Helping MFIs Make Better Technology Choices: CGAP releases new IS software reviews

October 1, 2009    

Thinking of getting new information systems (IS) software for your microfinance institution (MFI), but don’t know where to start? With more than a hundred programs to choose from, selecting a software solution can be a daunting task. But thanks to CGAP’s new software reviews, it just got easier. CGAP has added 15 new product evaluations to its collection, with 10 more being released in January 2010.

Why do MFIs need information software?
With the use of computers and the software applications that run on them, much of an organization’s information management – gathering, storing, tracking, retrieving and using information – is now automated. When implemented and managed properly, information systems can help MFIs improve operational efficiency; reduce approval time for loans and other products; evaluate performance; better predict cash needs; reduce time spent generating reports for regulators, donors, and investors; lower costs; and improve customer convenience. But selecting the right software is key.

The Software Reviews
The IS Program, a joint initiative of CGAP and the EU/ACP Microfinance Programme, evaluates products to help MFIs make sense of the many options out there – its section on Software Listings profiles more than 85 products available for purchase.

Conducted by a team of independent consultants, the Software Reviews are a more in-depth analysis based on information provided by the vendor, a series of test cases performed during a demonstration of the product, and user feedback from at least three MFIs. Of the 15 new reviews just released, some are updates to reviews conducted between 2002 and 2006, and others are products being evaluated for the first time.

“All of the products reviewed offer a basic loan management module,” says CGAP expert Lauren Braniff. “But most also offer additional modules to help MFIs manage deposits, money transfers, insurance, and other products. Many are also now offering delivery channel options to help MFIs use mobile phones, personal digital assistants (PDAs), and point-of-sale (POS) devices to conduct transactions in the field.” New products and updated versions of existing products come onto the market on a regular basis.

To further help microfinance institutions decide just which technologies are right for their specific needs, the IS Program also offers support in the form of the IS Fund. Some of the Funds’ services include financing the development of a technology strategy, and technical support for the selection and implementation of new software solutions. For example…
One product newly reviewed by CGAP is Bankers’ Realm, which faired reasonably well for medium to large MFIs.

Some pros of this software include:

• A wide range of functionality (it not only works not only for savings and loans, but for POS and mobile phones as well)
• The option to use a web-based version.

Some cons of the software include:

• Small MFIs may find it too complicated
• It is only available in English and French.

User feedback ratings range Banker’s Realm from good to excellent and the majority of its users are located in sub-Saharan Africa. For functionality, Bankers’ Realm gets four stars for ease of use, three stars for its management reporting, and four stars for technical capabilities.

There’s still room for improvement
Quality of service
“While we’ve seen growth in the number of products offered and an increasing range of functionality,” says Braniff, “User surveys still reveal problems with the quality of service received from vendors - many products still have a way to go.” Bigger MFIs have a large range of quality products to choose from, but Braniff says: “The smaller MFIs are still having a hard time finding a quality solution at a price they can afford.”

Cost
Cost is also a major obstacle. CGAP used three pricing cases to get an accurate picture of what vendors charge because it's often difficult to tell from the licensing fee. These revealed huge variations in costs among vendors. In one scenario, CGAP found a price range from US$15,000 to US$350,000. “With such difference in prices,” says Braniff, “it's really important for MFIs to shop around. Many MFIs simply purchase products they hear about from other MFIs in their country.”

The initial investment in IS software, along with on-going maintenance costs, are still prohibitive for many small MFIs. To address this, some vendors are starting to offer web-based solutions, in which the vendor maintains the software and database that the MFI accesses over the Internet. “But there still seems to be room for innovation in how these products are delivered,” says Braniff. “Many, many small MFIs would benefit from better ways to manage their information, but the market doesn't yet seem to know how to serve this group.”