Innovation in Microfinance From Rapidshare_4 pdf

The anticipated results of these efforts is a common public good—open source software licences5 that can create new business oppor-tunities by using the technology or providing support s

ments in branch networks, can turn offices from a cost centre into outlets that generate profit Additionally, the data that is collected through these electronic transactions can then be used to lower the cost of capital through improved portfo-lio reporting, faster capital turnover, market segmentation, investments, and secu-ritisation

Consortium Model

The consortium approach enables members to contribute resources such as time, money, expertise, and credibility in a way that no individual member could achieve alone This approach has had tremendous success in creating industry standards, protocols, and shared software solutions in both the technology and formal financial sectors Visa International, Bluetooth, Apache, and the Fair Isaac3

data consortium are private sector examples of successful collaboration among competitors that has expanded markets and services for all consortium members The primary example in the microfinance industry today is the Hewlett Packard (HP) led MFT4 initiative that resulted in the remote transaction system (RTS), a front-end delivery solution available under an open source license

This is a major step forward for the industry, eliminating duplication in oping delivery channel systems, sharing lessons from implementing last mile solu-tions, and gaining the momentum necessary to serve as a catalyst Other collabora-tive open source initiatives are underway to develop a core management informa-tion system and standard credit bureau management system, both being led by the Grameen Technology Center The anticipated results of these efforts is a common public good—open source software licences5 that can create new business oppor-tunities by using the technology or providing support services

devel-The consortium model lends itself to sharing credit and transaction histories that can be used to assess risk and build scoring models for underserved customer profiles Although a common practice in formal finance, there has been little or no sharing of customer data for building scoring models in microfinance Supporting

an industry serving a billion customers will require a significant shift from intensive customer screening processes towards high-volume decision making processes, which is achievable only with automated scoring Electronic transac-

time-3 The Bluetooth consortium created the Bluetooth standard for hardware devices to transfer data over a short range wireless connection Apache is an open source web server application created by the Apache Group, which later became the Apache Software Foundation Fair, Isaac and Company, Inc is a leading developer and producer

of credit scoring tables and associated products They created a consortium of banks in the US to provide their data to help build and test these products, which the members can then use in their credit businesses

4 Microfinance Development Team

5 Open source software in essence is free to anyone that wants to use it as long as they adhere to the restrictions outlined in the licence

tions increasingly provide the data that makes scoring models possible The next step requires a willingness and commitment among microfinance institutions to share data sets and develop mutually useful scoring based on country, regional or customer profiles

Aggregated Outsourced Services Model

An institution that can afford only one information technology (IT) staff member,

or even a small team, assumes a great deal of risk This person or persons will not always be available due to sickness, vacation, outside obligations, and other priori-ties In addition, information technology has become complex and broad, often requiring considerable specialisation, making it difficult to be a generalist in the field It is unrealistic to rely on one person or a small team to help an institution analyse all ICT options available, or to expect a team to remain up-to-date on the technology of greatest value to the business IT staff in an organisation are usually

so focused on day-to-day operations that they have little time to think strategically

By outsourcing certain IT activities such as application or database ment, network support, end of day processing, or backing-up and archiving tasks, internal IT departments do not require deep or broad skill sets Also, outsourcing enables the internal team to focus on optimising business value and on the strate-gic thinking that the institution requires from those who are familiar with opera-tions as well as technology Outsourcing discreet activities can lower overall ex-penses while simultaneously allowing the microfinance institution to apply its limited resources to its core business, such as improving product portfolios and providing higher quality customer service

manage-Strengths and Weakness of Collaboration

Although these models of collaboration have proved successful for microfinance institutions, they are not without risks The key is managing risks effectively, which requires commitment and attention Collaboration will expand opportunities for everyone involved: to make them work successfully they must be well-managed with incentives properly aligned from the start

