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Impact Assessment of Technology Adoption in Microfinance in India Page 1 Impact Assessment of Technology Adoption in Microfinance in India B L Mishra Dr. Manesh Chowbwy Centre for Microfinance Research Bankers Institute of Rural Development Chandragupt Institute of Management, Patna

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Impact Assessment of Technology Adoption in Microfinance in India Page 1

Impact Assessment of Technology Adoption in

Microfinance in India

B L Mishra

Dr. Manesh Chowbwy

Centre for Microfinance Research

Bankers Institute of Rural Development

Chandragupt Institute of Management, Patna

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Impact Assessment of Technology Adoption in Microfinance in India Page 2

CONTENTS

SR. NO. TOPIC PAGE NO

Contents i

List of tables ii-iii

List of graphs and exhibits

iii

List of abbreviations

iv

Executive summary

vi-xvi

1. Introduction

1-8

2. Methodology 9-13

3.1 Adoption of modern technology in microfinance institutions and

banking for financial inclusion in India and other countries

14-59

3.2 Computerisation in banks 60-71

3.3 Use of various technologies by selected banks and mFIs 72-75

4 Factors affecting Technology Adoption in Microfinance

76-89

5.1 Awareness and impact of modern technology in microfinance

90-100

5.2 Awareness and impact of modern on microfinance and bank

clients

101-148

6 Management information system in Microfinance

149-152

7 Strategy for penetration of technology based products and

services

153-160

8 Suggestions and Recommendations

161-165

9 Bibliography

166

Annexure

I Legal status of the institutions

167

Annexure

II Sources of Fund

169

Annexure

III No. of staff in banks and mFis

170

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Annexure

IV Outreach of the institutions

171

Annexure

V Various technologies used by banks and mFIs

172

Annexure

vi

OFFICES OF COMMERCIAL BANKS IN INDIA from 2005

TO 2009

173

Annexure

VII

STATE AND POPULATION GROUP-WISE DISTRIUTION

OF OFFICES OPENED BY COMMERCIAL BANKS as on

March, 31, 2009

176

Annexure

VIII Status of National Electronic Fund Transfer (NEFT)

177

ANNEXU

RE IX Nation-wide network of banks as on 31 March 2009

178-182

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LIST OF TABLES

Sl. No. Topic Pages 3.1 Adoption of modern technology in microfinance institutions

and banking

16

3.2.1 Status of Computerization in Public Sector Banks as on 31

March 2009 in percentage terms.

60

3.2.2 Computerization in Public Sector Banks (As on March 31,

2009)

64

3.2.4 Branches and ATMs of Scheduled Commercial Banks (As at

end-March, 2009)

66

3.2.5 Branches and ATMs of Scheduled Commercial Banks

(Continued) (As at end-March 2009)

68

3.2.6 Finance Indicators for India, 2001-08 71

3.3.1 Officials response on use of following technology 73

4.1.1 Factors that affect the adoption of technologies 76

4.1.2 Reasons for not using the following technologies 79

5.1.1 Awareness regarding following technology 82

5.1.2 Changes on cost structure they have experienced after

incorporating technology

83

5.1.3 Changes on outreach delivery after incorporating technology 84

5.1.4 Ranking for the Benefits of Technology 85

5.1.5 Cost of adoption of different technologies 86

5.1.6 Problems faced by mFIs and banks in adoption of technology 87

5.2.1.1 Age wise classification of clients 89

5.2.1.2 Education received by clients 92

5.2.1.3 Gender-wise classification of the clients 93

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Sl. No. Topic Pages 5.2.1.3 Marital Status of the clients 93

5.2.1.4 Social group wise classification of clients 94

5.2.1.5 Family Size of the clients 95

5.2.1.6 Income wise classification of clients 96

5.2.1.7 Occupation wise distribution of clients 97

5.2.2.1 Clients response on Awareness regarding following technology 98

5.2.2.2 Clients response about the use of technology 99

5.2.2.3 Facilities for which the technology are being used 100

6.2 Microfinance and Banking technology providers in India 104

6.3 Software used in the various Banking and MFI institutions 1109

LIST OF GRAPHS & EXIHIBITS

Sl. No. Topic Pages

Figure 6.1 MIS technologies employed worldwide

96

ABBREVIATION

ATMs Automated teller machines

ACH Automated Clearing House

BC Business correspondent

CA Correspondent Agent

CD Cash Dispensers

CGAP Consultative group to assist the poor

CRDB Co-operative Rural Development Bank

CSC Common Service Centre

FOCCAS Foundation for Credit Community Assistance

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FINCA Foundation for International Community Assistance

GCC Gulf Cooperation Council The

GK Grameen Koota

GSM Global System for Mobile Communications

GXI G-Xchange Inc

ICICI Industrial Credit and Investment Corporation of India

ICT information and communication technology

JCS Jitegemea Credit Scheme

LFIs Local Financial Institutions

mFIs Microfinance Institutions

MITRA Mobile Based Information and Transactions

MFT Micro development Finance Team

MGNREGA Mahatma Gandhi National Rural Employment Guarantee Act

NRI Non- Resident Indians (NRIs).

OIBM OPPORTUNITY INTERNATIONAL BANK OF MALAWI

OTC Over-the-counter

PDAs Personal Digital Assistants

POS Point of Sale

PRODEM Fondo Financiero Privado

RBAP Rural Bankers Association of the Philippines

RTS Remote transaction system

SBI State Bank of India

SECDEP Saint Elizabeth Community Development Enterprise Philippines

SHGs self-help groups

TAD Text-a-Deposit

UML Uganda Microfinance Limited (UML)

UMU Uganda Microfinance Union

USAID United States Agency for International Development

USSD Unstructured supplementary service data

VSAT Very Small Aperture Terminal

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Executive Summary

Microfinance institutions in India face a number of constraints in trying to serve the poor. Many

of these constraints can be linked to insufficient availability and use of technology. There is no

reporting mechanism that correctly captures performance data. Information on the financial and

operational performance of microfinance institutions (MFIs) is paper-centric and not timely,

while data are not complete and cannot be independently verified. This situation is detrimental to

MFIs, microfinance clients, and microfinance industry regulatory bodies. Paper-based operations

consume a significant amount of loan officers‘ time. There is not, in most MFIs, a timely

connection between the head office, the branch offices, and the loan officers in the field due to

lack of, or incomplete use of, appropriate technology applications. Technology can help

microfinance institutions to reduce costs, improve efficiency, and increase outreaches. Modern

technology based solution proves proficient in enabling micro financing institutions to

conceptualize, develop and operate projects for financial inclusion.

Thus there are only few studies explaining impact of technology adoption in microfinance

institutions in India. The need remains, however, to examine the use of various technology

products and channels in the delivery of micro finance in India. In Bihar there is hardly any study

to understand local technological and socioeconomic environment to understand the adoption

processes of modern technology. The current study ―Impact Assessment of Technology

Adoption in Microfinance in India‖ is an attempt in this direction.

The objectives of the project are stated as follows:

To review presently available technology for microfinance (for delivery channels and

MIS) in India. Extent of usage of modern technology in Indian Microfinance. Compare

the same with other countries based on secondary data.

To analyze the factors influencing the use of technology in microfinance in India.

Compare the same with other countries based on secondary data.

To analyse awareness about modern technology among MFIs and bankers, compare the

impact of use of technology on cost structure, outreach and delivery efficiency,

adaptability etc. Separately for banks and MFIs.

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Management information system on microfinance by banks and awareness of this among

bankers.

To formulate the strategies for penetration of technology based microfinance products

and processes.

Keeping the broad aspects of the study, two sets of questionnaires were prepared for Banks

officials & mFIs officials and clients. Stratified random sampling was used for the study. The

primary data were collected from 10 banks situated in Bihar and 20 mFIs from Bihar, Andhra

Pradesh, Orissa, Karnatka, West Bengal and Gujrat. Twenty clients each were selected from 10

banks and 10 mFIs.

Advanced and specialized tools like SPSS software were used to ensure authentic data analysis.

Cross-tabulation, comparison and processing were done to get detailed insights.

Major findings of the study are follows

Fully computerized public sector bank‘s branches were 95.7% of total branches which

81.4% branches were under core banking solution. Out of 171 banks 95 banks in the country

did using NEFT mechanism for transfer of funds constitutes 55.56% of the entire banking

system NEFT facility is still out of reach of the vast section of economy.

In private sector banks percent of ATMs to branch was three times as compared to public

sector banks. There was large variation amongst private banks in terms of percent of

ATMs to branches. Highest percent of ATMs to branches was found in Axis bank

(457.4%) followed by ICICI bank (334.5%) and HDFC bank (234%).

In India various experiments of technology use in micro financing and financial inclusion

has been attempted. Few examples are ICICI Bank‘s partnership with FINO, Business

Correspondents (BC) model- ICICI, ICICI Bank - I-Express, HDFC Bank financial

inclusion programme, SBI ties up with OXIGEN, Technology Assisted Financial

Inclusion- by BASIX, Dhanna X, E-Docs and real time monitoring by Equitas, mobile

banking by Eko financial services as business correspondence of SBI and ICICI, These

organizations use various types of technology which had helped micro financing and

financial inclusion.

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In other countries, ATM networks are being rolled out by a number of banks and have been

tested by a handful of microfinance institutions as well. MFI clients in the Dominican

Republic can even access international ATM networks. Many of mFis has stated using

technology eg. Smart card, mobile banking, PDA etc.

Banks officials were generally more aware about the various technologies than the MFI

officials. Majority of the officials surveyed, were of the view that usage of technology have

reduced the transaction cost, total cost and bad debts. While most of them also said that after

adoption of technology they have experienced increased return on fund, productivity per

employee and productivity per branch. Technology had helped them to satisfy their clients

in better manner through proving quick transaction, loan amount assessment, processing of

loan, transfer of funds and other financial services. There was improvement in

disbursement, average debt per borrower, recovery % because monitoring of borrowers

became faster than earlier. Officials were not able to quantify the impact and some were not

clear about actual impact.

Availability of finance/capital and technological awareness were the major factors that

affected the adoption of technology in their organization. 40% of the bank officials and 50%

of the MFI officials ranked availability of finance/capital as the main factor affecting the

adoption of technology. The factors which were least important according to the officials

were Government regulation, demand of customer and degree of diffusion of technology.

Major technology provider to microfinance institutions are RM IT solution, Hyderabad,

Jayam Solution, Hyderabad, BASIX /Sathguru Hyderabad, Elitser IT Solutions,

Hyderabad, Force ten Technology, Kolkata, Graditum IT, Bangluru, Craft Silikan,

Bangluru, Surya Software Solution, Bangluru, Financial Information Network &

Operations Ltd, Zero Mass foundation, Kredits, USA, Bangalore (In India), Snowwood,

Chennai, Surya Software Systems, FINO, Mumbai, Eko India Financial Services Pvt. Ltd,

New Delhi, Eko India Financial Services Pvt. Ltd, New Delhi, ClassifEye's solution etc.

That there are various types of management information softwares used in various

microfinance institutions in India and abroad. There is no uniformity of the softwares. These

are location specific and designed according to need of its local and regional customers.

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Various management information systems used by various microfinance institutions are

South Asia major Apparent Microfinance Manager, Common Cents 101 Micro Finance

Software, Southtech Ascend Banking, BEACON, IMP@CT, BankSoft, W-Bank,

MFASYS-Mobile Enabled Micro Finance, Micro Financer Standard Edition, ThemeproTM

Universal Micro Finance Solution (UMFS), Finance Solutions, McFinancier, Microfin360.

The various software used in Africa are Delta-Bank, e-Finance, El Mohassil 1.3, ELOGE

BANK, Delta Loan Tracking System, eMerge 1.0, EVOLAN PACK for Financial

Companies, Fin@ncia, FINCORESOFT, FinnOne Loans, GLOBAL BANK, Kredits

5.5503, Kredits 5.5539, LMS (Loan Management System, Loan Performer, Loan Tracker,

Loan Traking System (LTS), M2, Margill Loan Manager (MLM), MaxiSoftCB Banking

Software, MBWin - FAO-GTZ MicroBanking System, Microbank Information System

2.00, MICROFINA, Microfins, Mifos, MLAS (Microloans Administration System),

Octopus Micro Finance Suite.

In Latin America major software used are BANTOTAL COBIS, Conexus, CoopLeader,

eSIACOM, eConx, Emortelle, SIFCO, Topaz Microfinance, Orion, SIMCO PLUS, eConx,

SIFC Net. In North America the various microfinance institutions were using various kinds

of software. major software used are Mercury, Down Home Loan Manager 2.05, SYSDE

BANCA, Mimota etc.

In India different mFIs used different MIS softwares. FIMO developed by Jayam Solution

was major MIS software used by different mFIs. Other software were FAMIS developed by

BASIX and Sathguru, Hyderabad, BIJLI developed by Force ten Technology, Kolkata, mf

expert developed by RM IT solution.

Recommendations

Infrastructure support like increasing power supply and increasing connectivity may be

adequately provided for increasing use of technology. Capacity of micro financial

institutions has to be increase by providing them technical and financial support.

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Awareness about technology should be increased by capacity building of different

stakeholders.

Due to high initial cost micro financing institutions were not able to adopt latest

technology. Costs can be shared by assisting technology provider with financial support

which will reduce the cost by scaling up of technology. mFIs may get technology at

subsidized/ reduced costs. Incentive should be provided to mFIs who adopts technology.

It will help them in to scale up their business.

Appropriately staffing should be done by the mFIs to handle latest technology.

Recruitment of technical staff and their regular training on updates of latest technology

would help in adoption of technology.

Regular feedback should be provided to the service provider regarding functioning of the

software and other technology tools.

Requirement of mFIs differ amongst MFIs according to size, organizational form,

technical competency and adequacy of the technical staff. Tailor made solution should

be provided according to the need of mFIs.

Systems should be introduced to make for transparent reporting regarding their loan

portfolio and produce reports. It will help mFIs in timely and appropriate decision

making.

In choosing an appropriate technology, it is highly recommended that MFIs get their core

MIS right first before building any kind of delivery system on top of it. Technology

provider should address the problem of mFIs promptly.

Research done on mFIs about those who have successfully introduced new technologies

should share the finding with others which will help in penetration of technology.

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CHAPTER I

INTRODUCTION

Financial inclusion is delivery of banking services at an affordable cost to the vast sections of

disadvantaged and low income groups. Unrestrained access to public goods and services is the

sine qua non of an open and efficient society. As banking services are in the nature of public

good, it is essential that availability of banking and payment services to the entire population

without discrimination is the prime objective of the public policy. In India the focus of the

financial inclusion at present is confined to ensuring a bare minimum access to a savings bank

account without frills, to all. Internationally, the financial exclusion has been viewed in a much

wider perspective.

According to the United Nations the main goals of Inclusive Finance are

i. Access at a reasonable cost of all households and enterprises to the range of financial

services for which they are ―bankable,‖ including savings, short and long-term credit,

leasing and factoring, mortgages, insurance, pensions, payments, local money transfers

and international remittances. Sound institutions, guided by appropriate internal

management systems, industry performance standards, and performance monitoring by

the market, as well as by sound prudential regulation where required.

ii. Financial and institutional sustainability as a means of providing access to financial

services over time

iii. Multiple providers of financial services, wherever feasible, so as to bring cost-effective

and a wide variety of alternatives to customers (which could include any number of

combinations of sound private, non-profit and public providers).

