Banking on Technology

Financing the unbanked comes with its own set of challenges. Microfinance institutions (MFIs) often deal with complexities that regular banks do not face – collection and disbursement of funds, building a credit history, loan sanctions for peer groups and such others. In the recent times, the sector has faced flak for levying high interest rates and resorting to high pressure collection tactics. In the future, MFIs could look towards technology to provide a simple, fluid solution that keeps up with the industry’s developing scenario and allows them to develop tools which aid in customer analysis and risk assessment. We take a look at some of the technology services and products in the market that serve as enablers for these institutions, the field agents and primarily, the customers.

Artoo Slate

A software solution that works on the android and cloud computing model, Slate facilitates the cumbersome process of data entry. “Our services come ahead of the core banking system of MFIs,” says Sameer Segal, founder and chief-executive officer of Bengaluru-based Artoo IT Solutions Pvt. Ltd. Developed to be a touch-based interface, Segal says that Slate is very user-friendly and hence, field agents do not require much training to use the software. Compatible with over 300 devices, Slate eases data entry of single or group customers, takes pictures of important documents, automatically gives details of remote locations using GPS and works offline as well. “The idea is to cut down on the back and forth of data travel for verification and unnecessary paperwork,” adds Segal. With an MFI’s workflows mapped onto its system, information can be verified on the spot once it gets uploaded. According to Segal, a pilot project with Ujjivan, a microfinance institution, found that the software helped improve field agents’ productivity by 35 per cent and reduced loan disbursement time considerably. “With attrition being one of the main problems for this sector, Slate can help reduce their work pressure,” says Segal. Built on a cloud platform, the software is scalable and can be integrated with an MFI’s core banking technology in three weeks time. Slated to commence production by July end, Segal says the pricing varies on the number of agents and the volume of information and it can be between Rs. 150 – 800 per agent. It has also partnered with Dell to provide devices and Segal hopes to break even on this particular product in one year.

Eko India Financial Services

Where Eko steps in is to provide low-cost payment infrastructure for financial service providers to reach the low-income group effectively, according to Abhishek Sinha, co-founder and chief-executive officer of New Delhi-based Eko India Financial Services Pvt. Ltd. (Eko). “We provide last mile distribution of financial services and enable transactions at real time,” he says. As ‘business correspondents’ of State Bank of India and ICICI banks, Eko acts as special agents servicing customers beyond the physical presence of banks. For this, Eko ties up with retail outlets such as grocery and stationery stores that serve as customer service points, from where the customer can open an account, make deposits, withdrawals and remittances. And facilitating this is a simple mobile device through which customers can operate their accounts. Eko follows the FMCG distribution model that consists of retailers, who handle customers, and distributors, who manage retailers and the flow of funds. With 1,500 such retailers spread out in Delhi-NCR, Bihar, Jharkhand, Maharashtra and Uttar Pradesh, Sinha believes tying up with local retailers instead of deploying field agents and using mobile phones have helped the company reach out efficiently. Eko does not charge its customers, but the banks for every transaction. It plans to consolidate its existing presence in another year besides offering more services like overdraft and recurring deposits.

Agilis Universal Microfinance Solution

Agilis UMFS is a web-based financial platform that caters to the complete process cycle of MFIs. “The product makes sure the entire back office is completely automated so less manpower is needed, which is a crucial element for MFIs,” says Kalpesh Desai, chief-executive officer of UAE-based Agile Financial Technologies Pvt. Ltd. The technology is CGAP (Consultative Group to Assist the Poor)-compliant and takes care of the complete cycle of individual or group-based lending from sale, deposits and disbursement to collection, recovery and reporting. The platform also helps field agents to create loans, savings and deposit products based on different criteria that vary with each customer. An in-depth customer information management tool, it helps MFIs collate information about all financial transactions and define workflows. “An additional feature of this solution is that since many MFIs do not always have a corpus to rely on, it also monitors funds that come into these institutions,” adds Desai. Desai states that the technology is user-friendly and can be easily integrated with point-of-sale devices or mobiles that include smart cards or biometric authentication, thus eliminating fraud and help reach out to more remote areas. Though it is currently used by MFIs based in Africa, Desai soon hopes to tie-up with partners in India to have the product out by this September.

MF Resolve

MF Resolve is a web-based application service provider based on a pay-per-use functionality. Available on Microsoft Cloud services, MFIs needn’t buy the technology and can subscribe to it and pay per use. “The technology is beneficial for small MFIs that deal with loans of up to Rs. 15,000, but since it is a highly scalable architecture, it can process loans worth up to half a million as well,” says C.V.Prakash, founder and chief-executive officer of Bengaluru-based Gradatim IT Ventures. MF Resolve caters to almost the entire lifecycle process of an MFI from savings, loan and member management, collections, payment integration etc., except for the human resources (HR) module. Launched in 2009, Prakash believes where the technology differentiates itself from the others is the number of MFI models’ mapped onto it. “It can operate with nine MFI business models including the Grameen Bank, Islamic model and Federation model besides individual and group-based models,” he says. According to him, simplicity is its core feature – for instance, field agents will only have access to its data collection module. Integration of the technology with small MFIs would take about four weeks while with larger ones it would take up to eight weeks. The pricing is transaction-based, varying between Rs. 24 – 50 per loan for the basic service. There are value added services such as offline access, dynamic reporting and forms processing. With an investment of up to four million dollars and over two years of development, Prakash says they have broken even on the operating expenses and will see a net cash profit this fiscal year.