Online discussions on MIS of MFIs
The State of MIS among MFIs
From March to May 2008, PinoyME in partnership with Grameen Foundation USA conducted a series of Regional Consultations on MIS. Four consultations were conducted, one each in Central Luzon (Tarlac), Bicol (Legazpi), Visayas (Cebu) and Mindanao (Davao). To start the discussion, MFIs were asked to share their MIS experience and challenges. After which, the MIS Automation Guide (MIS Menu) was presented, together with the IT Service Models and MIS Implementation Process.
Based, on these consultations, it was concluded that the MFIs who attended the consultations were aware of the value of managing information and the role of information technology in achieving this. In fact, most MFIs already had an IT-enabled information system in place, either developed in-house or bought off-the-shelf from a vendor. There were a number of institutions however which were still using the manual system. Interestingly, among those using the manual system were those considered to be large MFIs. And while some were open to eventually shifting to an automated system, there was one MFI which felt that the manual system was still the best option.
The level of automation varied among the MFIs. Some had very advanced systems in place, in-house datacenters, real-time processing, VPN internet connection and even exploring the possibility of using biometrics. The organizations with such systems were mostly rural banks with a skilled and well-trained IT department. On the other hand, there were organizations which still used a purely manual system. Reports from the centers must be manually consolidated and reconciled at the branch and head office level. While it can be a time-consuming and tedious process, some of the MFIs claim that they are able to generate regular (even daily) monitoring reports. In the middle of this spectrum, and where the majority are, are those MFIs with piece-meal applications, such as a loan monitoring or accounting module. The applications however are not integrated, thus some manual intervention is necessary in the process. Regardless of the level of automation, most of the MFIs acknowledge that there are inefficiencies in their system and are looking to improve their system further.
The following were identified MIS-related issues and concerns:
Cost. To set up an automated system, an estimated cost of about P400,000 for a centralized server and P100,000 per branch will be incurred for hardware and software licenses. Aside from these, incidental costs, such as electricity, maintenance, training, manpower, security, etc. must also be considered. As such, the costs to MFIs are significant. To manage the cost, some MFIs would adapt the systems offered by their funders or “inherit” those used by their mother organization. In other cases, management would opt to buy just a module of the program, rather than the entire software package. This may pose some problems for the organization when migrating data from one system to another. To cut on licensing costs, some MFIs would prefer to hire acquaintances to develop the program for them. This presents some risks since the MFI becomes dependent on the individual programmer. Should the programmer opt to leave the country, then the MFI is left without any support.
It was also observed that MFIs may not be fully aware of how much they are actually spending on MIS. Often, only upfront hardware and software costs are considered. Incidental charges are not included.
Lack of internal and local capacity to handle development and maintenance. MFIs lack internal capacity to support their systems. Most of the MFIs do not have qualified staff to manage and maintain their systems. Thus, they rely heavily on an external party, either the IT department of their mother organization or their vendor. There was general feedback about poor after-sales support from vendors. Since the software companies were based mostly in the major cities, MFIs operating in far-off rural areas had to wait a considerable amount of time before they could be attended to. This was identified by BSP as a cause for rural banks to submit delayed reports.
Responsiveness of reports. The internal and external reports are not automatically generated by the system. Data needs to be exported to Excel format first so it can be customized. Consolidation of data from branches can also be a time-consuming and tedious process. For rural banks and other institutions which offer other services, microfinance data must be integrated with the rest of the operations of the institution so that a comprehensive report can be generated.
Project Management. The planning, implementation and post-implementation stage must be properly managed. A particular concern is scoping and needs analysis. Some MFIs start talking to vendors and developers before knowing what they need and want. It is common experience also for the project’s life cycle to be prolonged. By the time the system has been implemented, there are already changes in the policies of the organization which affect the system. Other areas to be considered are securing user support, developing a migration plan and training.
Connectivity. This is a concern especially in the Bicol area. Aside from areas without internet connection, there is also the risk of power interruption. Being prone to typhoons, Bicol may experience power failure for an extended period of time.