Thus having a current account / savings account on its own is not regarded as an accurate

indicator of financial inclusion. There could be multiple levels of financial inclusion and

exclusion (V.Leeladhar, 2005). ―Financial inclusion may be defined as the process of ensuring

access to financial services and timely and adequate credit where needed by vulnerable groups

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such as weaker sections and low income groups at an affordable cost.‖ (Rangarajan Committee

Report 2008), Out of 6 lakh villages, just 30,000 had been provided with banking services —

mere five percent of total villages in the country (S. Karuppasamy, Executive Director, Reserve

Bank of India (RBI), June 2011). 134 million households are financially excluded, which is 60

percent of country‘s population. (Microfinance Focus, January 2009). Moreover, Financial

Exclusion in Urban India is about 44 percent where as exclusion in Rural India is about 76

percent. National Rural Financial Inclusion Plan has been launched with a clear target to provide

access to comprehensive financial services to at least 50 percent of the financially excluded

households (approximately 55.77 million) by 2012 through branches of Commercial Banks and

Regional Rural Banks. The remaining households are to be covered by 2015. Fund for financial

inclusion of about Rs. 500 Crore to meet cost of technology adoption was set up by Finance

Ministry in 2007-08. (Frost & Sullivan’s Roadmap for IT-Enabled Financial Inclusion, 2010).

According to Frost & Sullivan (2010) ―On one hand, there are 234 million mobile users today –

the CAGR since 2001 is 87.9 %. While each mobile phone is an indicator of connectivity, it can

be presumed to be an enabler of Financial Inclusion. Since the number of mobile phones

currently is more than the number of borrowers from the banking system, it is envisaged that a

convergent technologies involving Information Technology and Telecom would be the most

efficient vehicle for achieving Financial Inclusion.

Financial exclusion is most acute in Central, Eastern and North – Eastern regions – having a

concentration of 64% of all financially excluded farmers‘ households in the country. Overall

indebtedness to formal sources of finance alone only sector 19.66 % in these three regions.

(Rangarajan Committee Report, 2008). The topography in hilly terrains is such that banks

cannot open branches in every corner. Mobile banking as a technology is certainly an answer to

the growing demand for banking facility at the village level.

RBI has granted permission to transfer fund across various mobile phone service provider. Three

public sector banks have started mobile banking solution. SBI had partnership with EKO

financial services and Spanco system. Union Bank of India and Bank of India have started their

mobile banking services in Mumbai. The RBI‘s guidelines call for a two-factor authentication for

validation of a customer. Several MFIs today act as a business correspondent (BC) to reach areas

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where opening a bank branch is not viable. The bank through a BC can enroll clients; the clients

can be served by the bank using mobile banking thus fulfilling the objective and the spirit of

financial inclusion.

Microfinance institutions in India face a number of constraints in trying to serve the majority of

the poor. Many of these constraints can be linked to insufficient availability and use of

technology. There is no reporting mechanism that correctly captures performance data.

Information on the financial and operational performance of microfinance institutions (MFIs) is

paper-centric and not timely, while data are not complete and cannot be independently verified.

This situation is detrimental to MFIs, microfinance clients, and microfinance industry regulatory

bodies. Paper-based operations consume a significant amount of loan officers‘ time. There is not,

in most MFIs, a timely connection between the head office, the branch offices, and the loan

officers in the field due to lack of, or incomplete use of, appropriate technology applications

(www-wds.worldbank.org/.../528630PUB0link101Official0use0Only1.pdf).

Technology can help microfinance institutions to reduce costs, improve efficiency, and increase

outreaches (Lauren Braniff, 2008). Modern technology based solution proves proficient in

enabling micro financing institutions to conceptualize, develop and operate projects for financial

inclusion. It supports sector initiatives, which are aimed at enabling rural and remote un-banked

areas to enjoy the benefits of formal financial products and services. The entry of technology has

opened more options in the field of finance that lead to lower costs, greater efficiency, real time

information and better customer service. Micro finance offers a great, largely untapped market

for modern technology and a chance to make a big difference in outreach, sustainability and its

impact.

In a survey (CGAP, 2008), 62 financial institutions in 32 countries report using technology

channels such as automated teller machines (ATMs), POS terminals, and mobile phones to

handle transactions for poor customers. Some are using new technology to better serve existing

customers. But other institutions are using technology to develop ‗branchless‘ channels that

reach new clients in areas where setting up a bank branch may be too costly. The widespread

use of mobile has offered a gateway for handling financial transactions. After a number of years

where the innovative products in developed markets stalled, there are number of innovations that

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have found in developed markets. It was observed that that around 45% of existing microfinance

institutions still track and record their operations and accounting in excel sheets or even

completely manually.

Technology can reduce transaction costs and improve transparency in delivering financial

services, both of which can translate into increased access and lower costs for many lower-

income clients. Streamlined and automated processes allow financial institutions to extend

services to harder-to-reach and more costly clientele by replacing people and branches with

point-of-sale (POS) devices and branchless banking strategies. Technology undergirds the

management information and reporting systems that are essential for efficient financial service

delivery. Despite the appeal of advanced delivery technologies, relatively few financial

institutions have successfully deployed them to reach poor and low-income clients. Developing a

solid management information system still remains one of the most important tasks facing

microfinance institutions, particularly those scaling up. Challenges include the high cost and

limited availability of existing technological solutions, lack of widely available local technical

support to support MIS software, consumer adoption rates of technology, lack of basic

communications infrastructure in many countries, and inadequate policy environments.

(www.microfinancegateway.org/p/site/m/template.rc/1.11.48240/)

Adoption of technology is expensive for MFIs, while use of currently available technology does

not always correspond to gains in revenue or increases in productivity in the short term. Due to

non-use of appropriate technology applications, there is a lack of holistic, sector-wise data on

MFI borrowers and outstanding portfolios. MFIs are unable to share useful information about

clients with each other. This contributes to the persistent client overlap seen in the microfinance

sector (RBI, financial inclusion, 2008).

Branchless banking is a distribution channel strategy used for delivering financial services

without relying on bank branches. While the strategy may complement an existing bank branch

network for giving customers a broader range of channels through which they can access

financial services, branchless banking can also be used as a separate channel strategy that

entirely forgoes bank branches. ATM and Internet banking have been around in India for a

while. While both modes have had some success, penetration and use levels have been moderate.

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While ATMs offer convenience, they pose a perceived security threat in India given instances of

mugging around them. Senior citizens and women appear reluctant to use ATMs if they have a

choice to of the to a branch and withdraw money in safety. The security situation in India shows

little sign of improvement and therefore a large-scale proliferation of ATMs will remain a

challenge. Internet banking, on the other hand, relies on P C and Internet penetration. Estimates

suggest that there are approx 40 million Internet users that are expected to rise to 100 million

soon – despite this growth; penetration and use levels remain low, especially in non metro area.

Harma and Dubey (2009) stated that mobile banking, a symbiosis of technology and financial

services, is the hottest area of development in the banking sector and is expected to replace the

debit/credit card system in future. Unlike online banking, mobile banking has certain advantages

on its side. It would not attract much investment from the bank and would not need a change in

the existing infrastructure of the bank. Mobile banking has the potential to bring a whole host of

people that have no/little access to land lines/internet connections onto the electronic platform –

an innovative way to generate financial inclusion. To do so successfully will require customer

training, technology stabilization and managing carefully the ‗know your customer‘ issues.

(Microfinance Focus, 2009).

Management information system has become an essential part of microfinance institutions. The

MIS involves all aspects of gathering, storing, tracking, retrieving and using information within a

business or organization. The information system helps loan officers track their clients‘

repayment schedules and balances. It helps management assess the quality of the loan portfolio

and to monitor progress toward operational objectives. Management Information System

software can improve transparency and efficiency, lower costs, improve reporting, and allow

management to make more informed decisions. The right technology is invaluable in helping

microfinance institutions become better managed and more transparent institutions. Strong

information systems are the foundation of any financial institution. Yet many microfinance

institutions struggle with their systems resulting in inefficiencies which limit their ability to grow

and eventually take advantage of other technologies, such as branchless banking. A good back

office system lies at the core of every successful financial institution. In many cases, however,

MFIs struggle to generate accurate information and reports for themselves, funders, and

supervisors. This limits the soundness and efficiency of MFIs, reduces the government‘s ability

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to supervise the market, and in turn, negatively impacts the expansion of access to financial

services (Lauren Braniff, 2009). A study by the Consultative Group to Assist the Poor (CGAP)

in 2004 showed that just half of all MFIs around the world have automated information systems,

and those that do invest in technology spend duplicative resources on custom-built systems that

are extremely costly and difficult to maintain.

Jim Rosenberg (2007) stated that IBM, had been touting its foray into open source solutions,

will partner with Grameen Foundation to help expand its MIFOS solution for information

systems. Grameen and IBM noted that microfinance institutions were inhibited from extending

their reach because they lack a flexible, cost-effective technology infrastructure that enables

them to expand their operations to provide loans to more people and to develop new products

and services. Many MFIs are still using pen and paper or simple spreadsheets to process loans.

Outsourced core banking systems could increase the efficiency and capacity of microfinance

institutions (MFIs). MFIs, however, have been slow in adopting the use of outsourced core

banking systems. They are concerned about finding a system that works for their unique

situation, fear losing control over sensitive client data, and worry about security risks. Moreover,

they are not convinced outsourcing will lead to reduced costs (Jim Rosenberg, 2008).

Although there is plenty of literature on adoption of new technology, only a handful of studies

look specifically at the financial services industry. There is a general recognition of the particular

importance of financial innovation (e.g. Silber, 1975; Van Horne, 1985; Miller, 1986, 1992;

Faulhaber and Baumol 1988; Campbell, 1988; Siegel, 1990; Finnerty, 1992; Merton, 1992).

Empirical studies on the technology adoption in financial services have focused on the

introduction of automated teller machines (Hannan and McDowell, 1984, 1987; Sinha and

Chandrashekran, 1992; Sharma, 1993; Ingham and Thompson, 1993; Saloner and Shepard, 1995;

Gourlay and Pentecost, 2000, 2002; Hester et al., 2001), small business credit scoring (Akhavein

et al., 2001), video banking (Pennings and Harianto, 1992), teleprocess terminals (Escuer et al.,

1991) and cash dispensers (CD), Point of Sale (POS) and remote banking (Buzzacchi et al.,

1995).

Mark Pickens and Claudia McKay (2010) studied the data about 8 branchless banking services

M-PESA in Kenya and Tanzania, Banco Postal in Brazil, FINO in India, G-Cash and Smart

Money in the Philippines, WIZZIT in South Africa, and WING in Cambodia. They found 37%

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of active clients were previously unbanked. They also found that 5 of the 7 countries, branchless

banking serves more previously unbanked people than the largest MFI. Branchless banking is

scaling faster than MFIs. The branchless banking services needed 3 years to surpass the outreach

of the largest MFI in the same market, which on average operated for 15 years. (Branchless

Banking, CGAP, 2010).

It is quite significant that most of the studies are related to developed markets, e.g. US or

European banking markets. Arguably, this paucity in the literature needs to be addressed. Thus

there are only few studies explaining impact of technology adoption in microfinance institutions

in India. The need remains, however, to examine the use of various technology products and

channels in the delivery of micro finance in India. In Bihar there is hardly any study to

understand local technological and socioeconomic environment to understand the adoption

processes of modern technology. The current study ―Impact Assessment of Technology

Adoption in Microfinance in India‖ is an attempt in this direction.

Objectives of the study:

The objectives of the project are stated as follows:

To review presently available technology for microfinance (for delivery channels and

MIS) in India. Extent of usage of modern technology in Indian Microfinance. Compare

the same with other countries based on secondary data.

To analyze the factors influencing the use of technology in microfinance in India.

Compare the same with other countries based on secondary data.

To analyse awareness about modern technology among MFIs and bankers, compare the

impact of use of technology on cost structure, outreach and delivery efficiency,

adaptability etc. Separately for banks and MFIs.

To study Management information system on microfinance by banks and awareness of

this among bankers.

To formulate the strategies for penetration of technology based microfinance products

and processes.

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CHAPTER 2

METHODOLOGY

Both primary and secondary data were collected. The primary data were collected from various

stakeholders e.g. banks, mFIs, clients of banks and mFIs, technology providers.

For the first objective to review presently available technology for microfinance (for delivery

channels and MIS) in India, extent of usage of modern technology in Indian Microfinance and

compare the same with other countries based on secondary data, data were collected both from

primary and secondary sources. Secondary data were collected through various reports, news

papers, websites of microfinance and technology provider‘s organisations.

To analyze the factors influencing the use of technology in microfinance in India and compare

the same with other countries data were collected from above secondary sources.

For primary data collection two different sets of questionnaires were developed each for

Banks/MFI officials and clients. Pre testing of questionnaires / schedules was done. Based on

the pre-testing, questionnaires / schedules were modified. SPSS software was used to ensure

authentic data analysis. Cross-tabulation, comparison and processing were done to get detailed

insights.

For technology provider interviews were conducted to understand the operations.

Pretesting of questionnaire was done by taking 40 samples of different stakeholders.

Questionnaires were revised with the help of opinions and suggestions made by different

stakeholders.

Sampling:

The sampling method followed was purposive sampling. The primary data were collected from

10 banks situated in Bihar and 20 mFIs from Bihar, Andhra Pradesh, Orissa, Karnataka, West

Bengal and Uttar Pradesh. 20 clients each were selected randomly from 10 banks and 10 mFIs.

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The purpose of the selection was to analyse awareness about modern technology among MFIs

and bankers, compare the impact of use of technology on cost structure, outreach and delivery

efficiency, adaptability etc for banks and MFIs. The samples were taken from various region.

More representation was from South India because of availably of technology adopter

microfinance institutions.

The following microfinance institutions were selected.

1. Bihar Development Trust, Bihar

2. Trust Microfinance Services, Muzaffarpur

3. Disha Microfinance Pvt. Ltd. Gujrat

4. Nav Achetana Microfin Services Private Limited,

5. Mahashakti Foundation, M. Rampur Kalahandi, Orissa

6. Star Microfin Service Society (SMSS), Andhra Pradesh

7. Ushodaya Integrated Urban and Rural Development, Andhra Pradesh

8. Share Microfinance, Hyderabad, Andhra Pradesh

9. Agricultural Science Foundation, Hyderabad, Andhra Pradesh

10. Sambandh Finserve Pvt. Ltd, Hyderabad, Andhra Pradesh

11. SKS, Hyderabad, Andhra Pradesh

12. BASIX , Hyderabad, Andhra Pradesh

13. Spandan Sphoorty Finance ltd, Hyderabad.

14. Nano Financial Services India Private Limited Chennai, Tamil Nadu

15. Janlaxmi, Tamil Nadu

16. Gramin Koota, Karnatka

17. IDF financial service Pvt. Ltd, Karnatka

18. Ujjivan Finance Service Pvt. Ltd

19. Sanghamithra Rural Financial Services,

20. Bandhan Financial Services, West Bengal

Various banks were also selected to analysis the type of technology available with these

banks which help in financial inclusion.