Building a delivery channel network requires time and resources to determine the criteria or profile for the channel partner, conduct due diligence, build relation-ships and establish working agreements with good partners Policies and their enforcement must be established regarding liability, liquidity management, secu-rity of handling cash, customer service levels, reconciliation, settlement, compen-sation, training, support, and quality control Cultural differences in customer bases can be a problem, making market research on client behaviour essential throughout The regulatory requirements of working with third-party agents must

be understood, adhered to and in some cases changed Institutions should follow international standards and precedents to make sure all risks are properly ad-

dressed In countries lacking laws regarding third-party agents, such guidelines can help establish standards

Creation and management of a consortium is time-consuming, especially in the early stages when commitments are made regarding working principles, overall objectives, and exit strategies for all participants To be successful, the potential impact and value of the final results must be aligned with the objectives of all members of the consortium A common vision and guiding principles for working together are an essential starting point, but relationships are truly built by promot-ing the principles and dedicating time and attention to them

Outsourced service models also require due diligence to identify the partner with the right technology and the highest possible quality of service If the tech-nology provider is not committed to the results of the MF providers, the relation-ship is unlikely to be viable Outsourced ICT services create dependency on exter-nal partners if the business is to survive as it grows in complexity This position may be uncomfortable for institutions that are accustomed to operating independ-ently This makes due diligence on vendors critical Clear contracts defining the responsibilities and commitments of each entity are essential

All these partnership models contain the potential risk of falling apart before gains are realised The most effective means of managing this risk is to require, from the start, a clear understanding of the intended purpose or benefits of the collaboration, authentic commitment to the process, and agreements or covenants

to guide the work Given this risk, the most common driver of collaboration is cost savings Many microfinance providers cannot afford to create new IT solutions or

to pay for the infrastructure required to expand operations, especially into rural areas This key resource driver provides the essential rationale for overcoming the challenges and risks of collaboration Collaboration provides a higher likelihood that institutions can obtain access to the most appropriate technologies without commitments to on-going development and investment in specialised expertise Additionally, collaboration makes it possible for institutions to leverage fully their investment in information communication technology In summary, collaboration enables MF providers to use technology creatively to expand operations without incurring the full cost of ownership

Examples of the Potential of Information Technology

Partnerships in Rural Microfinance Outreach

Operating in rural areas is difficult and expensive given low population density, long distances and travel time that lower staff productivity and raise costs or risks associated with moving cash, limited market access, and lower savings and bor-rowing capacities Historically, telecommunication and power infrastructure is underdeveloped in rural areas Each of these factors increases costs Furthermore, the traditional space-based model of growth by expansion, by establishing more branch offices, is capital intensive and expensive to maintain, requiring higher

transaction volumes to be sustainable This cost structure limits the areas into which microfinance providers can expand, making it very difficult to reach rural populations This section provides examples of the three models that are overcom-ing these barriers

Model 1: Delivery Channel Networks

Several emerging IT solutions to support alternative delivery models demonstrate the potential to contribute to the scaling-up of microfinance Most noteworthy is the creation of merchant networks using PoS and mobile solutions or ATM networks to expand access to cash transactions, payment and other financial services Addition-ally short messaging systems (SMS), interactive voice response (IVR), and internet banking options make it easier and more convenient for customers to access account information, apply for new products or services, and perform financial transactions All of these options offer different benefits and cost structures must be analysed to determine the strategic value of each in the local context

A growing number of businesses are working to build solutions that support use of third party delivery channels FERLO, a technology company in Senegal, has established separate private merchant networks for three cooperatives using PoS devices for prepaid services Teba Bank in South Africa has pilot-tested a PoS solution enabling salaried workers and pensioners to purchase items, top-up airtime and make cash withdrawals through a merchant network SMART Communications in the Philippines began in 2004 to offer remittance services – Smart Money and Smart Padala—using SMS messaging MABS, a USAID pro-ject in the Philippines, is working with four rural banks, members of the rural bankers association, and two telecommunications companies, including SMART Communications and also GLOBE, which offers G-Cash, that have developed a chain of outlets to pilot test loan payment and remittance services using SMS messaging via mobile phones In a recent study of microenterprise borrowers in the Philippines, 93%6 had a mobile phone or a family member with one, making this approach viable

