Chapter 38 Use and Management of Conventional ICT and Mobile Technology in Microfinance: A Bangladesh Perspective

Mohammad Badruddozza Mia

Open University, UK

Magnus Ramage

Open University, UK

ABSTRACT

Microfinance has been a significant means of reducing poverty since the mid-1970s.

INTRODUCTION

Since time immemorial, a significant proportion of the world’s population has been in a vicious cycle of poverty. Considering the extent and intensity of poverty in the world, the United Nations (UN)

DOI: 10.4018/978-1-4666-6268-1.ch038

has fore-grounded its poverty reduction agenda through its Millennium Development Goals (UN, 2000). Microfinance has been a significant means of reducing poverty since the mid-1970s. Realising the important role of microfinance in liberating the poor from this cycle of poverty, the UN pro­claimed the year 2005 as the International Year of Microcredit, and the Nobel Peace Prize for 2006 was dedicated to the pioneer of the microfinance movement, Professor Muhammad Yunus and the Grameen Bank that he built for the intervention of microfinance.

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Nowadays, thousands of microfinance or­ganizations have been established, especially in the LDCs (Least Developed Countries), and they are engaging millions of economically and socially marginalised women and men within their microfinance program operations. With the economic, social and demographic characteris­tics, microfinance has been an important sector of Bangladesh for long time. Besides Grameen Bank, hundreds of microfinance organizations have been implementing microfinance program covering almost one-third rural households of the country with an aim to address the economic and social problems of poor community of the society (CDF and InM, 2011).

The implementation of microfinance pro­gram is information intensive. A successful implementation of this highly distributed nature of program intervention is largely dependent on the information systems of it (Iyengar et al., 2010; World Bank, 2010). The use of ICT (In­formation and Communication Technology) in the information systems of microfinance can be helpful for operational performance, supervisory performance, increasing transparency, account­ability and poverty outreach with many other positive organisational and social implications if the ICT is properly managed (Mia, 2013). This chapter looks into the currently-used Information Systems (IS) in microfinance of Bangladesh, the extent and intensity of the use of ICT, the factors hinder the use of ICT in microfinance, the ap­proaches to ICT management, and the emerging mobile technology-based operational model of microfinance. The chapter concludes with some recommendations regarding the use and impli­cations of the changing landscape of ICT in the microfinance sector of this developing country.

MICROFINANCE SECTOR AND USE OF ICT

Although helping poor people through providing financial services used to be in the long past in different parts of the world (Seibel, 2003; Nath, 2004), the present movement of microfinance began after the liberation war of 1971 in Bangla­desh, within the context of on-going poverty and undeveloped social circumstances, exacerbated by the war and post-war destruction (Choudury et el., 2009; Yunus and Joils, 1998).

Use of ICT: Organisational IS

The use of ICT in the information systems of microfinance in Bangladesh started in the mid- 1980s. During this period, BRAC, Proshika and then Grameen Bank started using customised software for the information management of mi­crofinance. Until the late-1990s no organisation used customised software for microfinance of this country other than these three large organiza­tions. However, the use of spreadsheet software has been popular besides using manual informa­tion systems since early 1990s in microfinance organizations. A recent survey (Mia, 2013) on 58 microfinance organisation of the country reveals that presently about 30% microfinance organiza­tions use customised software system, of which only 7% organizations use the system both at the head offices and field level offices, and 23% organizations use it only at head offices. The use of web-based online system is still rare in the microfinance organizations of the country. About 60% organizations use spreadsheet software be­sides the using manual system. Organizations that use customised software also use spreadsheet for preparing casual summary reports besides using the customised software for regular data processing and reporting purposes.