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1. RIG, HDFC Ranchi

2. State Bank of India

3. Canara Bank

4. Uttar Bihar Gramin, Bank

5. UBI, Patna, Bihar

6. Syndicate Bank, Patna Bihar

7. UCO Bank, Zonal Patna

8. PNB, Patna, Bihar

9. ICICI Bank, Patna, Bihar

10. Samastipur Kshetriya Gramin Bank

Technology providers were selected to understand the various kind of technology available in

microfinance and their uses by various microfinance institutions.

The purpose of the selection these technology providers were to understand description of the

various technology, its uses and different microfinance institutions adopting their technologies.

They were interviewed to understand technology solution in microfinance.

1. RM IT solution, Hyderabad

2. Jayam Solution, Hyderabad

3. BASIX /Sathguru

4. Elitser IT Solutions, Hyderabad

5. Force ten Technology, Kolkata

6. Graditum IT Banglore

7. Craft Silikan, Bangaluru

8. Surya Software Solution, Bangaluru

9. EKO financial services

10. Zero Mass foundation

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Analysis of data:

The data collected were tabulated to facilitate easier sharing, referencing and analysis. Review of

available technology was done by analysing secondary information available on literature from

World Bank, Consultative Group to Assists the Poor (CGAP), Asian Development Bank,

Reserve Bank of India, NABARD, Microfinance focus journal, websites of different

microfinance and other financial institutions.

Use of various technologies by selected banks and mFIs were collected from primary and

secondary sources. Factors responsible for adoption of technology was collected and analysed.

Awareness about modern technology among MFIs and bankers were collected from

microfinance institutions and banks and analysed.

To study impact of technology, the use of technology was collected and their impact on cost

structure, outreach and delivery efficiency, adaptability were analysed separately for banks and

MFIs.

To analyse factors that affect the adoption of technologies the data were collected from 10 banks

and 20 microfinance institutions and analysed. The variables were identified and weighted

averages of response were calculated.

Data regarding Management Information System of banks and microfinance institutions were

collected and analysed. The secondary information regarding information was collected from

various sources and classified by various regions of the world.

Strategies for penetration of technology based microfinance products and processes were

prepared with feed back provided from different stakeholders.

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Chapterisation of report

Report is divided into following eight chapters.

Chapter I: Introduction

Chapter II: Methodology

Chapter III: Adoption of modern technology in Banks and microfinance Institutions

Chapter IV: Factors affecting Technology Adoption in Microfinance

Chapter V: Awareness and impact of modern technology in microfinance

Chapter VIII- Suggestions and Recommendations

Chapter VI – Management information system in Microfinance

Chapter VII- Strategy for penetration of technology based products and services

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CHAPTER III

ADOPTION OF MODERN TECHNOLOGY IN

MICROFINANCE

Technological advances have contributed to major improvements in the quality of financial

service delivery and have lowered transaction costs. Use of computers has reduced the time and

cost of dealing with transactions, clearing of cheques and screening of loan applicants. The

benefits are beginning to reach developing countries, but many rural communities remain

excluded. Buchenau (2003) reported that some MFIs are experimenting with technical

innovations to reduce operating costs and improve the quality of service in rural areas. A good

information system equips managers to make informed decisions and produce reliable reports

that follow recognized international and national standards. This transparency can also attract

funders and provide clients with immediate information about their accounts, thereby attracting

more customers.

The most important contribution of technology is lower operating costs. Researchers have tested

the relative costs of tellers and ATMs in several emerging market countries (including Brazil,

India, Kenya, Malaysia, Mexico, Nigeria, and South Africa). The comparison shows the potential

of cost reduction through technology, which is particularly important today as financial

institutions face increasingly competitive markets (CGAP).

The purpose of this chapter is to review presently available technology for microfinance and

banks in India and other countries.

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Rural cash handling options for MFIs.

Major technologies used by microfinance institutions and banks are ATM, Biometric ATM,

solar powered ATM, automated teller machines (ATMs) linked to ‗smart‘ cards and palm-top

computers for rural loan officers, IVR, mobile banking, POS, hand held devices, GRPS system,

mobile banking etc.

The data were collected from primary and secondary sources to analyse the various kind of

technology adopted by microfinance institutions in India and other countries.

3.1: Adoption of modern technology in microfinance institutions and banking

in India and other countries

Both primary and secondary data were collected from various sources to understated the various

technology adopted by banks and microfinance institutions in India and other countries and

presented in table 3.1.

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Table 3.1: Adoption of modern technology in microfinance institutions and banking for

financial inclusion in India and other countries.

Technology Banks/mFIs Partnership Uses

Smart card

Smart card

ICICI Bank Partnership with FINO Client identification

with biometrics

Client and agent

authentication with

PINs

Offline transactions,

including

withdrawals

Government of Bihar

financial inclusion, E

Shakti project

Glodyne Technoserve

SBI Zero Mass

PNB, BOI TCS

PRODEM,

BOLIVIA

Smart card and

POS devices in

GSM Network

Remote Transaction

System (RTS) at

Uganda Microfinance

Limited

Electronic passbook

Interest calculation

Mobile banking

ITZ Cash Tata DOCOMO Remittance

transactions and

Loan servicing Cashpor Microcredit

Varanasi

Atom technology

Reliance

communication

Atom Technology

SBI Eko financial Services

ICICI, SBI and

Centurion Bank of

Punjab

Eko financial Services Remittance

transactions and

Loan servicing

Smart

Communications,

Philippines

Faulu/Vodafone

Remittance

transactions and

Loan servicing

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(Tanzania,Kenya)

Brand Banking,

Korea

Remittance

transactions and

Loan servicing

K-REP BANK‘S

KENYA

Remittance

transactions

VISA Apple i Phone Remittance

transaction

Duch Bangla Bank Banal link and Citycell Remittance

transactions Loan

servicing

enda – Tunisia Mifos platform MIS

Safaricom‘s M-Pesa,

Pakistan

Tamer and Telenor Remittance

transactions

Mobile Branches SBI Madhya Pradesh,

India

AISECT Remittance

transactions and

Loan servicing

Equity Building

Society (Kenya)

Money transaction

Loan processing

Hand held Device

Hand held device

using GRPS

technology

Sanghmitra Rural

Financial Services

- Loan processing

Hand held device Putiskar, Udaipur Albertson Loan processing

Common service

centre - point of

sale (POS)

terminals and

information

technology enabled

kiosks,

HDFC bank -Jharkhand government Remittance

transactions and

Loan servicing

POS Teba Bank (SA)

FOCCAS

Loan servicing

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FINCA

Uganda Microfinance

Union.

Combination of

POS terminal and

magnetic strips

Correspondent

banking Model in

BANCOLAMBIA –

CONAVI in

Colambia and

Interbank in Peru.

Teba Bank (SA)

Loan servicing

Palm Pilot (a brand

of PDA)

Equity Building

Society, Kenya

Loan servicing

ATM

Prodem(Bolivia)

Innova (Bolivia)

PSHM (Alania)

Paynet (Kenya)

Banko Ademi

MEB Kosovo

Remiitance

transaction

Loan servicing

KIOSK Banking

Kiosk based

oxygen web

Retailers

SBI

-Oxygen supported by

Sahyog foundation

Customer acquisition

Product servicing,

disbursements,

and

collections

Kiosk banking - I InfoTech as BC Customer acquisition

Transfer to home

service –

remittance

facilities

Standard Chartered -Times of money Product servicing,

disbursements,

Banking

correspondence

with IGS – Hub

KBS bank IGS Customer acquisition

Product servicing,

disbursements,

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and spoke model and

collections

e- based remittance services

Green money

transfer

Tata Indicom - Remittance

transaction

SMS based

payment system

Iway media - Remittance

transaction

E- Remittance

service

ICICI bank I- express Remittance

transaction

Other technology

No frill account Axis bank SunTec's TBMS-F Remittance

transaction

IVR Edyficar (Peru) / Voxiva (Peru,

worldwide) Client information

access, and product,

account, or branch

information

Account transaction

E pass book &

authentication

device

ICICI bank Partnership with Vikas

Sahyogis‘

Client identification

System security

Solar Powered

Rural ATM

Vortex Engineering -

Mifos Software ASOMI Grammen foundation MIS

Mifos software Grameen Koota,

Banglore

Grammen foundation MISD

STEM

Technology,

Technology

assisted financial

inclusion

BASIX - Financial inclusion,

accounts opening

Person to person

financing platform

Dhann - X - Person to person

loaning

e-docs, Equitas -

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IT system Bank

2000

Equity Building

Society, Kenya

USSD in SMS like

format

G-CASH I-

Philippines

Globe telecom

Scoring

BancoSol (Bolivia),

Mibanco (Peru)

Banco Solidario

(Ecuador)

CMM Medellín,

CMM Bogotá

(Colombia)

Unibanka (Lativa)

LAPO (Nigeria)

Loan origination—

loan application

processing and

approval

Product servicing—

collections

Customer

retention—loyalty

programs

and incentives

Source: Primary and secondary data

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Smart Card

Smart Cards are emerging as a solution for microfinance institutions (MFIs) to easily keep

accounts and record loan transactions. Wallet-sized plastic cards with embedded computer chips

that can process information or simply store data. It uses in Client identification with biometrics

and helps in client and agent authentication with PINs. It also helps in office transaction and

withdrawals. It helps clients in repayments of their microloans. The smart card allows for

withdrawals, deposits, currency exchanges, money orders and other services. As a security

precaution, fingerprint images are stored on the microchip and are compared with those taken by

biometric scanners at the time of transaction. Since Smart Cards hold their information on the

cards (in the microchip), transactions do not require a transfer of information from a central

source; transactions can be entirely off-line, rendering telephone lines and fibre-optic cable

unnecessary. In addition, since smart card transactions can reduce some of the paperwork,

transaction times are much shorter, enabling loan officers to service more clients. Information

reconciliation/consolidation from the vendor/loan officers to head office can occur through

information transfers at regular intervals.

In many countries Smart card was used by several microfinance institutions. Prodem, a Bolivian

mFI, has conducted a pilot project using Smart Cards to replace much of the paperwork

previously needed for transactions. A savings account with a smart card uses microchip

technology. A card with an embedded microchip allows microfinance institutions to have saving

deposits without being on-line. The balance and account transactions are kept in the

microchip.One large advantage Smart Cards have over traditional ATM and credit cards (which

are also being used by MFIs) is their ability to store and track purchasing and transactional

histories. The fingerprint as a control method for the savings account was developed because

twenty-seven percent of our clients do not read or write. Most clients are women who live in

rural areas. In the past, many of their clients instead of signing credit contracts used their

fingerprint because they did not know how to write. This fact led to use this tool as a means of

identification and given the fact that no two fingerprints are alike, company could be assured of a

secure identification.

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Remote Transaction System (RTS) in Uganda Microfinance, supports both group and individual

lending, online and batch offline processing, and back office synchronization. The RTS is based

on the use of sturdy hand-held devices that can communicate over GSM cellular networks. This

solution was intended to become an industry standard, helped MFI reach isolated clients cost

effectively, and enable microfinance to reach a new stage of development. Combined with the

use of smart cards given out to clients and microfinance agents, the system allows MFI agents to

collect crucial financial data in the field and subsequently to transfer the data directly into the

MFIs‘ computerised financial management systems. The RTS eliminates the need to prepare,

transport, and enter hand-written reports, reducing costs for rural operations. In addition,

electronic collection of data raises client confidence in MFIs, as well as reducing fraud. Finally,

the system, if used by the industry as a whole, might allow MFIs to take full advantage of latent

synergies that exist among geographically and financially diverse institutions.

With prototype technology, the MFT implemented a pilot of the system in Uganda in partnership

with three MFIs active in this country. The three MFIs were Uganda Microfinance Union

(UMU), a cooperating partner of ACCION; the Foundation for International Community

Assistance (FINCA), and the Foundation for Credit Community Assistance (FOCCAS), a

collaborating partner of Freedom from Hunger. The difference in size and modus operandi for

each MFI has allowed the MFT to assess the value of RTS against a range of practices currently

in use in the microfinance industry, including group, branch, and individual clients. This

assessment showed that the most commercially-oriented of the three MFIs gained the most value

from the technology, in large part because they were most willing to re-engineer their business

model to take advantage of the RTS. The advantages of the system as implemented included

automation of transactions, reduced client time and travel, more frequent payments, reduced cash

management risk, and avoidance of costs for ―brick and mortar‖ branches.

Modular Corporation, a wholly owned subsidiary of Modular Techcorp Holdings of Malaysia,

announced the launch of its first Microfinance Smart Card for the Mahasemam Trust, a

microfinance institution based in Madurai, India. Field officers of the Mahasemam Trust will use

the Smart Card in combination with a small hand held device to record data such as payments

and transactions. This information would then be downloaded daily to a central server. The

Smart Card should help in better managing the collection and distribution of microloans, as well

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as reduce fraud and increase information security such as user identity and account information.

This Smart Card will hopefully prove to be a more efficient management system than previous

manual processes.

In India ICICI Bank has partnership with FINO to provide technology solutions to the micro

finance sector. The technology solution comprises of core banking and smart card systems. In

light of the technology solutions available through FINO, the Bank has designed a new process

for delivering loans under the partnership model. Some of the key aspects where a strong

technology platform will add value to the micro finance operations include reduction in

transaction cost; better data management and reporting capacities and capability to interface with

multiple peripherals, etc. This would also enable enhanced disclosure and transparency in the

operations of MFIs, setting a platform for robust securitization / buyout opportunities to meet the

priority sector lending objectives of the regulator.

www.cab.org.in/ICTPortal/Lists/.../icicibank_strategy_promoting.pdf)

ICICI Bank also employed delivery channels backed by technological innovations to achieve

scale and outreach in a sustainable manner. The Bank‘s channel architecture includes branch and

non-branch channels. Branches act as a business hub providing banking services on the one

hand, while facilitating the fulfillment of products that have been sourced by the business

facilitators and business correspondents. Non-branch channels are of two types, business

facilitators and business correspondents. Business facilitators, referred to as ‗Vikas Sahyogis‘, are

outsourced channels that generate business opportunities for the Bank. Network of Vikas

Sahyogis has been set to act as referral or sourcing agents for loans, insurance and investment

products such as mutual funds. These centers are operated by local people with existing

relationship with the Bank‘s customer segments. Vikas Sahyogis include agri input dealers,

tractor dealers, automobile dealers and diesel dealers.

In India ZERO Microfinance and Savings Support Foundation (ZERO MASS Foundation/ZMF)

also uses Smart cards not needed for biometric authentication in local service area.

Union Bank is serving the underprivileged and disadvantaged 68000 beneficiaries serving

through biometric smart card and forging ahead to service 2.5 million customers through smart

cards in coming year.

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Tata Consultancy Services (TCS), also launched its smart card solution that would enable banks

to reach the remote areas and address their need for micro financing. To begin with, the Punjab

National Bank (PNB) and Bank of India (BoI) have come forward to implement the solution on a

pilot basis. While PNB intends to apply it in three locations spread across Punjab, Gujarat and

Delhi, BoI is planning to enforce it in Maharashtra. The smart card technology enabled banks to

provide a multi-application smart card to the account holders. The card stores the necessary

customer information including demographic details and financial applications such as loans,

deposits and insurance. It also contains secure identification and authentication, and can be

integrated with the core banking system for automatic account update and fraud control. Both

fingerprint and PIN are provided for user authentication.