In Latin America, a growing number of cyber centre networks offer services to microfinance service providers, small and medium sized enterprises or other busi-nesses interested in delivering products and services to customers in urban slums (‘barrios’) and rural villages, creating yet another type of channel Major banks in Brazil have developed nearly 30,000 points of service in every municipality in the country, making it possible to open accounts and access savings, credit, money transfers, insurance, government benefits, bill payment and other services By combining technology (in this case PoS devices and PCs) at postal and lottery outlets and retail shops such as groceries stores, drug stores and butchers, the

6 Of these, 68% had a mobile phone and the other 25% had a family member with a mobile phone

banks now serve every town in Brazil, some of which can be reached only by plane or boat

Vodafone is working with its African subsidiaries, Safaricom in Kenya and Vodacom in Tanzania, to transmit financial transactions through cellular net-works Safaricom and Vodacom airtime shop dealers will use either a mobile phone or a point of sale device in the store to complete transactions Vodafone’s subsidiaries leverage a bank partner for clearinghouse services and work with FAULU, an MFI, to pilot test the solution with their customers Using their chain

of airtime shops as outlets, Vodafone affiliates will offer loan payments to pilot test the initiative, which will be extended to include bill payments, checking credit information, and transmission of loan requests The technology leverages Voda-fone’s SMS platform as well as mobile phone and PoS technology

HP, in conjunction with the MFT consortium, has been working with three MFIs in Uganda to pilot-test a remote transaction system (RTS) that leverages web services, smart cards, and PoS devices The technology supports loan pay-ments, savings deposits, transfers, and withdrawals offline and online An MF partner, Uganda Microfinance Union (MFO), has used the solution to build a net-work of independent third-party merchants in operation since January 2005.7ICICI Bank in India has built a network of 1500 village kiosk operators who re-sell ICICI’s insurance products Operators were selected who had an existing business with a physical location, demonstrated an entrepreneurial attitude, and were respected and trusted in the community The kiosk consists of a personal computer with an internet connection, a printer and a web camera ICICI Bank built a web-based application for entering insurance requests as well as an online banking interface The operator network is also a disbursement location for money orders paying out insurance claims ICICI plans to offer other types of financial transactions through this network The operators are free to use the equipment and connection to offer, and charge for, other services important to the community

In all these scenarios an agent takes or gives cash, making these outlets cash put or output points The agent model relies on liquidity management by the agent

in-as well in-as the capacity to manage cin-ash surpluses or shortages In essence, the third-party merchant model rotates cash in rural areas and electronically in the capital city, limiting the movement of cash between urban and rural areas Through these points of access customers can put cash in, take cash out, or con-duct cashless transactions, which helps the rural poor to manage their liquidity

An alternative example of a delivery channel is the strategic partnership of echange, LLC and Centro AFIN.8 Centro AFIN is a private institution that con-tributes to the development and consolidation of the financial industry in Latin

7 See Janine Firpo, “Banking the Unbanked: Issues in Designing Technology to Deliver

Financial Services to the Poor” in this volume

8 Centro AFIN was founded in 2002 and is comprised of ACCION International, FINRURAL, BANCOSOL, CAF, DGRV, ECOLF Peru, FONDESIF, AGROCAPITAL and FUNDA-PRO, all of which are involved in microfinance

America and the Caribbean, primarily by providing professional development services Through an Inter-American Development Bank (IADB) grant, echange developed two e-learning courses One is CD-ROM-based, coupled with facili-tated discussions designed for loan officers dealing with delinquency manage-ment The second is an on-line customer service course for branch managers, which incorporates facilitated chat sessions and web-based tools for launching a customer service initiative