Fully Manual Information Systems: The survey reveals that a small proportion (about 10%) of microfinance organizations in B angladesh still use fully paper-based manual information systems for their microfinance operations. The information systems within all layers of these organizations are fully paper-based. All the functions related to information systems, such as data recording, processing, communicating, calculating, reporting and conducting feedback are accomplished manu­ally, using paper. These organizations are usually very small in size and located in remote areas of the country. However, it has been observed while staying in the field, and corroborated by the sur­vey results, that alongside the formal information systems, mobile phones have been widely used within microfinance operations as an information device for activities such as information gather­ing, consulting, decision making, decision and information passing, getting approval, providing suggestions and more. Even the organizations us­ing paper-based fully manual information systems as their formal information systems also use the mobile phone as a casual information device for their microfinance operations.

Combination of Manual and Spreadsheet Software: The majority of the microfinance or­ganizations (about 60%) use spreadsheet software along with their paper-based information systems. Spreadsheet software is mostly used for the com­piling, summarising and reporting of the raw data recorded by paper-based systems. In addition, some organizations also perform financial analysis of microfinance data using spreadsheet software. Typically, organizations begin by using spread­sheets at the head office and then extend their use to their midlevel and branch offices. However, the use of spreadsheet software at the midlevel and branch office level has not been observed in many organizations.

Off-Line Customised Software: Although the use of off-line customised software for microfi­nance began several years ago in some of the larger organizations in B angladesh, at the time of writing its use is not widespread among the microfinance organizations of the country. The survey reveals that about 30% of the organizations use custom­ised software for microfinance implementation. About 20% of organizations use it only at head office level, and under 10% (4 organizations) use off-line customised software at branch office level, in addition to using it at head offices. It has been observed in the field that organizations that use the off-line customised systems only at head of­fice level collect data from branch offices in the form of a monthly report at end of each month, and use this paper-based data as the input of the customised systems running at head offices. Then the system at head office processes the data and produces customised reports as the output of the system. Organizations using the systems both at head office and branch office levels like BRAC and ASA collect raw data at the end of each month from the branch level systems using portable storage devices, and upload this data to the head office systems for further processing and reporting.

On-Line Customised Web-Based Software: On-line web-based customised software for micro­finance is still hard to find within the microfinance sector of Bangladesh.

The usefulness of spreadsheet software for internal and external reporting, and the main­tenance-free usability of spreadsheet software even by the general staff having no technological background, also promote the use of spreadsheet software, especially in the socio-economic and technology contexts of this developing country. The freely available spreadsheet software and the usefulness of it may even discourage migration to customised software, especially in the cases of small and medium sized microfinance organiza­tions. The survey also reveals that besides the formal and information systems discussed above, 100% of microfinance organizations use mobile phones in their microfinance programs.

Use of ICT: Sectoral IS

Although the microfinance sector of Bangla­desh is an important sector of the country that has passed more than three decades with a large number of microfinance organizations covering about one-third of total rural households of the country (Ahmed and Hakim, 2004), yet there is no sectoral ICT-based information systems in place. However, the case study observes that the microfinance organizations provide periodic reports on microfinance operations to PKSF and MRA, CDF (Credit and Development Forum) and MIX (a Washington based international in­formation exchange centre for microfinance) on a regular basis.

Microfinance organizations that get funding from PKSF must send monthly reports to PKSF formally using predefined paper formats. Besides, the paper-based reports most of the microfinance organizations also send operational data using PKSF-provided spreadsheet files through email to PKSF. After receiving the data PKSF pro­cesses and analyses it, and uses it for monitoring, supervision and other administrative purposes. All the microfinance organizations working with the licence from MRA send six-monthly reports manually to MRA. MRA uses these reports for regulation-related activities. Most of the micro­finance organizations also send yearly summery reports to CDF that the CDF uses for preparing ‘Bangladesh Microfinance Statistics’ as an an­nual publication of CDF. Some microfinance organizations also send microfinance operational data electronically to MIX and this is used for preparing global microfinance statistics and for exchanging information among the microfinance organizations all over the world.

In 2004 PKSF initiated the development of a credit bureau database with financial support from the World Bank. Application software was devel­oped and hardware was procured for the systems.

The systems were not finally successful because of the problem of backward linking with the cli­ent databases of microfinance organizations that were manual in most cases (World Bank, 2010).