BASIX in Andhra Pradesh has worked as banking correspondence using smart card for their

account holders. BASIX also launched Technology assisted Financial Inclusion (TAFI)

operations in some slums of East Delhi, A tripartite agreement was signed between Axis Bank, A

Little World (our technology partner) and Indian Grameen Services. (Source: Annual Report

BASIX, 2009)

Mann Deshi Mahila Bank is undertaking an initiative to become one of the first rural banks in

India to utilize cutting-edge SMART card technology for its banking operations. These plastic

'credit cards' will display women's names and photographs, utilizing micro-chip technology to

store financial information. The cards instantly allow the bank's field agents and clients to view

savings account balance, loan account status, and repayment history. The use of SMART cards

will increase the efficiency and business capacity of the bank and provide clients with enhanced

security and service. The card benefits the client by discreetly keeping her account information

free from unwanted inquiries and alterations. However, it has been challenging to find an

appropriate vendor to supply the technology and the hardware for this innovative new idea.

Swadhaar Finance, an ACCION microfinance partner, offers savings accounts to its poorer

clientele by becoming a banking correspondent of ICICI Bank. Through the partnership,

Swadhaar sets up small kiosks where clients can make basic transactions (e.g., balance inquiries,

deposits, withdrawals). Clients needed to pay INR 200 (US $4) for smart cards to use these

kiosks.

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Thus it can be seen from the above that smart card is widely used by banks in India and other

countries. The use of smart card was less prevalent in microfinance institutions in India except

few like BASIX. The reasons of less adoption are high cost to manage and maintain and

illiteracy among the clients.

Point of Sales (POS) devices

Small machine located at a third party merchant that can be used to authenticate the transfer of

funds from the customer to the retailer or the reverse depending on the transaction type.

Similarly, POS and cell phone systems offer an opportunity to MFIs to increase their outreach in

remote and rural areas. When the country infrastructure allows, POS-based systems are a less

expensive solution for providing financial services to remote and rural clients when compared

with the expenses associated with opening a new branch.

Benefits to POS/ PAD

Microfinance can increase the security of financial transactions

Reduce transaction cost to service clients

Reach new areas without branch infrastructure

Staff can focus on customer acquisition and service

Additional services and revenue streams

Benefits for Clients

Reduced transaction cost

educed risk of cash handling

Prestige of access to international payment networks (VISA)

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In Colombia the correspondent agent model (CA) allows financial institutions to reach remote

areas by using a combination of POS terminals and magnetic strip cards. This model is currently

implemented in several Latin American institutions, including BANCOLOMBIA-CONAVI in

Colombia and Interbank in Peru. In this model, the financial institution works closely with an

external technology provider to identify potential locations for the remote branches. The ideal

locations include retail stores, supermarkets, convenience stores, and gas stations. The hardware

requirements for these locations are minimal, mostly consisting of the POS device. From the

Colombian and Peruvian experiences, the main benefit the CA model offers to financial

institutions is the fact that this solution is a cost-effective way to increase outreach in remote

areas. CA model provides great savings for financial institutions to increase their local coverage:

a branch is 40 times more expensive than using a CA agent and similarly, an ATM is seven times

as expensive as a CA agent.

(Source: Client-Focused Technologies in Microfinance, microNOTE # 31, USDA)

Another example of an organization experimenting with Palm Pilot technology to optimize field

operations can be found in the Grameen Bank‘s own backyard in Bangladesh. Remote transaction

Model system at UGANDA MICROFINANCE LIMITED currently allows clients to make savings

deposits and payments of microfinance loans through a network of agents. This system is at the final

stages of its pilot phase at Uganda Microfinance Limited (UML). Once the pilot of the solution is over,

this technology should be able to support a full range of financial transactions, including withdrawals and

account- to-account transfers. The RTS technology currently works through a combination of smart cards

and POS devices in a GSM network. The system uses wireless POS devices running the RTS client

software. These POS terminals wirelessly communicate with a central server, which then connects to the

MFI‘s main MIS.

In Malawi, OPPORTUNITY INTERNATIONAL BANK OF MALAWI (OIBM) has combined

biometric-enabled POS devices and smart cards to provide banking services to Malawi‘s low- income

population. OIBM‘s biometrics and smart card model overcomes the identification problem by using

fingerprints. This eliminates the need for clients to have PINs and makes the transaction process easier for

illiterate customers because they do not have to select and memorize any numbers to access their

accounts. As part of this model and through partnerships with small retail outlets, the bank has set up a

network of POS agents in rural areas. OIBM is using the POS solution at one of its branches located in a

high-transit area, allowing the institution to bring its POS services to more peri-urban and rural clients.

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The institution currently has more than 60,000 clients using the service on a regular basis. Use of POS in

OIBM has the Increased in outreach, Productivity and customer satisfaction gains, Efficiency of

operations and Lowered operating costs.

(Source: www.opportunity.net/.../opportunity_international_bank_malawi)

In Uganda Microfinance Union in Uganda, FINCA, Teba Bank, FOCCAS using POS devices.

Banco Solidario, with support from ACCION International, implemented a PDA-based

application for microfinance purposes. This first generation of ACCION‘s Porta Credit

application was called Credi Palm. The Palm-OS-based application was implemented in all of

the bank branches to create an easy way to capture and store credit evaluation information in the

field, A solution that allowed credit officers to become more familiar with the use of technology

for their daily field activities, and an effective interface between the main MIS of the institution

and the PDA application.

(Source: www.mixmarket.org/mfi/banco-solidario)

In India, HDFC bank using branches as hubs for other inclusion initiatives such as direct

linkages to self help groups and joint liability groups, bank on wheels, point of sale (POS)

terminals and information technology enabled kiosks, and other information & communication

technology (ICT) backed initiatives in these locations. Under the Project Jharkhand program

the Bank has launched its services at a Common Service Centre (CSC) in Kanke (Ranchi)

comprising over 1.5 lakh households spread across 100 villages in 30 Panchayats. The Bank

also adopted Chakala village near Ranchi as part of the programme. The programme

envisages covering over 45 lakh households in the State through both the CSC and village

adoption models, subject to regulatory provision. CSC is an integral component of the Central

Governments National e-Governance Plan that seeks to set up over 5,000 CSCs in Jharkhand

and about 100,000 in the country (HDFC Bank Annual Report 2011). POS device was also

used on trail by ICICI bank in Karnataka and Wrana Sugar cooperative in Maharashtra.

ICICI bank has supported several of its mFIs partners in Madurai, India. ICICI supported

community internet and tele centre projects in the region.

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Manvish MiFAUN-Micro finance device developed in Bangalore is

an internet enabled hand held device that is stand alone, (IP

addressable) and can communicate to any remote server located

anywhere on the net via TCP/IP/Wifi, GSM/GPRS or a PSTN

Modem. This makes it completely PC independent. Data files can be

encrypted and can communicate with Oracle (tested already) or any

other database (DB2, SQL etc) and vice-versa with a high level of

data integrity.

KBS Bank Chincholi is able to provide banking services in Chincholi town (hub) and door-step

services in about 25 villages (spokes). Together with IGS, KBS Bank has established such

Business Correspondent outlets in 18 Hub locations and 45 spoke locations in the three districts

of its operation. In the next three to five years, the bank seeks its presence in all the 147

blocks/hoblis through hub outlets and over 1500 villages through spokes. (Source: Annual report

BASIX, 2009-10).

SKS Microfinance introduced a prototype data collection system using the popular Palm Pilot

PDA devices and smart cards in May of 2001. Loan officers used the PDAs to record client

transactions in the field, which were simultaneously recorded on the smart cards that were

provided to clients as a form of backup. During the year-long pilot program, SKS tested the new

system in two client centers, marking improvements in accuracy, loan officer productivity and

operational efficiency. This initial pilot was supported through $125,000 in grants and soft loans

received from CGAP (the World Bank's apex body on microfinance), Digital Partners and

Grameen Foundation USA (two US-based non-profits working on technology based solutions for

international development challenges). ( http://www.sksindia.com/Milestones.htm).

Sanghmitra Rural Financial Services, Bangluru has used 45 hand held device for online real

time reporting of transactions particularly in regard of repayment of loan installment by using

GPRS technology. It has purchased another 35 instruments from Quantam System, software,

Bangluru. Total cost of up gradation and 35 new machines costs 10 lakhs funded by SIDBI.

They dispensed with issuance of manual acknowledgement receipt to SHG since January, 2010.

This ensured prompt reporting by field staff and eliminated opportunities to misuse of money

recovered from groups, besides it facilitated proper monitoring of recovery at regional office and

head office.

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(Annual report, 2010, Sanghmitra Rural Financial Services, Bangluru)

Pushtikar, a Jodhpur-based cooperative MFI, has introduced handheld devices to cover clients

at their doorsteps especially for collecting periodic payments. This is an MFI, registered under

the Multi-State Cooperatives Act, engaged in thrift and credit. It provides individual loans and

also forms and finances women self-help groups (SHGs), through four branches. Handheld

devices (similar to credit card transaction machines, but without any reading capability such as

magnetic strip or biometric) with a printer and inbuilt memory are used by their field staff. As

indicated by the MFI, the device costs Rs 12,500 per machine (supplied by Albertsons).

Thus it may be concluded here that Hand held devices are used in India as well as other part of

the world. Prevalence was more in African countries. India adoption was less as compared to

African and Latin American countries.

PERSONAL DIGITAL ASSISTANTS

PDAs are small, handheld digital computers that can run specialized programs to manage MFI

and client data and perform financial calculations. Using PDAs, loan officers can consult an

electronic list of borrowers in arrears to plan collections visits, review clients ready to apply for

their next loans, and refer to historical client information, while working in the field. Loan

officers can even fill out that that loan applications forms on the PDA and calculate the

indicators used for loan review and approval. Virtually all client data and client visit records are

stored electronically and are immediately available in a device small enough to fit in a shirt

pocket. Since PDAs are a platform that can run various software programs, MFIs can use the tool

to improve performance in a range of tasks. MFIs may want to employ PDAs to standardize their

credit methodology and operating policies, improve loan officer efficiency, and increase data

accuracy and access in the field.

In Latin America, where increasing competition is forcing MFIs to lower costs and improve

service, several MFIs are using PDAs to save on relatively high labor costs (CGAP). It helps in

Customer acquisitions, Certification to origin, tracking produce for payments. PDA technology

does not replace an MIS. Rather, it requires a well-functioning MIS for effective results. Any

changes to an MIS after implementation of PDAs may necessitate changes to the PDA software

to maintain compatibility.SKS Microfinance (India) implemented PDAs to record transaction

data during group meetings, not for detailed loan analysis. PSHM (Albania) and ACCION Latin

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America are using Personal Digital Assistants. BanGente and Banco Solidario have improved

workflow efficiency, reduced operational costs, and made better information available to loan

officers. Fin Comun‘s used PDA technology which has increased the consistency of work among

loan officers and saved staff time in the field.

in Mexico Asociación Programa Compartamos—an MFI targeting very low-income women—

is experimenting with Palm Pilot (a brand of PDA) usage in cases where greater productivity is

predicted and integration with MIS is justified. PDAs are small portable handheld computers that

can allow loan officer‘s access to his/her Institution‘s MIS from the field. Depending on location,

information can be updated by the loan officer to the head office instantaneously or every day,

which decreases the need for data entry clerks.

In India Dharani Mahila Macs, a microfinance institution in Andhra Pradesh, has decided to introduce

first Personal Digital Assistant (PDA)-based Management Information and Credit Monitoring System

with technology back up by Hyderabad-based Elitser IT Solutions. The PDA, a hand-held device, will

help to carry information, make collections and issue receipts instantly to the clients. The collected data is

stored and updated to the computer at the headquarters. Based in Bachannapet, Warangal District,

Dharani Mahila Macs has 3 branches and around 7,000 members. Using a tailor-made solution for

member-lending methodology, the technology can integrate PDAs, biometric solutions and smart cards

for enabling ease in managing field operations typical to microfinance organisations, said a statement.

The software solution also supports mobile phone based technologies and is available with multilingual

facility.

Figure: Dharani Mahila Macs

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Based in Bachannapet, Warangal District, Dharani Mahila Macs has 3 branches and around

7,000 members. Using a tailor-made solution for member-lending methodology, the technology

can integrate PDAs, biometric solutions and smart cards for enabling ease in managing field

operations typical to microfinance organisations, said a statement. The software solution also

supports mobile phone based technologies and is available with multilingual facility.

Equipped with features like automated SMS alerts, e-mails to clients, mail-merge facility for

sending letters to clients, facility to track, scan and store documents, the product also features

Financial Accounting and Management Information systems to serve any microfinance

institution irrespective of its lending model, said the statement, highlighting further that the

savings module covers all types of thrift activities pertaining to microfinance.

The software enables financial accounting reports, comparative financial statements, member-

related reports, operating reports, management reports, funder reports, field officer-wise reports

and other miscellaneous data that is required by all stakeholders in microfinance operations.

Thus it may be concluded here that PDAs are used in India as well as other part of the world.

Prevalence was more in African countries, Maxico, Latin America. India adoption was less as

compared to African and Latin American countries.

BIOMETRICS TECHNOLOGY

It Measure‘s an individual‘s unique physical or behavioural characteristics to recognize and

confirm identity. It helps in clients‘ identification and system security. In Malawi it helps in

client identification and system security. In Malawi Opportunity international also uses this

technology.

In India Punjab national Bank has started using biometric ATM for their rural and uneducated

customers. Vortex‘s solar-powered Gramateller with built-in Biometric capabilities, Gramateller

ATMs have been used by the Government to disburse wages under the MGNREGA (Mahatma

Gandhi National Rural Employment Guarantee Act) programme.

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Thus it may be concluded here that biometric devices are used in India as well as other part of

the world. Prevalence was more in Malawi. In India adoption was less as only restricted to

banks.

MOBILE PHONES/BANKING

Mobile phones can be used for financial services in three different ways: for micropayments (m-

commerce), as electronic money (e-money), and as banking channel Consumers of Tata. The

key potential benefits of using mobile phones to deliver banking services are lower cost of

deployment for MFIs and greater choice and control over financial services by the client. The

potential benefits of mobile banking should be related to an MFI‘s own strategic drivers. The

four core strategies that MFI may follow to promote and protect growth are: 1) increase market

penetration; 2) sell more services to existing clients; 3) retention of most valuable clients; and 4)

reduce cost of service provision. In a year of 2010, mobile banking users soared over 100 percent

in Kenya, China, Brazil and USA with 200 percent, 150 percent, 110 percent and 100 percent

respectively.

In South Africa WIZZIT Bank was established as a commercial, mobile phone-based bank,

operating off of the banking license of the South African Bank of Athens. With a combination of

ATMs, POS devices, and Maestro cards, WIZZIT clients have access to cash across the country,

allowing them to perform more than just mobile banking transactions. WIZZIT uses USSD

technology that allows for a continuous session with instantaneous responses. The transactions

are done in a single session and the system notifies the client when the transaction is completed.

The WIZZIT service works with any type and generation of cell phone. Customers of WIZZIT or

MTN Banking in South Africa use their phone as the primary way of accessing their bank

account. MTN, a mobile network operator, is partnered with Standard Bank, and WIZZIT is

partnered with the South African Bank of Athens. Customers load cash into their bank accounts

at branches or automatic teller machines (ATMs), or through a direct deposit of salary, and can

use their mobile phone to purchase airtime and make payments, transfers, and balance inquiries.