Through this partnership, AFIN can offer MF providers affordable, high ity, results-based training without having to develop the courses themselves In addition, the MF employees do not have to leave their places of work, can incor-porate their learning into their workflow, and apply course content immediately Through this training method, MF providers can ensure the quality of the content and course delivery, have direct knowledge of participant progress, and measure performance improvements quickly In an institution trying to expand rapidly, services that ensure staff are well equipped to perform their jobs is very important Distance learning, especially through a strategic partnership such as this, provides that possibility

qual-Model 2: Consortium

In August 2002 HP convened a group of eight public and private organisations9

interested in scaling up the delivery of microfinance services The group’s form and process was influenced by the approach Dee Hock used to launch the Visa International model in the 1960s Early conversations led the consortium to a breakthrough that could be shared with the entire microfinance industry, acknowl-edging that a cross-industry approach would be required This group envisaged a next generation transaction processing infrastructure that could connect individual customer transactions with global financial systems, creating a true last mile link The key requirements were that it adhere to existing data standards, be affordable, scalable and ultimately accessible to all interested parties

The consortium worked for nearly three years following a methodical process

of business analysis, identification of requirements and technology specification, followed by development and testing RTS is now available under an open source license issued by Sevak Solutions, a non-profit corporation created by the MFT consortium to hold the technology as intellectual property and provide coordination and leadership for its development In addition, Sevak is working

on national transacting systems to support stronger and deeper rural financial systems to serve the poor

Grameen Foundation, through Grameen Technology Center, a member of the MFT consortium, is leading two further efforts to develop open source applica-

9 Microfinance Development Team – ACCION International, Bizcredit, echange, FINCA International, Freedom from Hunger, Grameen Technology Center, Hewlett Packard, and Pride Africa

tions that scale up microfinance service delivery One is building a core ment information system that will facilitate easy localisation, flexible configura-tion and still connect with the larger financial system Mifos, as it is called, will be available for local installation, client-server, or web based usage They have or-ganised a product development group of MFIs to help define requirements and pilot-test the technology

manage-The second application, developed in collaboration with PlaNet Finance, will help create dedicated microfinance credit bureaus The pilot country is Morocco, where nearly two dozen MFIs are testing the service and the technology Both of these initiatives adhere to and propagate industry standard data protocols Broader collaborations being defined will include alignment with a number of large micro-finance institutions or networks as well as local vendors for localisation and im-plementation

A key advantage of open source solutions is that they move companies away from making money on software licences towards business models that deliver technology Open source development holds out the promise of creating shared knowledge for the key players in automating microfinance operations10 that can create a common framework to support new models of access Investments in development of software solutions are still required, but at a lower cost that ex-cludes marketing and intellectual property protection costs This benefits the entire industry, not just one institution

Companies that have built their business strategy around open source solutions will also be motivated to support on-going development The overall social return

on investment for the main sponsors of an open source solution is generated by its broader use A primary goal of the open source work that the MFT and the Grameen Technology Center have undertaken is to help the industry establish a set

of low-cost, adaptable solutions that will eventually produce a shared, integrated, and flourishing network of financial institutions serving the poor

Model 3: Aggregated Outsourced Services

A broad range of technologies is available to improve microfinance operations and services Consequently, an MF provider could not afford to have all the required expertise in-house, especially where IT skills command a premium While generic skills such as network administration are readily available locally, others, such as financial MIS expertise, require specialised skills that are harder to find MF provid-ers that plan to scale-up operations in a sustainable manner will need alternative means to support their information technology If only a few institutions in one area outsource these services, the aggregate effect could be sufficient to build a viable local support business Such a firm can provide more sophisticated and reliable services at a lower price than each institution could previously sustain on its own

10 Dailey, James and McKiernan, Lynn, “The Case for Automating Microfinance With An Open Source Architecture,” The Grameen Technology Center, 2003, p 25

The types of aggregated services well suited for outsourcing include: hosting services, application or database management, and local area network (LAN) sup-port, as well as external telecommunication services to create a wide area network (WAN) for sharing information across an organisation Through reliable connec-tivity, the location of the servers – in the offices of the MFI, the application sup-port team, or a hosting provider – becomes less relevant as long as users and the technical team can access the system, offering more flexibility and better data management MF providers that can reliably access IT solutions through an aggre-gated model will have lower capital and recurring costs, the opportunity to up-grade software more seamlessly, and more management time to build the business The power of an electronically connected organisation is measured best through improved risk management, efficient information sharing, employee coordination, greater productivity, lower communication costs, and lower IT management costs For organisations that are regulated, a connectivity strategy is imperative in order

to determine accurately and easily their financial condition on a daily basis and for on-time reporting Being fully connected through a wide area network is a requirement for any institution that wants to leverage front-end delivery tech-nologies, such as PoS devices, ATMs, SMS messaging or interactive voice re-sponse systems