Factors Hindering the Use of ICT in Microfinance

It can be seen from the discussion of above section that although the microfinance program of B angla- desh is one of the largest covering microfinance of the country but the use of ICT in information systems of microfinance is still remarkably low. This section looks into the major factors that hinder the use of ICT in microfinance of this developing country.

Financial Issues: In a recent survey a con­siderable number of microfinance organizations mentioned that they did not computerise their information systems because of the financial problem as a primary reason (Mia, 2013). The find­ings of this study show that most of the small and medium sized microfinance organizations are not financially strong. These organizations are highly dependent on loan money for their microfinance operations. Due to financial constraints, these organizations tend to be less interested in spend­ing significant amounts of money on ICT from their microfinance capital. Poor performing small and medium sized microfinance organizations of the country are especially constrained financially. The management staff of small microfinance organizations perceived that those organizations that have a small number of branches can man­age their data with manual information systems. They stated that small organizations cannot af­ford the costs of ICT-based information systems. Some organizations speculate that they will get more return in a shorter time if they invest their money in microfinance instead of investing it in ICT. Some are more interested in capturing new geographic areas for microfinance operations rather than investing in ICT.

Scarcity of IT Firms and Experts: A consid­erable number of organizations mentioned the scarcity of IT firms and experts in the country as one of the strong barriers to computerisation (Mia, 2013). The scarcity of IT firms and experts who are grounded in both technology and microfinance is one of the factors that hinder the use of ICT­based information systems for microfinance. The working processes and procedures of microfinance differ from organisation to organisation. Due to the lack of standardised processes and procedures of microfinance, developing an information system that could be used in all organizations is difficult. IT firms or professionals with the knowledge and skills for working on the information systems with heterogeneous work processes and procedures tend not to develop in the country. IT professionals possessing experience in the working processes and procedures of microfinance are also rarely found within the general IT industry of the country.

Electricity andICTInfrastructure Problem: As a developing country the problem of electricity, both in terms of area coverage and the quality of supply, is a common phenomenon in Bangladesh. At present, a considerable portion (about 40%) of the country is not covered by the electricity network (Bangladesh Government, 2010). Even in the areas where there is network coverage, there is a significant amount of interruption in the sup­ply of electricity throughout the year. It was also observed that the Internet bandwidth tends to be weak in most parts of the country. More recently, some mobile phone operators have been providing Internet services through Internet modems, but the available bandwidth is not yet adequate for running on-line web-based information systems smoothly as it was observed during field visits in different parts of the country. These fraught issues with the lack of power supply and the inadequate ICT infrastructure within the country discourage microfinance organizations from migrating from manual to ICT-based information systems.

Fear that they are Incapable of Replacing Manual Systems with ICT-Based Systems: Infor­mation systems for microfinance are distributed, complex, sensitive and non-standardised, that are used by the semi-literate staff members, and in many cases for the non-literate borrowers in underdeveloped rural and slum settings (Iyengar et al., 2010). Organizations are doubtful of their ability to replace their manual information systems with ICT-based systems within this organisational context. It has been observed that organizations take years to computerise the running transac­tion data and the reconciliations needed for this. For example, organizations like BRAC had to go through a rigorous reconciliation process taking a number of years when they started branch office computerisation.

Fear of the Inability to Maintain ICT-Based Systems: Microfinance is by nature a volatile program. There are frequent changes in program polices and operational procedures with which information systems need to comply (Iyengar et al., 2010). Microfinance program operations take place in a distributed manner, mostly in rural areas far from head offices. The maintenance of computer hardware and software with frequently changing requirements is difficult in remote operational areas. The microfinance operations cannot be stopped even for one day if the system is down. From the discussion with the IT staff, it appeared that the organizations, especially the mid-sized ones, fear that it would be very difficult for them to manage this maintenance-intensive remotely-located hardware and software, and so they stay with their manual systems.