With the help of international agencies like International Finance Corporation these

technologies were tired in least developed countries like Africa, Latin America, and Asian

countries. In June 2010, the Financial Services for the Poor initiative at the Bill & Melinda Gates

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Foundation partnered with USAID on the Haiti Mobile Money Initiative (HMMI), featuring a

$10 million fund to provide incentives to mobile service providers to quickly launch and expand

m-money services. Notably, Digicel, Haiti‘s leading mobile provider, won the first-to-market

prize of $2.5 million in January 2011 after launching its Tcho Tcho Mobile service. Soon

thereafter, Voila, Haiti‘s second largest mobile provider, released its T-Cash m-money service

and received a $1.5 million USD second-to-market award. To help monitor the impact of the

HMMI as well as m-money service use and financial access in general, the Gates Foundation

commissioned InterMedia to design and conduct a series of household surveys of Haitian adults

(aged 18+). The first Haiti Mobile Money Tracker (HMMT) survey was conducted in March

2011, in the early days of m-money usage, and sampled all ten Haitian administrative

departments based on figures from the latest census in 2003. Follow-up surveys will be

conducted to establish usage trends – hopefully based on a more up-to-date 2011 census.

InterMedia‘s HMMT Online Data Analysis Tool allows financial access practitioners and

stakeholders to dive into the survey data themselves in a user-friendly way. The combinations of

financial, mobile and demographic data are easily cross-referenced to support project planning

and analysis.

In the Philippines, Globe Telecom lets customers load cash (or G-Cash) onto their mobile phones

at partner merchants or Globe outlets. For one million customers, G-cash is real value that can be

stored and withdrawn as hard cash, transferred to a friend across town or across the world, or

used to pay for products at restaurants and stores. In addition, customers of Globe, and of

Safaricom in Kenya (which has a similar product called M-Pesa), can use their virtual money to

repay loans to, or make deposits in, microfinance institutions.

HIFIVE was established in June 2010 as part of a longer term response to the disaster in an effort

to establish long term financial services for all Haitians; HMMI was created by the Bill &

Melinda Gates Foundation in partnership with USAID. HMMI, implemented by the USAID

project HIFIVE, provides incentives to encourage mobile operators and financial institutions to

launch mobile money services. It has tied up with Haiti Mobile Money Initiative (HMMI).

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Visa, is actively working with leaders in the mobile and financial services industry to deliver the

next generation of payments and financial services. VISA believed that mobile technology can

democratize financial services for billions of people worldwide by helping the industry overcome

historical challenges to deliver mobile financial services to more than 1 billion consumers

worldwide who own mobile devices but do not have a formal banking relationship.

Safaricom‘s M-Pesa is in the mobile banking world that it has come to be accepted by some as a

blueprint for mobile financial services. The service relies on the phone in the hands of the

customer (now more than 12 million) to perform transactions and the phone in the hands of the

agent (all 20,000 of them) to credit and debit accounts. But in markets that have either lower

penetration of mobiles or higher fragmentation among operators, offering over-the-counter

(OTC) payment services.

G-Cash in Philippines is a mobile banking solution offering a range of payment services through

the use of unstructured supplementary service data (USSD) in an SMS-like format type. G-Cash

is operated by G-Xchange Inc (GXI), a wholly-owed subsidiary of Globe Telecom. The

subsidiary manages all of the G-Cash operations and is registered as a financial company. G-

Cash started operations in 2004 and now has more than 3,100 outlets.

It is providing following services:

i. Payment for goods and services: At any G-Cash outlet, including utility companies,

schools, and grocery stores.

ii. Cash withdrawals: At authorized G-Cash stores.

iii. Deposits: G-Cash can make deposits through the Text-a-Deposit (TAD) service,

iv. Money transfer services: G-Cash allows clients to receive and send local and

international money transfers.

v. Account balances.

vi. Airtime transfers between two client accounts.

(Source: www.globe.com.ph/gcash/)

K-Rep in Kenya in adopting cell phones for banking purposes. The K-Rep experience with the

use of the mobile phones was brief and did not prove successful.

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By implementing a mobile banking system, K-rep wanted to offer the following services to its

clients: Money transfer between accounts, Account balance inquiries, and Mobile real-time

transfers between accounts.

The main problem with K-rep‘s mobile banking solution was an inappropriate choice of vendor

and technology type. The bank‘s technology provider was not able to provide an unstructured

supplementary service data (USSD) technology capable of a reliable transfer of transactional

data. Several of K-rep‘s mobile transactions were lost between the phone and the bank, creating

issues with the transaction reconciliation. The USSD is a technology that permits subscribers of a

mobile phone carrier to send and request information, normally with the use of text menus,

between a mobile phone and a network application. The information exchange under USSD is

done in a continuous session with real-time responses, allowing transactions to be completed in

one session. Hence, the user does not need to wait for a text message response or SMS to

complete a transaction. (Source: www.shorecapexchange.org/k-rep)

Mobile banking is used in many parts of the world with little or no infrastructure, especially

remote and rural areas. This aspect of mobile commerce is also popular in countries where most

of their population is unbanked. In most of these places, banks can only be found in big cities,

and customers have to travel hundreds of miles to the nearest bank.

In Iran, banks such as Parsian, Tejarat, Mellat, Saderat, Sepah, Edbi, and Bankmelli offer the

service. Banco Industrial provides the service in Guatemala. Citizens of Mexico can access

mobile banking with Omnilife, Bancomer and MPower Venture. Kenya's Safaricom (part of the

Vodafone Group) has the M-Pesa Service, which is mainly used to transfer limited amounts of

money, but increasingly used to pay utility bills as well. In 2009, Zain launched their own mobile

money transfer business, known as ZAP, in Kenya and other African countries. In Somalia, the

many telecom companies provide mobile banking, the most prominent being Hormuud Telecom

and its ZAAD service.

Telenor Pakistan has also launched a mobile banking solution, in coordination with Taameer

Bank, under the label Easy Paisa, which was begun in Q4 2009. Eko India Financial Services,

the business correspondent of State Bank of India (SBI) and ICICI Bank, provides bank

accounts, deposit, withdrawal and remittance services, micro-insurance, and micro-finance

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facilities to its customers (nearly 80% of whom are migrants or the unbanked section of the

population) through mobile banking.

Dutch-Bangla Bank (www.dutchbanglabank.com) launches the very first mobile banking service

in Bangladesh on 31 March, 2011. This service is launched with ‗Agent‘ and ‗Network‘ support

from mobile operators, Banglalink and Citycell. Sybase 365, a subsidiary of Sybase, Inc. has

provided software solution. There are around 160 million people in Bangladesh, of which, only

13 per cent have bank accounts. With this solution, Dutch-Bangla Bank can now reach out to the

rural and unbanked population, of which, 45 per cent are mobile phone users. Under the service,

any mobile handset with subscription to any of the six existing mobile operators of Bangladesh

would be able to utilize the service. Under the mobile banking services, bank-nominated

‗Agents‘ perform banking activities on behalf of the banks, like opening mobile banking

account, providing cash services (receipts and payments) and dealing with small credits. Cash

withdrawal from a mobile account can also be done from an ATM validating each transaction by

‗mobile phone & PIN‘ instead of ‗card & PIN‘. Other services that are being delivered through

mobile banking system are person-to-person (e.g. fund transfer), person-to-business (e.g.

merchant payment, utility bill payment), business-to-person (e.g. salary/commission

disbursement), government-to-person (disbursement of government allowance) transactions.

Brand banking, Korea uses Mobile banking uses the same infrastructure like the ATM solution.

But it is extremely easy and inexpensive to implement. It reduces the cost of operation for

bankers in comparison to the use of ATMs. They were also using compact HTML and WAP

technology. In countries like Korea, two SIM Card is used in mobile phones one for the

telephonic purpose and the other for banking. Bank account data is encrypted on a smart-card

chip. About 3.3 million transactions were reported by Bank of Korea in 2004.

In Kenya, the Financial Institutions Supervision Department is responsible for the prudential

regulation of banks and deposit taking MFIs. The country‘s National payment system (NPS)

views M- Pesa (Third party provided – Non bank led model) as a payment service provider

dealing with e- money, however it does not have specific regulations to supervise the payment

system. With respect to bank led models, Central Bank of Kenya (CBK) is approving agents on a

hoc basis. It exercises its approval right in its sole discretion. The telecommunications regulator,

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Central Communications of Kenya (CCK) and the National Communications Secretariat agree

that the central bank should oversee financial services offered by MNOs. CBK is primarily

responsible for regulating and supervising the payments system. There are no licensed credit

reference bureaus yet in Kenya, but there are firms providing some of the same services. (Liu

and Mithika.2009) The regulation of M- Pesa‘s services is not yet formalized by the Central

Bank, which has agreed to allow the transactions under the assumption that ―remittance is not

banking‖ and should be viewed as a payment service. The country has AML/CFT law in the

form of AML Bill 2007. The agents are not covered by any law.

South Africa has made it a priority to extend reliable financial service in spite of the e – money

to be issued by only banks. The South African Reserve Bank (SARB-Central bank of South

Africa) issued a Position paper on E- money enabling e- money issue only by banks. The

payments of bills are considered payment services, but transfer payments between people

(remittances) are considered deposits. Under the National Payment System Act, SARB is

permitted to delegate its responsibilities with respect to control of the national payment system

to payment Association of South Africa (PASA) which is the self regulatory body for payment

system. Bank Circular 6 and Exemption 17 allows bank to open mobile phone operated banks

accounts without face-to-face KYC procedures, beyond a limit, it is necessary. These data must

then be verified against a third- party source, such as credit bureaus or databases containing

information from the Department of Home Affairs. To transfer money Wizzit uses the well

developed South African inter-bank clearing house system as an autonomous division of the

South African Bank of Athens Ltd. The financial Intelligence Center Act (FICA) and its

regulations govern anti-money laundering. The country permits a range of player subject to

appropriate regulation.

M-Pesa M-PESA (M for mobile, pesa is Swahili for money)

is the product name of a mobile-phone based money

transfer service for Safaricom, which is a Vodafone

affiliate. It was initially developed by Sagentia

before transitioning to IBM.

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The initial concept of M-PESA was to create a service which allowed microfinance borrowers to

conveniently receive and repay loans using the network of Safaricom airtime resellers.[3] This

would enable microfinance institutions (MFIs) to offer more competitive loan rates to their users,

as there is a reduced cost of dealing in cash. The users of the service would gain through being

able to track their finances more easily. But when the service was trialled, customers adopted the

service for a variety of alternative uses; complications arose with Faulu, the partnering

microfinance institution (MFI). M-PESA was re-focused and launched with a different value

proposition: sending remittances home across the country and making payments.

M-PESA is a branchless banking service, meaning that it is designed to enable users to complete

basic banking transactions without the need to visit a bank branch. The continuing success of M-

PESA, in Kenya, has been due to the creation of a highly popular, affordable payment service

with only limited involvement of a bank. The system was developed and ran by Sagentia from

initial development to the 6 million customer mark. The service has now been transitioned to be

operationally run by IBM Global Services on behalf of Vodafone, the initial 3 markets (Kenya,

Tanzania & Afghanistan) are hosted between Rackspace and Vodafone. The Bangko Sentralng

Pilipinas (BSP), the central bank of Philippines, in 2000, issued two circulars requiring banks

wishing to offer services via electronic channels to seek prior approval from payment system unit

of BSP before offering them to the public. Pursuant to the circulars, five commercial bank (each

having applied individually) have entered into partnerships with smart, the largest MNO, to use

the Smart Money mobile payments platform for account opening, marketing, data processing and

other functions. In Philippines, e- money is not considered as deposits. In 2006, the BSP passed a

circular for consumer protection, and it requires face to face check by remittance agents. Smart

money and G-Cash render international remittances services through mobile. A draft of the

Payments and Settlements system act is pending for implementation. And G-Cash was chosen by

Rural Bankers Association of Philippines and Microenterprise Access to Banking service

(MABS) to provide microfinance products to the rural poor. The country follows FATF‘s AML

CFT recommendation.

Branchless banking was started in MALAWI by Opportunity International Bank of Malawi

(OIBM). A $2.9 million joint program with The MasterCard Foundation, the CEBB is intended

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to test the use of financial education in supporting branchless banking among low-income

populations in Asia and Africa. Spanning over 3 years, the programme seeks to strengthen

understanding of the value of branchless banking services among youth, women and the

unbanked, and to build financial capabilities that can support the adoption and sustained use of

mobile banking and electronic card services. Opportunity International Bank of Malawi is

currently offering its clients two branchless banking channels: ―Banki M‘khonde‖ and ―Banki

M‘manja‖ service. ―Banki M‘khonde‖ allow customers to use their bank cards at local agents to

perform cash in and out transactions whereas through ―Banki M‘manja‖ customers can access

their bank accounts using mobile phones. OIBM joins Mobile Transactions in Zambia, FINO

Fintech Foundation in India and RBAP-MABS in the Philippines as partners in the CEBB

program. Over the next year, Microfinance Opportunities will continue to work with these

partners to develop financial education toolkits for branchless banking.

The mobile Banking Services Report released by World Economic Forum 2011 reported that

India is strengthened with readiness of market environment and whereas the country has

competitive disadvantage in the agency network. Mobile banking in India, viewed by the

government as a potent tool for financial inclusion, is yet to clear many hurdles before it can

fulfill its objective of reaching the unbanked masses. RBI released operative Guidelines for

Banks on mobile banking. Bank are now permitted to offer the service subject to a daily cap of

Rs. 50,000 per customer for both funds transfer and transactions involving purchase of goods/

service with certain conditions. The challenges to the growth of mobile banking services depend

upon the various issues such as working of agency model BCs and BFs, Know Your Customer

(KYC) norms, mobile technology and risk connected with mobile banking services.

In India TATA DoCoMo has developed to pay mobile bills via SMS using an ItzCash card.

ItzCash Card Ltd, a multi-purpose prepaid cash card of its kind in the country, facilitates a

simple process of mobile bill payment wherein a Tata DoCoMo customer can SMS the keyword

PAYBILL, the amount, ItzCash account number and password and sends it to 121. ItzCash

Card, which was available in denominations ranging from Rs. 100 to Rs. 10,000, could be

obtained from their franchisees. The card also enables micro payments of Rs 10 also. With no

hidden costs, the card users get confirmation of transactions in real time. ItzCash Card Ltd., part

of the Essel Group established in 2004, has an annual turnover of Rs. 2000 crores.

(www.hindu.com/2009/12/03/stories/2009120360841600)

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Cashpor Microcredit adopted ClassifEye's innovative camera-phone-based transactions and

authentication solution. This helped to facilitate broader financial inclusion, enabling Cashpor to

broaden its customer base and allow their agent-serviced customers to improve their financial

reach. It has also adopted mobile banking system with the partnership of ATOM technology

(Source : annual report, Cashpor Microfinance, 2010).

Eko has tied up with Centurion Bank of Punjab (CBoP) and launched a pilot in West Delhi‘s

Uttam Nagar area in February 2008. EKO financial services has established customer service

points manned by a bank correspondent, and use a secure password to withdraw or deposit

money into his account. Eko is based on the fundamental premise of reducing the cost of secure

financial transactions and providing an extremely intuitive user interface such that access to

financial service can be democratized. Eko works as a Business Correspondent of State Bank of

India, ICICI Bank and as a distribution partner of Bharti AXA Life Insurance. It provides the

ability for these customers to deposit cash, withdraw cash, remit funds and pay the insurance

premium at these local ‗kirana‘ like stores. It has network of more than 1000 retail outlets

(processors, pharmacists, cybercafé, etc) across 5 states in India i.e, Delhi- NCR, Bihar,.