Based, on these consultations, it was concluded that the MFIs who attended the consultations were aware of the value of managing information and the role of information technology in achieving this. In fact, most MFIs already had an IT-enabled information system in place, either developed in-house or bought off-the-shelf from a vendor. There were a number of institutions however which were still using the manual system. Interestingly, among those using the manual system were those considered to be large MFIs. And while some were open to eventually shifting to an automated system, there was one MFI which felt that the manual system was still the best option.
The level of automation varied among the MFIs. Some had very advanced systems in place, in-house datacenters, real-time processing, VPN internet connection and even exploring the possibility of using biometrics. The organizations with such systems were mostly rural banks with a skilled and well-trained IT department. On the other hand, there were organizations which still used a purely manual system. Reports from the centers must be manually consolidated and reconciled at the branch and head office level. While it can be a time-consuming and tedious process, some of the MFIs claim that they are able to generate regular (even daily) monitoring reports. In the middle of this spectrum, and where the majority are, are those MFIs with piece-meal applications, such as a loan monitoring or accounting module. The applications however are not integrated, thus some manual intervention is necessary in the process. Regardless of the level of automation, most of the MFIs acknowledge that there are inefficiencies in their system and are looking to improve their system further.
The following were identified MIS-related issues and concerns:
Cost. To set up an automated system, an estimated cost of about P400,000 for a centralized server and P100,000 per branch will be incurred for hardware and software licenses. Aside from these, incidental costs, such as electricity, maintenance, training, manpower, security, etc. must also be considered. As such, the costs to MFIs are significant. To manage the cost, some MFIs would adapt the systems offered by their funders or “inherit” those used by their mother organization. In other cases, management would opt to buy just a module of the program, rather than the entire software package. This may pose some problems for the organization when migrating data from one system to another. To cut on licensing costs, some MFIs would prefer to hire acquaintances to develop the program for them. This presents some risks since the MFI becomes dependent on the individual programmer. Should the programmer opt to leave the country, then the MFI is left without any support.
It was also observed that MFIs may not be fully aware of how much they are actually spending on MIS. Often, only upfront hardware and software costs are considered. Incidental charges are not included.
Lack of internal and local capacity to handle development and maintenance. MFIs lack internal capacity to support their systems. Most of the MFIs do not have qualified staff to manage and maintain their systems. Thus, they rely heavily on an external party, either the IT department of their mother organization or their vendor. There was general feedback about poor after-sales support from vendors. Since the software companies were based mostly in the major cities, MFIs operating in far-off rural areas had to wait a considerable amount of time before they could be attended to. This was identified by BSP as a cause for rural banks to submit delayed reports.
Responsiveness of reports. The internal and external reports are not automatically generated by the system. Data needs to be exported to Excel format first so it can be customized. Consolidation of data from branches can also be a time-consuming and tedious process. For rural banks and other institutions which offer other services, microfinance data must be integrated with the rest of the operations of the institution so that a comprehensive report can be generated.
Project Management. The planning, implementation and post-implementation stage must be properly managed. A particular concern is scoping and needs analysis. Some MFIs start talking to vendors and developers before knowing what they need and want. It is common experience also for the project’s life cycle to be prolonged. By the time the system has been implemented, there are already changes in the policies of the organization which affect the system. Other areas to be considered are securing user support, developing a migration plan and training.
Connectivity. This is a concern especially in the Bicol area. Aside from areas without internet connection, there is also the risk of power interruption. Being prone to typhoons, Bicol may experience power failure for an extended period of time.
Comment
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Comment by Eamon Scullin on October 28, 2008 at 4:59am -
As a vendor of 30 years standing there is nothing easy about software development and ongoing support. If there was I would have found it by now.
We provide a range of different products (M2, Focus SQL, Abacus) to suit different stages of development, seamless data migration between the different products as the MFI grows and a common user interface. This simple approach protect the substantial investment in data and training - very important for the front line users.
The constant reference to developing an in-house system is like saying crocodiles make good pets - at some stage the "pet" will bite you when you least expect it: delays, no upgrades, emigration of the developer, running out of money to finish the development, no budget for modifications or new reports. The downside of developing your own system is too horrible to continue. Stick to running your MFI and let the software developers do their job - the market will take care of the price so that you are not ripped off.
As I said before, developing software and providing long term support is not easy - running an MFI is not easy either. Stick to what you know best.
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