Fear that Existing Staff will be Unable to Use ICT-Based Systems: Majority of microfinance staff members have very low educational backgrounds. In most cases they are recruited from the local area. These staff members are not familiar with ICT-based information systems. Management staff fear that most of their existing staff would not be able to work with ICT-based information systems. They also fear that if they try to replace the existing staff members with more educated personnel familiar with ICT, or capable of using ICT-based information systems, then it would have a negative impact upon their profitability, at least in the short term, as higher salaries would be needed for them.

Fears of Transparency: Microfinance organiza­tions are monitored and regulated by the funding agencies and the government regulatory author­ity on a regular basis. As it was also mentioned in World Bank (2010), a significant number of microfinance organizations do not want the ex­ternal funding and regulatory bodies seeing all their financial and operational conditions. The higher management thinks that if their informa­tion systems become digital then they would not be able to hide information from the monitoring and regulatory bodies. For example, PKSF does not provide finance if the organisation’s OTR (On-Time Realisation) is below a certain percent. MRA can call for disciplinary action and even cancel the operational licence of microfinance or­ganizations if they find irregular operations. Many organizations prefer to sacrifice the benefits of computerised systems and remain non-transparent to the external funding and regulatory bodies by using manual information systems.

APPROACHES TO MANAGING ICT

In the microfinance sector of Bangladesh, four broad approaches of ICT management can be observed. The approaches are discussed in the following paragraphs.

Managing ICTby the Organization: The micro­finance organization itself manages its ICT without taking direct help from outsiders. In this approach the organization develops software in-house usu­ally through opening a new department. People in this department also take care of the activities of system testing, implementation, hardware and network installation and maintenance. For example Grameen Bank, Proshika and ASA follow this ap­proach. In the case of Grameen Bank, rather than opening an internal new department it has given all the ICT management responsibility to a sister concern named Grameen Communications, for cost control and to keep ICT management entity separate from the microfinance operational entity for confidentiality and security reasons. ASA, another large microfinance organization has re­cently launched its own ICT project for the total computerization of its large information systems solely by its own internal ICT management depart­ment. This approach enables faster development and support, and more easily matches the IT-based systems with business processes, but prevents learning and adaptation of good practices of others.

Managing ICTby the Organisation and Exter­nal Firms: There are microfinance organizations who manage their ICT in a combined manage­ment approach involving external IT firms with their own IT team. Instances of this approach in the microfinance of Bangladesh are rare, but BRAC is a good example of this approach. BRAC operates the largest microfinance program in the world, giving most of the IT project management responsibilities to an external IT company. This company developed information systems for BRAC and implemented them in all branch offices of BRAC throughout the country. A team within the microfinance program works with the exter­nal IT company, to link between BRAC and the company. However, BRAC is currently taking the management of IT back from the external company in a gradual manner. Interestingly, BRAC started managing IT projects by itself at the beginning of IT use in the mid-80s, went for outsourcing in the late 90s, and now again is in the process of taking back to its own management.

Managing ICT by External Firms: A recent trend of total ICT management by external IT firms has been emerging in the microfinance sector. See­ing the benefits of using IT for microfinance, an increasing number of microfinance organizations are showing interest of using IT for their opera­tions. At the same time, given the large market in the microfinance sector and after a long process of capacity building, a few Bangladeshi IT firms have gained the capacity to develop information systems for microfinance. Some smaller-sized microfinance organizations have started using IT with this approach of IT project management. This is a very new trend of ICT management in this sector and its positive and negative aspects are not yet clear. With this approach a rapid growth of IT use in the sector is likely that did not occur with the other approaches. However, some instances of mishaps have been observed like non-matches of the system with the business process and inability to provide instant support by the external firms.

Managing ICT by Apex Funding Body: There was an initiative to manage IT projects by PKSF, the apex funding body of the microfinance sector in Bangladesh. This project started in 2002 with the aim of developing and implementing an IT-based information system for its partner organizations. PKSF started this project observing the lack of capability of its partners to develop their own systems. However, the apex funding body was likewise unsuccessful and abandoned in 2007, but for different reasons, including the inability to streamline the dissimilar business process of different partners, lack of adequate project plan­ning, and the appointment of members within the project for political reasons rather than their abilities.