Jharkhand, Maharastra & Uttar Pradesh). It has 75000 customers, processes more than 2 million

across 25000 transactions per day. SBI in collaboration with Bhopal based organisation AISECT

has launched mobile banking services in Madhya Pradesh. Two mobile banking vans fitted with

ATM and Kiosk banking machanisms have started operation in the districts of Hosangabad and

Tikmgarh to provide banking services to rural population. Additionally AISECT and SBI have

launched a scheme to benefit the rural migrants who are hesitant to enter corporate banking set

up.

The ZERO platform is based on new generation mobile phones and Fingerprint authentication

which converts new generation low-cost NFC (Near Field Communication) mobile phones with

large storage capacities as a secure, self-sufficient bank branch, with biometrics based customer

ID, for customer enrollments for no-frills accounts and all types of transactions in the village

with the local Customer Service Point operator acting as a Teller. Existing Mobile

communications networks are used for all transaction uploads, downloads and application

updates. The platform ensures that banking facility is provided to the right people at the right

time and the right amount of money is transacted. The CSPs are equipped with a mobile phone

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and a Fingerprint Scanner cum Receipt Printer to carry out Banking and Payment transactions

(i.e. Cash Deposit, Cash Withdrawal, Account to Account Transfer, Balance Enquiry, Mini

Statements, etc.) using both online connectivity to Banks and in an offline mode.

The RBI guidelines 2008 and 2009 reflect a fact that RBI plans to provide additional guidance

for mobile banking to take off. And RBI indicated that it sees high potential for electronic

banking to increase efficiency and have concern for mobile security, particularly authenticating

users accessing bank accounts remotely. The mobile payment is being guided by the payment

and settlements systems bill 2008 and the country has an agency model called BC model and the

Prevention of Money Laundering Act 2002 govern the AML/CFT. There are few pilot projects

going on in few States of India, however all the projects are under bank led model, of which,

FINO (a financial services technology provider) emerged just three years ago, reached 10 million

poor clients with various financial services on behalf of banks. FINO has launched FINO-

MITRA (Mobile Based Information and Transactions) a comprehensive set of end-to-end

offerings for enabling microfinance initiatives leveraging mobile as a platform. SKS micro

finance, from India, is testing m- banking model in the State of Andhra Pradesh in collaboration

with Andhra Bank.

Thus it may be concluded here that mobile banking is used in India as well as other part of the

world. Prevalence was more in African countries, latin America, East Asia, Europe etc. In India

Banking correspondence and mobile service providers has started mobile banking apart from

commercial banks.

MOBILE BRACHES /ATM

It is ATM on a truck or a branch in a bus that goes from one village to another in rural area,

which can be served infrequently. It helped in Customer acquisition, Product servicing,

disbursements and collection. Some of the security features built into mobile units are a dial up

alarm system that communicates over cellular or land line, door contacts, PIR, motion detectors,

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double squeeze buttons, siren, tilt device, ignition lock out and security camera's. Global

Positioning Systems and armor protection with BR windows are additionally available.

In abroad many of the banks uses mobile branches/ ATMs some of the examples are SunTrust Banks,

PNC Banks, Star Bank, Regions Bank, Bank of China, Qatar National, Amsouth Banks, Barnett

Banks, Tinker FCU, Inter. Bk of Commerce, Colonial Bank, Bank Atlantic, Bank of Boston, Five

Points Credit Union, Ridgewood Savings Bank, Regions Bank, Suncoast Schools FCU,

Woodlands Bank, Whitney Bank, Huntington Banks, Parda FCU, Crestar Bank, Visa-Winter

Olympics, Omni Bank, Sowa Bank, Japan, Fifth Third Banks, Chevy Chase Bank, M&T Banks,

Standard Charter, Ghana, Inco FCU, US Banks, Kuwait Finance House, Muscat Bank, Oman,

BankUnited, FL, Banco Popular, Bk of Guam, Ridgewood Saving, First Union, Glendale Federal,

BB&T, Security Service FCU, Union Planters, Bay Bank, North Fork Banks, Alhamrani U, Saudi

Arabia, First State Bank, Texans U, Guaranty Banks, North Jersey FCU, FL Telco CU, Wells

Fargo, Bank of America, State Street Bank, Core FCU, Shawmutt Bank, Riverside Bank,

Southside Bank, State Empl. CU, NC, Cinco FCU, Omni American CU, Visa-Atlanta Olympics,

Qatar Islamic Bank etc.

In India Tamilnadu Mercantile bank have Learn more about the extensive global branch network

of Tamilnad Mercantile Bank established 2 mobile bank braches apart from 251 full fledged

branches all over India, 1 Service Branch, 7 Regional Offices, 11 Extension Counters, and 263

Automated Teller Machines. Learn more about the extensive global branch network of

Tamilnadu Mercantile Bank. UCO Bank today has also planned to open 100 mobile branches

across the country to make mobile banking services available to the people within a year.

The State Bank of India (SBI) in association with the Bhopal based organization AISECT have

started mobile banking services catering to villages in the state of Madhya Pradesh. This service

is a part of the Financial Inclusion Scheme. Corporation Bank has introduced branch-less

banking facilities including a mobile ATM van and a financial literacy and credit counselling

centre. The "Corp Vikas" mobile van will provide ATM (automated teller machine) services

while plying at a fixed route, and will stop at specific locations at fixed timings. The mobile

ATM van will also have internet connectivity facilities, and will showcase short films or

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important general information on matters of financial literacy and inclusion. The staff in the van

will help customers in filling up account opening forms and loan applications, and also in

collecting the same from them for submitting in the branch. The bank has opened more than 1.3

million no-frills accounts across the country through its branch-less banking model.

The service is comprised of two mobile vans equipped with an ATM machine and a banking

kiosk. This service has been started keeping in mind the rural population which is not

comfortable in visiting corporate banking setups and tend to make use of slower traditional

banking methods. The new service will help people in making remittances and open fresh

accounts with the bank. This service has been projected to cover most of the districts of Madhya

Pradesh State and Chhattisgarh State also. The security systems designed into mobile branches

were designed by one of the largest bank security companies in the country. Additionally, the

designs are continuously reviewed by our customers' security personnel and modified to their

specific requirements. Thus it may be concluded that mobile branches has helped in providing

financial services in remote areas in India and other countries.

INTERACTIVE VOICE RESPONSE TECHNOLOGY

IVR technology may be a viable solution for MFIs that seek to enhance customer service and

reduce the bottlenecks in day-to-day operations that are caused when large numbers of clients

request simple information from staff at branch offices. An investment in IVR technology would

only be cost-effective for institutions that have a fairly large number of clients and that have

clients who have access to telephones and are comfortable with them and electronic technologyIt

allows callers to request information from, or conduct business with, an automated system by

speaking into a telephone or inputting information through its keypad. It helps in Client

information access, and product, account or branch information. Edyficar (Peru)/Voxiva (Peru,

worldwide) uses Interactive Voice Response technology.

EDYPME Edyficar (Peru) Edyficar implemented IVR technology to limit the amount of staff

time at its branch offices consumed by responding to client information requests. Its objective

was to reduce the number of client visits to a branch and the costs of serving each account, while

increasing the quality of customer service. After considering several options, including opening

mini-offices for information requests only, the organization began considering technology-based

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solutions. Edyficar‘s board, senior management, and staff all view technology as one of the

institution‘s key competitive advantages and historically have been willing to invest in

technology to realize benefits in the future. In 2002, Edyficar implemented a pilot IVR system

(called EDYFONO) hosted by Voxiva, Inc. The pilot was designed to help Edyficar understand

(a) the geographic areas from where clients would use the service more frequently, (b) the

percentage of callers that would be clients, (c) the economic status of those clients using the

service, and (d) the most popular services on the IVR system. Within three to four months of

launching the new EDYFONO service, Edyficar received 1,500 calls per month, but only about

50 percent of those calls were clients accessing account information. The other calls were from

people seeking more information about Edyficar‘s services. A significant percentage of calls

came from outside the geographic regions where Edyficar operates, which drove up operating

costs without providing immediate benefits.

Based on the number of clients that used the EDYFONO service, and the reduced number of

visits to its branch offices, Edyficar decided to install IVR technology in its main offices to

prepare for expanding the implementation. At present, Edyficar has suspended the automated

service while the transition takes place, and while the communications network in its region

stabilizes after having been acquired by a foreign operator. It is also upgrading its MIS to

integrate the in-house IVR system (http://www.voxiva.com).

In India Elister IT solution has developed IVR technology for their microfinance institutions

clients.

INTERNET BANKING

It is Web-based application (fund transfer, bill payments, securities trading etc). It helps in Loan

servicing and payment transaction and Payment transactions.

The adoption of electronic banking in sub-Saharan Africa is expected to surge during the next

few years, despite it being a developing market. With improvements in delivery channels, the

scope for automation and back-office integration - based on electronic banking - will grow.

Africa was the fastest growing cellular phone market in the world in 2005. From 1999 to 2004,

the number of mobile subscribers in Africa rose to 76.8 million from 7.5 million, an average

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annual growth rate of 58%. Growth in Internet use in Africa from 2000 to 2006 was the highest

of all world regions at 625.8%, compared with 479.3% for the Middle East, 245.5% for Asia,

193.7% for Europe, 141% for Oceania/Australia and 112% for North America. And the potential

for further growth in Africa is significant, with only 3.6% of the population using the Internet.

Africa accounts for only 3% of Internet use globally. More than nine out of every 10 Standard

Chartered Bank customers who use electronic banking in sub-Saharan Africa do so via the

Internet. (Vinod Madhavan 2007).

There are numerous benefits of electronic banking, and banks are continually trying to improve

security. There is a wide range of delivery channels available, depending on a company's

requirements in terms of volume of transactions and overall cost. Most delivery channels can

support cash management and trade functions in most African markets. Although electronic

banking is still relatively undeveloped in Africa, it has significant growth potential.

During the next few years, the adoption of electronic banking in sub-Saharan Africa is likely to

surge. The attraction of markets such as South Africa for the establishment of shared service

centres will increase the take-up rate. As improvements in delivery channels are introduced, the

scope for automation and back-office integration will grow.

Grameen Koota has partnered with Money Gram international Inc to offer remittance services

to both clients and non – clients in rural and semi urban areas. The moneygram international is a

global repayment company.

Axis Bank in India, one of the leading private sector banks in India, replaced its home grown

legacy system with SunTec's TBMS-F solution and established a centralized dynamic billing and

pricing framework, thus increasing its operational efficiency significantly. The Relationship-

based Pricing and Centralized Billing product suite enabled Axis Bank to manage fee billing for

current account, cash credit and savings account banking functions. TBMS-F also provided Axis

Bank with the ability to offer personalized product packages to specific customers or groups of

customers, and also to go to market with fresh product packages and promotional plans quickly.

(Axis bank, Annual report, 2010). Punjab national Bank in Bihar has started specialised

microfinance branch which is providing all the facilities to self help groups.

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ICICI Bank also employed Business Correspondent (BC) model to extend financial services

especially the much-needed savings services to rural customers. In the pilot stage, the

transactions by BC are being done with the help of an 'e- Passbook' and an Authentication

Device (AD). The e-Passbook can display and store the customer KYC information, customer

account details and the transactions in each account. It also has a unique feature of biometric

authentication by the way of fingerprints, thereby mitigating the risk related to PIN (Personal

Identification Number) in the rural scenario. ADs provide Customer interface with user-friendly

menu options, enabling transactions. Business facilitators, referred to as ‗Vikas Sahyogis‘, are

outsourced channels that generate business opportunities for the Bank. Network of Vikas

Sahyogis has been set to act as referral or sourcing agents for loans, insurance and investment

products. These centres are operated by local people with existing relationship with the Bank‘s

customer segments. Vikas Sahyogis include agri input dealers, tractor dealers, automobile dealers

and diesel dealers.

HDFC Bank offers products and services such as savings, current, fixed & recurring deposits,

loans, ATM facilities, investment products such as mutual funds and insurance, electronic funds

transfers, drafts & remittances, etc. The Bank also leverages these branches as hubs for other

inclusion initiatives such as direct linkages to self help groups and joint liability groups, bank

on wheels, point of sale (POS) terminals and information technology enabled kiosks, and other

information & communication technology (ICT) backed initiatives in these locations. Under the

Project Jharkhand program the Bank has launched its services at a Common Service Centre

(CSC) in Kanke (Ranchi) comprising over 1.5 lakh households spread across 100 villages in

30 Panchayats. The Bank also adopted Chakala village near Ranchi as part of the programme.

The programme envisages covering over 45 lakh households in the State through both the

CSC and village adoption models, subject to regulatory provision. CSC is an integral

component of the Central Governments National e-Governance Plan that seeks to set up over

5,000 CSCs in Jharkhand and about 100,000 in the country. (Source: HDFC Bank Annual Report 2011).

Glodyne Technoserve, a technology services company in partnership with the Government of

Bihar has rolled out rural financial inclusion services in the state providing banking facility to

the 25 million ‗E-shakti‘ MNREGS (National Rural Employment Guarantee Scheme) project.

Smaarftech Technologies, a subsidiary of Glodyne Technoserve Limited which is implementing

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the ‗Eshakti‘ project in the state has initially partnered with Central Bank of India. Under this

scheme, ―No Frills‖ Bank Account will be opened for every beneficiary as per KYC norms and

payment of wages will be done through banking channel. Glodyne, through its subsidiary

Smaarftech Technologies has partnered with the Rural Development Department of the

Government of Bihar for implementing and managing the National Rural Employment

Guarantee Scheme (NREGS) project in Bihar, ‗E-shakti‘. (www.glodynetechnoserve.in/)

Standard Chartered Bank, India‘s largest international bank, announced the launch of its online

remittance service, Transfer2Home, as part of its NRI services offering. The service will enable

customers to transfer money to India from USA, UK, UAE, Singapore, Hong Kong and Bahrain.

Standard Chartered has tied up with Times of Money in order to service customers in United

Kingdom, United Arab Emirates, Singapore, Hong Kong and Bahrain. The Bank has also entered

into a strategic arrangement with BNY Mellon for providing Automated Clearing House (ACH)

based remittance service from the United States. BNY Mellon is the global leader in asset

management and securities servicing. ( http://transfer2home.in)

3i Infotech Foundation (3i Infotech) has joined hands with the State Bank of India (SBI) to

provide 'Kiosk Banking' facilities to the rural citizens of India. 3i Infotech is a National Business

Correspondent for SBI, and shall leverage the I-SERV stores across rural India to provide

banking services to the hitherto unbanked population of the country. These services include

opening of accounts, cash transactions, deposits (Fixed and Recurring Deposits) and loans (Crop,

Home, Automobiles, Business, etc.). The tie-up, which will provide SBI access to over 6,000

villages in Tamil Nadu alone through more than 2,000 I-SERV stores of 3i Infotech (apart from

various other states where it will be gradually rolled out) over a course of time, will go a long

way in achieving the goal of financial inclusion in the country, especially in rural India.