Telecommunication companies such as Bushnet in Africa are working to tend wireless infrastructure deep into rural areas by using appropriate, leading-edge technology that is accessible and affordable for any size of microfinance provider In 2004, Bushnet helped four microfinance providers in Uganda to implement wide area networks, connecting more than 50 branches across the coun-try Some of these institutions are NGOs that are becoming regulated, which is the primary rationale for their investment in technology In addition, Bushnet offers local area networking services, reliable hosting or backup services, and some application support for its RTS partners in Uganda Established local technology firms with reliable services are usually a better investment of limited IT re-sources than MF providers that try to maintain the skills and necessary environ-ment in-house

ex-Opportunity International Bank of Malawi (OIBM) uses the Temenos eMerge management information system In-house IT staff support and manage new ini-tiatives, but they outsource end-of-day processing and application management support services to Bastion Using a remote connection, Temenos eMerge experts

in South Africa oversee processing and back-up activities of the servers in lawi The OIBM IT staff can leave the office at a reasonable hour assured that the system will be ready to go in the morning Bastion support is quickly available if problems arise that the in-house team cannot handle or if new functionality is accessed Bastion also trains new OIBM IT personnel This arrangement is cheaper and more reliable than maintaining the expertise in-house

Ma-A final example, Microbanx, offers an MIS application—COBIS—to ers off site Pricing is based on the number of active client accounts rather than the user license fees traditionally charged by software vendors Microbanx offers a

custom-full range of services including application hosting, management, data security, reliable power, data back-ups, mirroring11 and connectivity for all branches for a monthly fee with no upfront capital investment Microbanx’s offices (and servers)

in Ecuador serve customers throughout Latin America and the US This tion service provider (ASP) model significantly reduces internal IT skill require-ments, especially at branches, and provides a flexible information infrastructure that can easily be scaled up

applica-Beyond this handful of examples, an informal mapping exercise by CGAP counted at least 63 financial institutions in 33 countries using ATMs, PoS, mobile phones or PC banking to serve poor people Of these, 46 are universal banks While there is still much to be learned and proved, especially regarding sustain-ability, a trend has been established Considerable effort is required to scale up and replicate these pilot efforts

Challenges and Opportunities for IT to Improve Rural

Microfinance Outreach

The promise of technology to make breakthroughs in delivering microfinance is quite encouraging in spite of near-term obstacles The greatest barrier to informa-tion technology is generally its cost A key element of models described here is the leverage of existing and emerging infrastructures, such as chain outlets, tele-communications or even electric power Sharing infrastructure reduces costs, fa-cilitating delivery of financial products and services to rural areas Sharing these services incurs minimal risks compared to the dependence on similar services such

as roads and water Our collective challenge remains reducing the cost of tions so that institutions can process small transactions profitably in remote areas While many IT pilot projects have been conducted over the last 10 years in the microfinance industry, adoption and adaptation of these models has been limited The cause is simply a lack of awareness about the initiatives and the technology Those institutions that are aware do not have the expertise to explore or apply the ideas In some cases a lack of understanding about technologies coupled with a fear of exposing this knowledge gap restrains progress In other cases, a lack of resources to fund research or a pilot initiative is the excuse As is typical to all industries, there are early adopters and innovators followed by far greater numbers that are risk averse and doing “business as usual”, even when indicators show that the market is changing Funds for researching and developing new business mod-els, products and partnerships, additional advocacy and education are required to overcome these barriers and facilitate more rapid adoption of these three models

transac-of collaboration

11 Mirroring is the replication of a server for faster recovery in the event that information

or applications on the main server are lost or damaged

To date, no regulatory body has completely blocked the use of third-party chant networks to deliver financial services Each institution should examine local regulations to determine whether this type of partnership model can be used Gen-erally, if the formal financial sector is leveraging these types of partnerships and

mer-IT solutions, it should be possible for a microfinance provider to make a plausible case to do likewise This regulatory due diligence should be part of the exploratory and design phase of the initiative In addition, if an institution follows the risk management principles for e-banking and related resources provided by the Basel Committee12 on Banking Supervision (2003) as a framework for their delivery services model, the auditors, investors and regulators are likely to be comfortable Products and Transaction Volume