USE OF MOBILE PHONES AND

Emarging Microfinane model

Previous sections discuss the use and the approach­es of managing conventional ICT in microfinance of Bangladesh. This section concentrates the use of mobile phones and the emerging mobile phones enabled microfinance operational model with its presumed implications on the fundamentals of conventional microfinance.

As an information and communication device the mobile phone in microfinance is seen to be an enabler of a new business model of future micro­finance of the world (Reed, 2013). Because of the growing coverage of the unbanked households by the cellular networks in the developing world, an increased outreach with a new model of low-cost microfinance through the use of mobile phones has been a growing expectation of the bodies concerned with global microfinance (Reed, 2013; CGAP, 2012; 2008; 2006). Statistics of the Interna­tional Telecommunication Union (ITU) shows that the subscriptions rate of mobile-cellular network in Bangladesh was 6.4% of total population in 2005, and after a very sharp growth it stood at 56.86% in 2011 (ITU, 2012). Because of the declining call charges and the wider availability of low-priced phone sets the use of mobile phones among the rural poor community is also remarkable in this developing country. It has been observed while staying in the field that all the microfinance staff members, including the frontline operational staff, have mobile phones and almost all of the borrowers can be reached either through their own or their neighbours’ mobile phones, even in rural areas of the country.

Pattern of Present Use

It has been observed in the case studies and survey that the use of mobile phones in microfinance of the country is remarkable. However, the pattern of using this mobile technology in the microfinance sector of the country is not the same as it is in M- PESA of Kenya (Reed, 2013) or similar models used in other developing countries to provide financial services for the unbanked individuals (CGAP, 2012; 2008). In Bangladesh, the use of mobile phones in microfinance is as yet mostly confined within the microfinance organizations for ‘operations management’ rather than using it in the borrower community for ‘transaction management’. Some of the current usage of mobile phones in microfinance organizations of the country is discussed.

The survey data indicates that about 40% of microfinance organizations, mainly the large and mid-sized ones, use mobile phones for microfi­nance data communication on a regular basis. The lower layer of the organizations send daily or weekly reports on important indicators such as disbursement, OTR (On Time Realisation), OD (Overdue), savings, savings withdrawals, and borrowers in-out status to the upper layer of the organizations either verbally or using texting (SMS) by mobile phones. The upper layer manage­ment collects the reports from different stations of lower layer of its jurisdiction, and records the data on a specified report format. Then all the collected reports are compiled and passed on to the upper layer using the same method by mobile phones. In most cases SMS is used as the staff of the middle layer travel a lot by motorcycle for supervisory purposes, and it is difficult for them to receive phone calls to receive the data from lower layers. Many organizations like BRAC do this reporting exercise daily in order to keep the upper layers of the organizations updated about these important indicators, as the formal reports go to the upper layers at one month intervals in most cases. However, the survey indicates that the use of mobile phones for this data flow between two monthly reports mostly happens within the large and mid-sized organizations. Locally based small microfinance organizations rarely practice this type of daily or weekly reporting on a regular basis.

As the survey revealed and it was observed in the case studies, mobile phones are heavily used in all microfinance organizations for operational and decision making purposes such as providing instant decisions and suggestions, following-up assigned tasks, getting and providing approvals, and letting the senior staff know about the work. Upper level managers assign tasks to the lower level staff and follow up the assigned tasks us­ing mobile phones. Managers of different levels provide instant decisions and suggestions about ongoing operations to the lower level managers and operational staff using mobile phones. The practice of using SMS by mobile phones for these purposes is also seen in some organizations as a way to keep records of the decisions and approv­als of the work.

Sometimes the mobile phones are used to su­pervise the operation of this highly distributed and supervision-dependent economic program, which is known as ‘mobile-supervision’. For example, using mobile phones, managers can try to check whether their subordinates are in the scheduled place of work by talking to other people who are supposed to be there, or asking some information which cannot be provided without being present at the work place. He said that this type of remote supervision practice can be seen in many micro­finance organizations of the country.