The I-SERV initiative of 3i Infotech I-SERV model will involve the use of biometric devices,

which will enable verification and authentication of the identity of customers through recognition

of their fingerprints. It will therefore enable a rural customer to carry out the aforementioned

banking transactions at the remotely located Kiosk, instead of having to travel several miles to

the nearest bank branch.

(Source: SBI, National initiative on financial inclusion, 2010)

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Tata Indicom has tied up with Corporation Bank and Paymate to launch Tata Indicom Green

Money Transfer. Tata Indicom hopes that Tata Indicom Green Money Transfer can bring the

unbanked millions of Indians closer to the banking system. This will result in better financial

inclusion and economic freedom. Facts support the case for mobile banking in India, where there

are millions on the countryside who don‘t have bank accounts, but have a mobile phone instead.

In many African countries, mobile phones have become an alternate banking tool for many

people who don‘t have bank accounts.

DhanaX is an online-offline person-to-person lending platform that allows Indians to lend and

borrow money from each other DHANAX is inspired by the idea of an online community‘s

ability to come together and help each other. NGOs take up the task of disbursing these loans to

needy communities in their areas of operation. Interest is charged at 24%, of which DhanaX

keeps approximately 6%. (Source: DhanaX Information Services Pvt Ltd,)

There are systemic problems often thought to be typical of the developing world: poverty,

illiteracy, unreliable power supply and poor telecommunications. This hinders adoption of

internet banking. But this is also growing very fast with the development around the different

parts of world apart from India.

RURAL/MICROFINANCE ATM

Prodem is a microfinance institutions has installed 20 smart operated automatic teller machine

inside its branches. These ATM is unusual as that they incorporate fingerprints readers for clients

verification rather than PIN technology. For Prodem primary benefits of ATM network is greater

convenience for customers and increased deposit mobilisation.

BankoADEMI partnered with A TODA HARA (ATH), an electronic fund transfer service

providers that operates a network of 1000 rural ATMs supported by ATH. It provides 24 hour

acess to fund to its clients through multiple location.

MEB Kosovo has installed ATM to help the overburdened network of seven branches. It has

partnered with compass plus of Russia to design and implement an ATM network to support its

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increasing client base. it also uses walled ATM rather than stand alone for greater security

(adapted from Whelan 2005.

In India none of microfinance institutions have ATM network. Because microfinance institutions

worked on group methodology and cannot accept deposits so that they do not have stated with

ATM. There is power shortage in rural areas. There is an attempt to start Rural ATM. Vortex

Engineering, a pioneer and leading provider of Rural ATMs (Automated Teller Machines),

announced India‘s first large-scale rollout of Solar ATMs. This rollout follows the winning of an

order from State Bank of India for a deployment of 545 ATMs across semi-urban and rural India.

Of these 545 ATMs, over 300 will be solar-powered. A conventional ATM consumes about 1000

W of power and requires an air-conditioned environment-another 1500 W-for functioning. Thus,

a conventional ATM consumes about 1800 units of power every month. Vortex‘s Solar-powered

Gramateller Duo ATMs consume less than 100 W of power and do not require air conditioning,

thus consuming less than 72 units per month. This indicates a saving 1728 units per month and at

least Rs 1,20,000 per year (at a conservative commercial rate of Rs 6 per unit) when compared to

a conventional ATM installation. Compared to conventional ATM installations, Vortex‘s solar-

powered Gramateller Duo ATMs reduce CO2 emissions by at least 18,500 kg per year. With

built-in Biometric capabilities, Gramateller ATMs have been used by the Government to

disburse wages under the MGNREGA (Mahatma Gandhi National Rural Employment Guarantee

Act) programme.

(www.vortexindia.co.in)

Equity Building Society in Kenya were doing their operation manually initially. Its growth was

slow and profitability was marginal. Equity installed its first IT system, Bank 2000, and within

one year, its total number of accounts rose to 100,000 and its ability to process accounts tripled.

It was doing two or three times the business as before without increasing its staff. With manual

systems, there had been a physical limit to the number of people they could serve, but that limit

was burst by technology. As Equity gradually developed and refined its system, particularly user

interaction with the system, they were able to significantly increase staff productivity.

BANKING CORRESPONDENCE MODEL

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According to the Central Bank of Brazil, Correspondent Banking (CB) is “a measure aimed at

extending services to bank clients in areas where that bank did not have a branch”. Introduced

in the 1970s, the correspondent banking channel has risen in relevance, especially after 1999

when regulatory changes broadened the range of services that could be offered by correspondent

banking agents. As the fifth largest country in the world with a population of 201 million, Brazil

has correspondents covering 62 percent of the total number of points of service of the financial

system. All of the 5,564 municipalities in Brazil are now reached by the channel, with 25% of

the municipalities being served only by correspondents. Between 2000 and 2008, the

correspondent banking system grew 85.5 percent while bank branches grew only 16.7 percent,

clearly indicating the increasing presence of the channel. Brazilian Central Bank (BCB) launched

a financial inclusion program to improve financial access in the country. Similarly commercial

banks were in a position to benefit from exploring correspondent banking as a noteworthy

business model. Given the years of hyperinflation in the early 90s, banks undertook technology

improvements to allow for fast transaction processing. At the same time, banks became the

predominant recipients for bill payments, as the public sought quick deposit and use of their

rapidly depreciating currency. The resulting considerable increase in foot traffic to branches

related to payment business became a strong driver for the need to find a cost effective

alternative.

In India, financial inclusion has been a focus of attention in recent times. However, the facts

above reveal the real and somewhat uncomfortable picture. The increase in the number of

branches has not answered the needs of the farmers; and reaching the unbanked population to

enable inclusive growth is a serious problem today. Branchless banking could be the big step

towards providing easy financial access to the poor people and achieving financial inclusion. AP

model scheme operates on the financial inclusion platform; created by banks through their BCs.

Banks have been allotted specific mandals for bringing the unbanked population to the banking

system. As banks do not have branches at remote locations, the services of BCs are utilized.

These BCs organize enrolment camps at village level and collect information of the ‗would be

account holders‘ as also their biometric identification. The concerned government department

communicates the list of social security benefits to ensure that all intended beneficiaries in a

specific locality are brought under inclusive banking. Every account holder is issued a smart

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card, which contains the basic data of the account holder along with the biometric data and

photograph. The BCs have been provided a handheld device that facilitates connecting to bank‘s

database and carry out cash-in and cash-out function on behalf of the bank. A day or two before

the due date of payment, the government gives a cheque to the bank along with the details of the

beneficiaries. The bank credits the accounts of the beneficiaries enabling the BC to access the

account balance through a mobile access device and disburse cash at gram panchayat level.

Eko financial services mobile phone is a low-cost, low energy consuming, always-on device that

has today breached geographic boundaries and consumer segments. Eko has tied up with

Centurion Bank of Punjab (CBoP) and launched a pilot in West Delhi‘s Uttam Nagar area in

February 2008.

EKO financial services has established customer service points manned by a bank correspondent,

and use a secure password to withdraw or deposit money into his account. Eko is based on the

fundamental premise of reducing the cost of secure financial transactions and providing an

extremely intuitive user interface such that access to financial service can be democratized. Eko

works as a Business Correspondent of State Bank of India, ICICI Bank and as a distribution

partner of Bharti AXA Life Insurance. It provides the ability for these customers to deposit cash,

withdraw cash, remit funds and pay the insurance premium at these local ‗kirana‘ like stores. It

has network of more than 1000 retail outlets (processors, pharmacists, cybercafé, etc) across 5

states in India i.e, Delhi- NCR, Bihar,. Jharkhand, Maharastra & Uttar Pradesh). It has 75000

customers, processes more than 2 million across 25000 transactions per day.

(Source: interaction with EKO financial services officials)

Reliance Communications (RCom) has entered into a strategic tie-up with Atom Technologies,

an m-commerce solutions provider from the Financial Technologies India Ltd group. The

agreement enables RCom offer a fast, secure, inter-operable and convenient platform to conclude

payment transactions using Reliance Mobile. Atom will offer, through RCom, multiple banks

(Indian and foreign) as well as merchants on a common platform, allowing its subscribers to

make payments across the entire merchant base. The transactions are secure and PIN protected.

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Atom currently has merchant acquiring relationship with ICICI Bank, HDFC, Citi and Axis

Bank. (www.rcom.co.in/rcom/.../press_release_detail.jsp?id=362 –)

Indepay Networks has tied up with Tripura State Co-Operative Bank Limited (TSCB) to launch

rural banking services. The company will use a biometric enabled, UID compliant Micro ATM

infrastructure to process and deliver rural payments, including those for government schemes

such as Mahatma Gandhi National Rural Employment Generation Scheme (MGNREGA).

The program was piloted at a few branches of TSCB and is now being expanded throughout

Tripura. Biometric smart cards are being distributed. Indepay plans to open an extended rural

banking branch in each village through the Banking Correspondent model, and also offer non

financial services such as Rail/Air ticket booking and utility bill payments. IndePay has a

financial payment and transaction processing business that includes point-of-sale services, card

issuance and master merchant acquiring services for debit, prepaid, credit cards, rural banking,

electronic distribution of prepaid recharge and content, money transfer and utility bill payment

services.

Insurance Regulatory and Development authority also stressed the need engagement for

exploring the Banking Correspondents model for increasing the reach of insurance products in

rural areas.

KIOSK MODEL

It is fixed locations with personal computer and some form of internet access. It helps collections

of payments or deposits and financial product marketing. Apart from financial services it also in

getting market information, aggregation of inputs and sales, price quotes. In India ICICI bank

uses village kiosk to serve their rural clients. ITC also using these technologies as ―e Chaupal to

network with farmers.

BASIX started STEMS (Single Terminal Enabling Multiple Services), which is kiosk model,

substituting for bank branch. STEMS would be effective as part of BC arrangements. BASIX

will be able to reduce transaction costs; the poorer sections will find it easier to get access to

financial services, and the kiosk operator will not only earn commissions on the transactions, but

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will also be able to derive extra income from the BASIX customers by providing them other

services, such as ordering supply of inputs, receiving information on market prices for

commodities, accessing information from the Internet and so forth.

BASIX launched Technology assisted Financial Inclusion (TAFI) operations in some slums of

East DelhiA tripartite agreement was signed between Axis Bank, A Little World (our technology

partner) and Indian Grameen Services. (Annual Report BASIX, 2009).

I-Express is an instant money transfer service for Non Resident Indians (NRIs). This service is

expected to be available through ICICI Bank‘s select partners in the six nation Gulf Cooperation

Council (GCC). The I-Express facility offers the remitter, the option of visiting any partner outlet

to transfer an instant credit into the beneficiary account maintained with ICICI Bank in India, at

no extra cost. Under this service, the funds will be transferred immediately and the beneficiary

can withdraw the money within minutes of the payment.

KBS Bank is able to provide banking services in Chincholi town (hub) and door-step services in

about 25 villages (spokes). Together with IGS, KBS Bank has established such Business

Correspondent outlets in 18 Hub locations and 45 spoke locations in the three districts of its

operation. In the next three to five years, the bank seeks its presence in all the 147 blocks/hoblis

through hub outlets and over 1500 villages through spokes. (Annual report BASIX, 2009-10)

Equitas is an MFI which has more than 200,000 borrowers and follows the Grameen style of

group-based lending model. Efficiency is driven by innovations which combine the use of

several simple technologies at various stages of the credit process. It is using E-Docs and Real

Time monitoring. Membership and loan applications are completed manually by branches but

are couriered to a central processing center. The documents are then scanned and from there on

out, remain paperless. Forms use a series of check boxes which can be read by scanners and

coded automatically.

(Source: Greg Chen, 2009 Innovation in India: Microfinance and Information Systems (MIS)

India based company ‗iwaycash‘ – cash on mobile using prepaid debit cards, customers will be

able to top-up through their existing bank account transfers or by depositing cash. These cards

can be used in ATMs for withdrawals. Ordinary phones with simple SMS knowledge are

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sufficient to have the safest payment process. For shopping, utility bills, and money transfers,

simple SMS based instruction will enable easy, fast and safe mode of payments.

(www.indiaprwire.com/pressrelease/financial.../2009102836483.htm)

MANAGEMENT INFORMATION SYSTEM BASED SOFTWARE

Philippines-based SECDEP, working with the Grameen Foundation and Mifos Cloud made

technology. Before SECDEP's Mifos deployment in December 2009 the organization operated

completely on a manual basis, making everything from basic loan disbursements and account

maintenance to reporting time-consuming tasks. Management knew that a technology upgrade

was needed, but with a small staff and limited budget, operating an in-house server on which to

run software would not be possible. SECDEP serves just over 7,000 clients throughout Iloilo in

the Philippines. For small, emerging microfinance institutions the costs and time investment in

technology upgrades like Mifos can be intimidating.

Jitegemea, a growing Kenyan MFI automated their operations with support from local Mifos

Specialist and collaboration with fellow Mifos users around the globe in our online community.

For Jitegemea Credit Scheme (JCS), working with Mifos provided access to a technology

community in addition to much-needed data management tools. When JCS first started, they

processed loans and all financial transactions using custom-built Microsoft Excel spreadsheets.

However, as the organization grew, this rudimentary system became inadequate for handling

sensitive client data and reporting. JCS immediately benefited from its new found ability to

create customized loan products, accurately track impact, and keep client information secure.

SHARE has an effective Management Information System (MIS) to monitor borrower

repayment as well as individual employee accountability. The integrated technology platform

that SHARE has adopted would enable all the branches to send data online daily to a centralised

server for consolidation and analysis. It would help SHARE increase its operational efficiency

and employee productivity, which in turn would minimize cost and time. It would also provide

timely decision support to the management and ensure strict monitoring controls. The key factors

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that have influenced SHARE‘s investment in technology are flexibility, scalability and

interfacing capabilities of the technical solution. Its technology partner has been successful in

customising all microfinance products as per the requirements of the company. Moreover, the

task of validation and critical assessment of SHARE‘s technology platform has been carried out

by an international consulting firm.

Mahasemam Trust, in Tamil Nadu a microfinance institution with about 1 lakh customers,

employed the technology to ease the tedious process of collection of repayments for micro-loans.

it uses MiFI software is developed with the latest technology tools, like .Net platform as front-

end and SQL Server as back end. The flexible nature of the MiFI‘s N-Tier Architecture has

enabled the software to easily adapt to Mahasemam operations with ease. MiFI software collects

and maintains the financial information of all the clients, which enables the management to take

decisions quickly, reduces the operating cost, and reduces workload of the branches, which

enabled them to concentrate more on the field operations. It works in decentralized mode where

branches operate in stand-alone application (client-server model) and the data is transfer to the

head office at the time of EOD (End of the Day) Process through Dialup connections with in few

minutes.

Once the information has been transmitted to the MFI‘s MIS, this system performs the

corresponding entries and reconciliations. To ensure security for clients, the RTS smart cards

contained encrypted information which can only be decrypted by the RTS server. The smart card

users have their own PINs to perform transactions. The PINs can be authorized at the server

level, when the system is online, or at the POS device level, when the system is on offline mode.

