It is really inspiring to see both nonprofit and for-profit organizations and countries, especially developed countries, work together to alleviate poverty through better access to health care, medicines, high-yielding seeds/crops, tools and techniques to improve agriculture practices, education for both boys and girls, and of course, access to financial services via microfinance.
This is truly wonderful to witness. A lot of these efforts though are conducted in somewhat of a vacuum. Even though one may be aware of what others may be doing, there is not much of collaboration between NGO’s providing healthcare, education, agriculture and microfinance, or even amongst NGO’s in the same sector. In fact there is more apathy than anything else. This is unfathomable.
There is one ray of hope, that I am aware of, which is an organization called Nethope.org which brings NGO’s of different shades and colours together, albeit from a technology perspective, and even here more needs to be done. It is a damn good start but we cannot just sit on our laurels and stop here.
We need to nurture, cultivate and engage now to make a concerted effort and push to collaborate more broadly and more regularly. Organizations such as CGAP are doing a good job, but they need to do more of what is needed to be done rather than what they think needs to be done. Everyone is too comfortable simply taking care of what is in front of them, but not clearly looking at the major challenges and ways to make significant inroads. Point is, we must challenge ourselves to attack the most pressing challenges, broaden our scope and our horizons.
To promote and speed this collaboration one must remove the blinders and set aside one’s own agenda to vigorously pursue a common agenda that is in alignment with the sectoral needs.
For example, in some quarters there is a singular focus of promoting front-end technologies, whereas the real pain and constrain felt by MFI’s is with the lack of having a robust and scalable (back-end) lending/banking software platform. This is largely and effectively a simple question of economics. Banking software vendors with a viable product just do not focus on, or to the point do not care for, the microfinance business, and so they price their product for the mainstream banking sector. These vendors do not see the value of investing in developing software for our marketplace – they do not see scale, in terms of customers, for recouping their investment.
Do not get me wrong, front-end technologies are needed, but it yields little in value for an MFI with a less than robust back-end. It may enable them to extend their reach but it does little if anything beyond that, other than compounding the problem for the back-end lending/banking software to handle the volume – it adds to the problem in terms of data quality, integration, and management, and its ability to properly and effectively process the growing loan volume, i.e. scalability.
This is the crux of the problem – should an MFI invest in a robust back-office, paying hundreds of thousands of dollars, if not a million or two, or should it stumble along hoping, praying that its current back-end software will be able to shoulder the burden. In the current economic times, many MFI’s make a very short-sighted decision in this regard, and I am not sure that I can blame them when funding in general is very tight – should one invest in systems or direct the precious few dollars towards making more loans?
The Achilles heel for most MFI’s is four-fold,· A lack of operational process discipline – this lies squarely in the hands of the MFI;· A lack of a reasonably priced, robust and scalable “core” back-end software;· Ready and cheap access to IT expertise, whether that be people or infrastructure services – meaning reasonably priced hosting and management of the server farm, network management, firewall management, and overall monitoring of this environment; and· Good reliable Internet access at a reasonable rate.
Compounding the problem is that there is easier and ready access to grant money for front-end technologies, and very little available for an MFI to help invest in a robust back-end. To put it mildly, the grantor is being penny wise and pound foolish, and the grantee, well they smell money and they readily raise both hands and both legs.
I would earnestly and forcefully ask the donor organizations to pay heed and try to understand these constraints faced by most MFI’s, and not push their own agendas.
Case in point, NetHope.org does a very good job of bringing together NGO’s and vendors to collaborate on developing solutions to problems affecting their members.
A pow-pow is needed, either under the auspices of NetHope or some other organization with a track record of delivering results, with attendance from the donor organizations, MFI’s, and technology and telecommunications vendors to discuss how to provide back-office software at a price-point that is reasonable for the MFI’s and reasonably profitable for the vendors; secondly, how to meaningfully provide access to this software and the infrastructure (i.e. data center) services on a ASP, SaaS or as a Cloud based service. Underpinning all of this is having good, reliable access to the Internet at a reasonable price-point.
Note that the goal is not to pick one back-end software vendor but to offer some choices, which ought to be limited, whereby MFIs get the right assistance that they need, the donor gets the satisfaction that its money is well spent, and the vendor has the means to make a reasonable profit by knowing that it can attract a sizeable volume of customers. The inducement to the back-office software vendors is some form initial subsidy to make the necessary investment to develop software to meet the sectoral needs.
Is this really asking a lot? Is this problem not surmountable?
This problem pales in comparison to the problems faced by those barely making less than $2 per day or even $4 per day.
We ought to do it, can do it, must do it.