Transaction volumes are low and outreach-per-customer is relatively expensive in rural areas Reaching “the last mile” requires a diversity of new products and a range of services that can be delivered through a single access point online and offline A limited range of financial transactions, such as loan payments and sav-ings deposits alone, will not cover the capital and recurring costs of the delivery channel Additional transactions, such as utility or pension payments, purchasing

of airtime, or even health care or e-government services, can be added to cover the costs of the delivery channel in remote areas The more points of access and diver-sity of products an institution can create to increase frequency of usage raises the overall value of a shared network, justifying the initial capital investments

To be truly competitive, MF providers must shift their thinking from being a provider of products to being a provider of services for an array of activities that people at the bottom of the pyramid engage in nearly every day These services must be provided when and where people want them, not where it is most conven-ient for the provider These services may include purchasing raw material or agri-cultural inputs, paying for health services or insurance, educational and communi-cation services, e-government or business development services, pension or re-tirement opportunities, household goods, and home improvements

Technology

Cellular and wireless infrastructures are opening wide possibilities for alternative service delivery models However, there are still a number of challenges such as poor fixed telecommunication lines outside capital cities, limited reach of wireless networks, low bandwidth, and high usage fees In 2001, the number of mobile phones surpassed the number of fixed lines globally, and there are more mobile phones in developing countries than in industrialised countries The growth of internet access is somewhat slower but steady, demonstrating exponential growth

12 www.bis.org/publ/bcbs98.htm, www.bis.org/publ/cpss68.htm

since 2000 Growth has been concentrated in industrialised countries, but is ing momentum elsewhere In South Asia, Latin America, the Caribbean, the Mid-dle East and in North Africa internet access is surpassing mobile phone access.13

gain-Growth has been primarily in urban areas, widening the communication gap tween rural and urban Mobiles are expensive to buy and use.14 Thus, rural areas

be-in the developbe-ing world are the last frontier of the be-information technology tion.15 Microfinance providers in countries with poor rural communications should collaborate, using their aggregated demand as a lever to attract resources and firms that will bring technology to the areas where they operate This will also help ensure the reliability of the service provider and lower costs for the local industry, which should translate into affordable pricing for microentrepreneurs

revolu-Where connectivity is available but not always operating, fall-back strategies should be devised Options could include local data repositories, device memory, smart cards, or restricted policies and procedures to operate securely offline Amounts invested in these alternatives should be related to the amount of time they are actually used

Shared infrastructure and services strategies lower per unit costs, build value, and leverage economies of scale for expansion of microfinance delivery, even among competitors Risks associated with using hosted or outsourced services can be mitigated by ensuring that the technology provider uses certified tech-nologies, follows proper security and network procedures, and uses encryption

to transfer data In addition, microfinance providers must protect their networks against viruses, follow policies and procedures for assigning system access and passwords, and properly manage internal systems Clients using a shared mer-chant PoS network or a MIS application that is hosted on a shared server must ensure that data cannot be mixed or accessed, except when a breech of security authorisation occurs

Regardless of the solution, customers will always have to provide identification

to authorise financial transactions using an encrypted code, personal identification number, password or biometric means Creating electronic profiles of customers will help rural areas join the digital economy Enabling customers to exist digitally and access their accounts remotely can transform service delivery, increasing elec-tronic data repositories and additional product development, and offering access to new services In nations where citizens inherently mistrust government, extra care

is required if this type of information is to be shared with legitimate credit bureaus and data consortia outside the domain of the financial institution