It has been observed in all cases that the com­munication between frontline operational staff and borrowers using mobile phones is a very common. The participants in the focus groups of all orga­nizations in the case studies described the use of mobile phones for various purposes such as to find out information about loan approvals and instal­ment payments, to provide suggestions, to inform about emergency issues, to call for meetings, and to communicate the reasons for non-attendance. Some focus group participants also said that they can get information for creditworthiness assess­ment of the new applicants, use of loans, even the information about members intending to abscond from neighbouring group members using mobile phones in a convenient and safer way.

Evidence of mobile phone use for more sophis­ticated purposes, such as to contact a call-centre by the borrowers of microfinance, is also observed in the country. BRAC started a call-centre for its microfinance borrowers mainly for two purposes - acknowledgement of loan repayment, and bor­rowers’ complaint management. Firstly, when repayment instalments are paid (especially for the bigger category of loans) and the repayment data is entered into the branch offices’ computer, an auto-generated signal is sent to the call-centre system located at the head office in Dhaka, and the call-centre system automatically sends an acknowledgement of the receipt of the repay­ment to the borrower’s mobile phone. Secondly, microfinance borrowers send their comments and complaints about the service to head office man­agement through call-centres, by mobile phone. The call-centre staff record these comments and complaints and submit them to the concerned head office management so that they can proceed with the issues.

It has been observed in the case study that a number of large and mid-sized microfinance organizations provide foreign remittance services to the borrowers and even non-borrowers using mobile phones. These organizations work in col­laboration with the international money transfer­ring companies or banks. The international money transferring companies or banks transfer the money from the foreign countries to Dhaka (the capital city of Bangladesh) and the partner microfinance organizations transfer the money from Dhaka to the remittance receiving households located even in the remote areas of the country through the local branches of the microfinance organizations using mobile phones. BRAC performs this PIN (Personal Identification Number) based services through mobile phones in one day as it has own collection points in most of the countries where Bangladeshi people work. However, this mobile phone based money transfer through microfinance organizations is limited to incoming foreign remit­tance. Outgoing transfer from country to abroad and transferring money from one person to another within the country through microfinance channels are not yet been permitted by the central bank of the country.

Premise for the Future Use

The usage of mobile phones in microfinance in Bangladesh discussed above denote that except for the auto-acknowledgement services of instalment repayment for the borrowers of bigger loans of one organisation, other usage of mobile phones are mostly related to the operation management of microfinance and the foreign remittance services. The use of mobile phones still remains mainly within the microfinance organizations rather than using it in the borrower community for transaction management. However, the present movement of providing financial services for the poor using mobile phones elsewhere in the developing world like M-PESA (Reed, 2013; CGAP, 2012; 2008; Hayes and Westrup, 2010) is very different from the usage of mobile phones in the microfinance organizations of Bangladesh.

The present movement of mobile phone- enabled financial services for the poor is based on a transaction management system in the client­server technology platform where the central computer ‘servers’ store and process transaction data which are connected to the mobile phone ‘clients’. Authorised users, both individuals and organizations can use mobile phones to perform transactions with other authorised users for differ­ent purposes such as deposit, withdrawal, money transfer, bills payment, and even salary and wages payment like a mobile branchless bank. However, when physical cash is required the users need to go to a local ‘banking agent’ appointed by the systems operators or to an ATM booth. This is a general purpose transaction management system usually run by cellular network operators where microfinance organizations or other financial service providers and their clients can join and per­form financial transactions (Reed, 2013; CGAP, 2012). This model is in practise in a number of developing countries including Kenya, Uganda, South Africa, the Philippines, India and Brazil (Reed, 2013; Hayes and Westrup, 2010; Duncombe and Boateng, 2009; Donner, 2008). It has been claimed that if the microfinance transactions are performed using this system then it would help increase outreach, reduce cost of operation, save time, bring transparency and minimise financial misappropriations in microfinance (Reed, 2013; Hayes and Westrup, 2010). These authors also argue that this mobile phone-enabled microfinance would radically change the conventional business model of microfinance.

