bank of Malawi
5. K-REP Bank’s experience with mobile solutions in Kenya
6. G-CASH – cell phone banking in the Philippines
7. WIZZIT, a branchless bank which relies on cell phones in South Africa
Most of the examples presented in the case studies indicate that client-focused technologies do help microfinance organizations increase their scale and efficiency. For instance, the Banco Solidario’s PDA applications showed positive impact on the efficiency of loan officers by giving them a tool which improved the loan application process and also enabled them to organize their field visits better.
Similarly, POS and cell phone systems offer a unique opportunity to MFIs to increase their outreach in remote and rural areas. Based on the three POS examples, it is clear that POS-based systems are a less expensive solution, when the country infrastructure allows, for providing financial services to remote and rural clients when compared with the expenses associated with opening a new branch. However, as shown in the RTS example, the development of this type of solution can sometimes be slow and complex because they depend highly on a good communication infrastructure—not available in every country.
One of the insights gained from the examples presented is that MFI clients and unbanked people are willing to try new technologies once they understand the direct benefit of using them. For instance, most clients using the POS services appreciated the fact that it saved them travelling long distances to perform transactions. However, providing adequate and continuous training for clients is crucial to their success in adopting technologies. On the supply side factors such as institutional buy-in, the choice of technology provider, the state of local infrastructure, and regulations play a key role in the success of these technology projects.