Management Issues

In addition to external factors, serious consideration must be given to managing changes in the organisation adopting technology Technology affects everyone: failing to acknowledge, communicate and prepare employees for new ways of doing business may result in complete rejection or sabotage of the IT strategy An important aspect of managing expectations around change is to define new roles and responsibilities clearly, to train and empower staff to accept responsibilities, and to align incentives to motivate them Committed and adequate staff is essential to ex-panding the sector to new heights Results-based development and training should

be required: investments in training create business value, as do investments in formation technology If management is not willing to commit time and resources

in-to organisational change, it is useless in-to spend money on technology

Second, thought, attention and leadership by senior management are absolutely critical to successfully implement an IT solution Every IT approach or solution has technological, financial, operational, and business strategy advantages and disadvantages, requiring that critical IT choices not be left to the IT department The top manager responsible for business strategy and performance must make the ultimate IT decision with input from the finance manager, the operations manager and the IT manager It is the collective responsibility of the manage-ment team to understand and determine the financial, operational and technical risks and impacts of the solutions to be pilot-tested It is the responsibility of man-agers, not the IT department, to extract value from IT investments.16 Institutional investments in partnerships and IT solutions affect everyone in the organisation Unless projects are well managed across the institution, they will fail to produce the required benefits

Third, think beyond a pilot test The design phase should include ways to scale

up and ensure sufficient analysis to justify the long-term investment Determining the break-even point is important, so that funding can be triggered when it is reached Small investments in technology without planning and management ownership often result in increased costs with little return despite anticipated busi-ness value Only by rigorously evaluating the solution periodically—such as on a six-monthly schedule—always making necessary adjustments, is it possible to ensure that business value is gained Implementing new IT solutions is iterative, requiring multiple phases and adjustments to the deployment strategy, the use of the solution, and processes to expand continually that will leverage and increase the value of the investment

Finally, managing pilot tests requires business leadership, rigour and discipline

to ensure problems are overcome and business models are adjusted until the pected economic value is delivered The importance of expertise in IT design, planning and project management skills must not be underestimated Implement-

ex-16 Ross, Jeanne W and Weill, Peter, “Six IT Decisions your IT People Shouldn’t Make”, Harvard Business Review, November 2002

ing an IT solution is not like managing any other project because technical and organisational risks must be managed aggressively to stay on time and within budget Paying for this expertise from the outset saves money in the long run; not having expertise in place causes problems, delays, budget increases and puts insti-tutional credibility at risk The importance of high quality project management cannot be overstated

Conclusion

The large size of rural markets, coupled with technological improvements, vides much of the impetus for IT innovations However, the true power to scale up lies not in the technology, but in the new business models and partnerships that technology enables Reaching significant scale and increasing outreach to rural areas occurs only through collaboration to resolve issues, thinking differently about them, and making innovations in the way financial products and services are delivered Through creative partnerships, information technology can help achieve broader impact, conserve limited resources and drive down transactions costs

pro-Of the three models of collaboration, the one with the greatest power to form microfinance is technology-enabled partnerships that make processing small transactions in rural areas possible and profitable Such partnerships could be those that bring large financial service providers and their capabilities into this market, partnerships that increase course offerings and quality of local training providers to increase human resource capacities, or technology companies with the capability to quickly roll-out or adapt technology for the unique challenges of rural markets All forms of technology-enabled partnership are essential to expand the outreach of rural microfinance services

trans-The major lessons from these models of collaboration—shared delivery nels, consortia and aggregated outsourced services—are profound, providing a road map to move from thousands of isolated entities to financial systems for the poor that are linked to global financial networks Collaboration is the key factor for reaching scale In sum, collaboration:

chan-(1) Allows responsible sharing and lowers cost structures of IT solutions that make it possible to reach rural markets

(2) Paves the way for the standardisation required to expand the industry and build integrated financial systems

(3) Enables organisations to achieve together what they cannot achieve alone For collaborative efforts to be successful, all partners—MF providers, technology companies, support agencies, and project sponsors—must invest time and create incentives to build relationships and work towards desired outcomes This ensures