As this model is not in practice in Bangladeshi microfinance, it was not possible to study the fea­sibility, usability and implications of the system in the context of the country during the field work of this study. However, with the experience and understanding from the seven months exploration of the microfinance sector of Bangladesh, some reflections about this mobile phone-enabled new model of microfinance in the contexts of the country are discussed below.

According to the mobile phone-enabled new business process of microfinance the branch of­fices of the conventional microfinance as the basic operational outposts would not be needed. The weekly meeting of microfinance borrowers with the operational staff of microfinance organizations would not take place for loan and savings instal­ments collection and development discussion. Instead, the microfinance borrowers would deposit their loan and savings instalments using mobile phones to the account of microfinance organisa­tion. In order to get a loan, usually once in a year, the borrower would either go to the local ‘agent’ appointed by the microfinance organisation or a loan disbursing branch.

It would be a vital transformation of the con­ventional microfinance operational landscape with deep implications for change in many areas of microfinance. On the one hand, the basic concept of people’s organisation (Yunus and Jolis, 1998) in the microfinance borrower community that is the borrowers’ group and sub-groups would be lost. The phenomenon of ‘individualism’ would emerge in place of the core concept of ‘collec­tivism’ in microfinance. The operational staff of microfinance organisation would not go to the borrowers community on a regular basis and the development discussion and demonstration would no longer be taking place. Hence, there is the pos­sibility of a drastic fall in social performance of microfinance (Yunus and Jolis, 1998; Anderson et al., 2002; Leatherman, 2011).

On the other hand, it would substantially mi­nimise the operational cost of microfinance. The staff involved in frontline operation and manage­ment, which accounts for more than 90% of total staff (CDF and InM. 2010) would be downsized significantly as the weekly instalments collec­tion work and the time consuming manual data processing are not required in the mobile phone- enabled model of microfinance. Microfinance organizations would be able to reduce interest rates significantly which has been a controversial issue in microfinance for long time (Ahmmed, 2004; Matsaert, 2004; Marilou, 2004). It would help save time for the borrowers to perform the repayment transaction in an automated way us­ing mobile phones. It may contribute to reducing financial misappropriations that usually happen in the operational level of conventional microfinance. As the loan disbursement and repayment data would be recorded in the central server, the long- discussed issue of client overlapping (Chaudhury and Matin, 2002; World Bank, 2010) would be identified. This new approach of mobile phone- enabled microfinance may address almost all the information related challenges that the World Bank study (World Bank, 2010, pp. 2-3) identi­fied without developing and implementing the World Bank proposed huge project of centralised ICT platform for the microfinance sector of the country. Even the organisational and sectoral reporting problem that the World Bank (2010) study identified could be done using the transac­tion data from the computer ‘servers’ connected with the mobile phone ‘clients’.

One of the prime objectives of mobile phone- enabled approach is to increase the outreach of microfinance (Reed, 2013; Hayes and Westrup, 2010). The mobile phone-enabled model might be helpful for ‘geographic outreach’ in the countries where accessibility in the remote areas has been a challenging aspect for microfinance interven­tion. In the case of Bangladesh the ‘geographic outreach’ is not an issue. The existing microfinance organizations cover almost all areas of the country (CDF and InM, 2010). However, there is an issue of ‘poverty outreach’ in Bangladesh. There is a possibility of more exclusion of the very poor seg­ment of population in this technology depended approach in the context where a tendency of exclusion of this segment is already present in Bangladesh. However, further work is needed to examine how the mobile phone-enabled new approach of microfinance may affect the issue of ‘poverty outreach’ of microfinance in Bangladesh.

Mobile phones are already in the hands or within the reach of microfinance borrowers of Bangladesh. Coverage by cellular networks is available in almost every corner of the country. Mobiles phones can be used with very low tariffs, and low cost phone sets are available in the country. Given these circumstances, thorough research on the assumptions and propositions discussed above needs to be conducted in Bangladesh. Conducting pilot studies within the frame of action research methodology, involving cellular network opera­tors, microfinance organizations and borrower community, may help develop a suitable model of mobile phone-enabled microfinance in the demo­graphic, organisational, technology and the socio­cultural context of Bangladesh. Alternative ways to address the presumed negative implications as mentioned above might also be found for this promising new way of microfinance intervention.

CONCLUSION

It is observed that although the use of ICT in microfinance started long ago in Bangladesh but the extent and intensity of the use have not been significant in the socio-economic, infrastructure and technology context of this developing country. The nature of human resources in microfinance, and the unstandardized and distributed nature of the operational model of this development program have also been hindering the use and effective management of ICT in this sector. Given the growing coverage of mobile phones even in the borrower-base of microfinance, it is likely to transform the conventional microfinance operational model into a mobile phone-based transaction management model of microfinance in near future. The lower operational cost, less time involvement for the borrowers and lenders and grater outreach of this mobile phone-enable microfinance transaction model would also be the motivational factors to promote this model in Bangladesh. Consequently, the conventional ICT in the field level would mostly be replaced by the mobile technology for the program. However, besides different financial and operational advan­tages of this emerging model, the risk of ignoring the fundamental social side of this development program is there in this model. Thorough studies on the mobile technology based operational model of microfinance and implications ofit on the social side of the program should be carried out involv­ing microfinance organizations, cellular network operators and borrowers. Then the approach of managing ICT would also take different shape accordingly with the vital changes of the use of ICT for this development program.

REFERENCES

Ahmed, S., & Hakim, M. A. (Eds.). (2004). Attacking poverty with microcredit. Dhaka, Bangladesh: Palli Karma-Sahayak Foundation, University Press.

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KEY TERMS AND DEFINITIONS

Conventional ICT: Information and Com­munication Technologies that have been in use for a considerable period of time are sometimes termed as conventional ICT. For example, per­sonal computers and associated software, printers, internet, traditional communication devices etc.

Microfinance: Microfinance is a development programme that aims to improve the economic and social life of people in poverty. It mainly provides small amount of money to poor households as loans without collaterals for income generating activities. Microfinance programme also involves the households in a process of social develop­ment besides the economic activates. In terms of coverage, microfinance is one of the largest poverty interventions that reach about200 million individuals and their families around the world.

Mobile Technology: Information and Com­munication Technologies that are used with mobile devices for input and output purposes. In this chapter the term ‘mobile technology’ is used for the mobile phones and similar type of devices which can be used for the purpose of financial transactions in microfinance operations rather than using stationary ICT solutions for microfinance.

Outreach: The term outreach is used to mean the number of people covered into the microfinance programme operations. Household members of the individuals who are covered by the microfinance programme operations are also treated as outreach of the programme.

Poverty Alleviation: It is the prime objective of microfinance programme intervention. Especially in the developing countries a considerable propor­tion of the population live in poverty. Microfinance intervention is carried to help them come out of poverty through creating self-employments which is termed as poverty alleviation.

Poverty Outreach: Coverage of very poor households by microfinance intervention is re­ferred to be the poverty outreach of the programme. For example, Microfinance Summit Campaign reports that about200 million individuals and their families are covered my microfinance programme but the poverty outreach is about 175 million in the world.

Social Performance: It is believed that try­ing only for economic development of the poor households does not work. Besides the economic development social development is essential. Oth­erwise, economic development may not persist. For this, activities for the social development of the poor household and their society are embed­ded in microfinance programme design. The social performance of microfinance programme is measured considering the intensity and the ef­fectiveness of the social development activities of the programme. Sometimes this term is also used to denote the overall mission and achievements of a microfinance programme intervention or a microfinance organisation.

This work was previously published in ICT Management in Non-Profit Organizations, edited by Jose Antonio Ariza-Montes and Ana Maria Lucia-Casademunt, pages 146-160, copyright 2014 by Business Science Reference (an imprint of IGI Global).

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