As Table indicates, a simple cost analysis of the RTS solution shows the financial benefits of this

solution for MFIs thinking of expanding their operations to remote areas. The start up cost is

$1500 which is much cheaper than setting up branch which costs $ 40000 to $ 60000. Monthly

operating costs are $3550 in RTS where as in branch model it is $7000 to $10000.

www.sevaksolutions.org/docs/RTS%20Uganda%20Case%20Study.pdf

Leading Tunisian MFI Enda adapts Mifos platform into their operations to drive continued

growth and service innovation to poor women throughout Tunisia. Alignment between people,

processes, and technology played an important role in the Mifos deployment at enda inter-arabe,

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an award winning Tunisian MFI that had plans for rapid expansion and now serves more than

135,000 clients. Wishing to expand to an individual lending model but lacking the technology

needed to effectively track and report on loans.

The details of MIS used in microfinance and banking given in Chapter VI.

It may be conclude that various kinds of technology are used in various parts of the world.

Technology has helped financial access to the poor who are spread across Asia, Africa, and Latin

America etc.

In India various experiments of technology use in micro financing and financial inclusion has

been attempted. Few examples are ICICI Bank‘s partnership with FINO, Business

Correspondent (BC) model- ICICI, ICICI Bank - I-Express, HDFC Bank financial inclusion

programme, SBI ties up with OXIGEN, Financial inclusion by Axis Bank, Transfer2Home tie

up with Standard Chartered Bank for money transfer, Kisosk Banking of SBI with 3i Infotech

Foundation, Solar Powered ATM for Rural India by Vortex Engineering, GPRS technology by

Sanghmitra Rural Financial Services, Bangaluru, hand-held service by PUSHTIKAR -a low-

cost model, Andhra Pradesh model of opening no frill account, STEMS— technology pilot from

BASIX, Banking Correspondent for KBS Bank in Chincholi, Technology Assisted Financial

Inclusion- by BASIX, Dhanna X, E-Docs and real time monitoring by Equitas, mobile banking

by Eko financial services as business correspondents of SBI and ICICI, Tata Indicom Green

Money fund Transfer, iwaymedia - SMS based payment solution, ItzCash ties up with Tata

DoCoMo, Mobile banking Cashpor Microfinance, Varanasi and Glodyne Technoserve. These

organizations use various types of technology which had helped micro financing and financial

inclusion. Technology led Business correspondent model has helped in adoption of technology

for financial inclusion. But business viability of business correspondence is a question. There is

needed to make business correspondents viable by adopting profit sharing models.

Various banks have started banking correspondence model for financial inclusion. MFIs, as

agents of banks operating as Business Correspondents (BCs) are also being tried. The way the model can

work is for banks to use the outreach and the efficient distribution structures that MFIs have established.

However, as an off-shoot of banks, the channel can be used to not only push credit, but also to offer a

much wider range of products - savings, credit, insurance, pension and remittances. The model can de-

risk MFIs from a variety of risks such as the political and operational risks that came to the forefront in

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AP. Local political interests will find it difficult to interfere at an operational level with agents of banks,

regulated by RBI. MFIs as BC model will also ensure greater degree of oversight from banks (and

hopefully RBI) than has been the case with the bulk lending model currently in vogue. At the same time,

MFIs as agents of banks will be able to offer clients with a wider range of products.

From the above it may be concluded that different banks and mFIs have started micro financing

with the help of technology adoption, but efforts were made scattered way. Various banks and

mFIs using different kind of technology and an integrated effort have not been made. There may

be difficulties in transfer of data from one organisation to another if integrated efforts were not

taken. It is obvious from the above that different kinds of technology are being used in different

parts of world. Indian microfinance finance has also started using various kinds of technology.

Still lot has to be done seeing the vast demand in microfinance and other such institutions. Indian

microfinance institutions and banks should learn from experiences of different parts of the world

and should adopt technology. It would help them in access of rural and urban poor which were

excluded from mainstream of financial inclusion.

If we see the scenario of MFIs, because most of the MFIs in India are only into credit operation,

the face to face interaction is vital part. Adoption of technology is limited to maintaining the

management information system. Adoption of technology for delivery to the customers is very

limited. Technologies can help MFIs increase their scale and efficiency. Microfinance

institutions like SKS and BASIX has developed their own technologies. Many of the

microfinance institutions have purchased the technology from technology providers. But most of

the technology adoption in at microfinance institutions is limited to managing their information

system. There are huge R&D costs associated with these technologies, not to mention the

expenses required in customer education and outreach. However the potential of technology –

the potential it has to really revolutionize the industry and expand the banking services available

to the poor. Under the new regulatory guidelines, with interest and margin caps, the outreach of

typical group microfinance, and outreach in far-off areas, will be constrained. MFIs will not be

able to address remote clients unless some form of local agent structures are integrated into the

delivery methodology. Local kirana (grocer) shops, medical shops, teachers etc. can be agents

for MFIs, who in-turn act as agent aggregators and managers for banks, to enable technology

backed delivery models with lower delivery costs. One reason for higher adoption of technology

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in different parts of the world may be that the microfinance institutions are allowed to accept

deposits and also provide other financial services like remittance and insurance. In India, due to

regulatory framework, the microfinance institutions mostly register as society and non profit

company who were not allowed to accept deposits.

3.2: Computerization in public sector banks

As on 31st March 2009, out of the over 56203 branches of Public Sector Banks, only 45730

(branches have been fully computerized. Lack of computerization among over 50,000 branches

of Public Sector Banks provides a huge market for players in IT Industry.

Having gained experience in the earlier mode of computerization, the second Rangarajan

Committee constituted in 1988 drew up a detailed perspective plan for computerization in Banks

and for extension of automation to other areas like funds transfer, electronic mail, BANKNET,

SWIFT, ATMs etc.

The computerization in Public Sector Banks is a result of these initiatives. RBI has also gone

ahead in creating nationwide and localised network for integration of the entire financial system

Table No. 3.2.1: Status of Computerization in Public Sector Banks as on 31 March 2009 in

percentage terms.

Name of the Bank

Branches Under

CBS

Branches

Already Fully

Computerised

Fully

Computerised

Branches

Branches Partially

Computerised

Public Sector Banks 81.4 14.3 95.7 4.3

Nationalised Bank 73.4 20.4 93.8 6.1

Allahabad Bank 40.1 59.6 99.7 0.3

Andhra Bank 100.0 0.0 100.0 -

Bank of Baroda 65.8 34.2 100.0 -

Bank of India 85.8 14.2 100.0 -

Bank of Maharashtra 54.4 45.6 100.0 -

Canara Bank 38.6 61.4 100.0 -

Central Bank of India 34.2 52.7 86.9 13.1

Corporation Bank 100.0 - 100.0 -

Dena Bank 51.2 48.6 99.8 0.1

Indian Bank 100.0 - 100.0 -

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Indian Overseas Bank 95.3 3.1 98.4 1.6

Oriental Bank of Commerce 100.0 - 100.0 -

Punjab National Bank 100.0 100.0 100.0 -

Punjab and Sind Bank - 11.8 12.9 87.1

Syndicate Bank 100.0 0.0 100.0 0.0

UCO Bank 49.8 1.5 51.3 48.7

Union Bank of India 100.0 - 100.0 -

United Bank of India 69.3 22.2 91.5 8.5

Vijaya Bank 100.0 0.0 100.0 -

State Bank Group 100.0 0.0 100.0 -

State Bank of India 100.0 0.0 100.0 -

State Bank of Bikaner and

Jaipur 100.0 - 100.0 -

State Bank of Hyderabad 100.0 - 100.0 -

State Bank of Indore 100.0 - 100.0 -

State Bank of Mysore 100.0 - 100.0 -

State Bank of Patiala 100.0 - 100.0 -

State Bank of Saurashtra 100.0 - 100.0 -

State Bank of Travancore 100.0 - 100.0 -

Source: RBI Report, 2009

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Table 3.2.2: Computerization in Public Sector Banks (As on March 31, 2009)

Sr.

No.

Name of the

Bank

Branches Under

Core Banking

Solution

Branches

Already Fully

Computerised#

Fully

Computerised

Branches

(3+4)

Branches Partially

Computerised

No. of

Branches

1 2 3 4 5 6 7

Public Sector

Banks 45730.0 8049.0 53779.0 2423.0 56203

Nationalised

Bank 28932.0 8049.0 36981.0 2423.0 39405

1. Allahabad Bank 906.0 1346.0 2252.0 7.0 2259

2. Andhra Bank 1432.0 0.0 1432.0 0.0 1432

3. Bank of Baroda 1924.0 1002.0 2926.0 0.0 2926

4. Bank of India 2593.0 428.0 3021.0 0.0 3021

5.

Bank of

Maharashtra 773.0 648.0 1421.0 0.0 1421

6. Canara Bank 1053.0 1676.0 2729.0 0.0 2729

7.

Central Bank of

India 1202.0 1854.0 3056.0 462.0 3518

8. Corporation Bank 1111.0 0.0 1111.0 0.0 1111

9. Dena Bank 606.0 576.0 1182.0 1.0 1184

10. Indian Bank 1642.0 0.0 1642.0 0.0 1642

11.

Indian Overseas

Bank 1824.0 59.0 1883.0 30.0 1913

12.

Oriental Bank of

Commerce 1467.0 0.0 1467.0 0.0 1467

13.

Punjab National

Bank 4470.0 0.0 4470.0 0.0 4470

14.

Punjab and Sind

Bank 10.0 108.0 118.0 794.0 912

15. Syndicate Bank 2227.0 0.0 2227.0 0.0 2227

16. UCO Bank 1029.0 30.0 1059.0 1006.0 2065

17.

Union Bank of

India 2557.0 0.0 2557.0 0.0 2557

18.

United Bank of

India 1005.0 322.0 1327.0 123.0 1450

19. Vijaya Bank 1101.0 0.0 1101.0 0.0 1101

State Bank

Group 16798.0 0.0 16798.0 0.0 16798

20.

State Bank of

India 11687.0 0.0 11687.0 0.0 11687

21.

State Bank of

Bikaner and Jaipur 860.0 0.0 860.0 0.0 860

22.

State Bank of

Hyderabad 1031.0 0.0 1031.0 0.0 1031

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23.

State Bank of

Indore 470.0 0.0 470.0 0.0 470

24.

State Bank of

Mysore 718.0 0.0 718.0 0.0 718

25.

State Bank of

Patiala 846.0 0.0 846.0 0.0 846

26.

State Bank of

Saurashtra 460.0 0.0 460.0 0.0 460

27.

State Bank of

Travancore 726.0 0.0 726.0 0.0 726

- : Nil/Negligible.

# Other than branches under Core Banking Solution.

Source : RBI Report, 2009

From the above tables it may be observed that 95.7% of branches were fully computerized of

which 81.4% branches were under core banking solution and 14.3% were already fully

computerized. Remaining 4.3% branches were partially computerized. The break-up of bank-

wise position presented a mixed picture of computerization while branches of 17 banks

belonging to SBI groups and nationalized banks, viz. Andhra Bank, Corporation bank Indian

Bank, Oriental Bank of Commerce, Punjab National Bank, Syndicate Bank, Union Bank of

India, Vijaya Bank were fully computerized, branches of other nationalized banks (10) were at

varied stage of computerization. The branches of Punjab and Sind Bank and UCO Bank were

least computerized.

Number-wise out of total number of branches (56203), 53786 branches were fully computerized

and 2417 branches were yet to be fully computerized.

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3.2.3: Branches and ATMs of Scheduled Commercial Banks

Branches and number of ATMs of schedule commercial banks are presented below in table

3.2.3.

Table 3.2.3: Branches and ATMs of Scheduled Commercial Banks (As at end-March, 2009)

Sr

.

N

o.

Name of the

Bank

Branches ATMs Per

cent of

Off-

site to

total

ATMs

Per

cent of

ATMs

to

Branc

hes

Rural Semi-

urban

Urban Metro-

politan

Total On-site Off-

site

Total

1 2 3 4 5 6 7 8 9 10 11 12

Scheduled

Commercial

Banks 20,058 16,146 14,761 13,643 64,608 24,645 19,006 43,651 43.5 67.6

Public Sector

Banks 18,941 13,504 11,994 10,999 55,438 17,379 9,898 27,277 36.3 49.2

Nationalised

Banks 13,381 8,669 8,951 8,375 39,376 9,861 5,177 15,038 34.4 38.2

1 Allahabad Bank 952 398 466 401 2,217 121 90 211 42.7 9.5

2 Andhra Bank 393 394 376 262 1,425 248 477 725 65.8 50.9

3 Bank of Baroda 1,099 651 536 629 2,915 691 488 1,179 41.4 40.4

4 Bank of India 1,231 603 542 559 2,935 300 200 500 40.0 17.0

5

Bank of

Maharashtra 518 262 270 357 1,407 258 87 345 25.2 24.5

6 Canara Bank 726 694 678 642 2,740 1,218 788 2,006 39.3 73.2

7

Central Bank of

India 1,351 897 686 599 3,533 302 98 400 24.5 11.3

8 Corporation Bank 190 219 309 317 1,035 522 510 1,032 49.4 99.7

9 Dena Bank 352 225 219 297 1,093 289 102 391 26.1 35.8

10 Indian Bank 474 410 407 321 1,612 547 208 755 27.5 46.8

11

Indian Overseas

Bank 544 450 497 436 1,927 445 131 576 22.7 29.9

12

Oriental Bank of

Commerce 275 325 453 369 1,422 576 269 845 31.8 59.4

13

Punjab and Sind

Bank 283 127 226 222 858 43 – 43 – 5.0

14

Punjab National

Bank 1,881 895 849 702 4,327 1,541 609 2,150 28.3 49.7

15 Syndicate Bank 657 530 557 502 2,246 911 179 1,090 16.4 48.5

16 UCO Bank 769 410 451 428 2,058 304 110 414 26.6 20.1

17

Union Bank of

India 760 619 608 583 2,570 1,099 691 1,790 38.6 69.6

18

United Bank of

India 615 235 314 281 1,445 156 66 222 29.7 15.4

19 Vijaya Bank 257 229 336 279 1,101 290 74 364 20.3 33.1

Other Public

Sector Bank

20 IDBI Bank Ltd. 54 96 171 189 510 372 528 900 58.7 176.5

State Bank Group 5,560 4,835 3,043 2,624 16,062 7,146 4,193 11,339 37.0 70.6

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21

State Bank of

India 4,366 3,311 2,022 1,773 11,472 5,229 3,319 8,548 38.8 74.5

22

State Bank of

Bikaner and

Jaipur 292 240 157 168 857 294 201 495 40.6 57.8

23

State Bank of

Hyderabad 262 318 249 193 1,022 452 158 610 25.9 59.7

24

State Bank of

Indore 119 138 87 125 469 204 146 350 41.7 74.6

25

State Bank of

Mysore 210 138 148 168 664 294 87 381 22.8 57.4

26

State Bank of

Patiala 263 229 222 134 848 372 123 495 24.8 58.4

27

State Bank of

Travancore 48 461 158 63 730 301 159 460 34.6 63.0

– : Nil/Negligible.

As on 31st March 2009 there were 64608 branches of Scheduled Commercial Banks comprising

20058 rural branches, 16146 semi-urban branches, 14761 urban branches and 13643

metropolitan branches operating in the country. Out of total 64608 branches of scheduled

commercial banks there were 55438 branches of public sector banks. Out of 55438 branches of

public sector banks 39376 branches belonged to nationalized banks.

43651 ATMs were installed out of which 24645 were on site and 19006 were offsite all over the

country by all scheduled commercial banks. Out of 43651 public sector banks had set up 17379

on-site and 9898 off-side ATMs all over the country forming 62.5% of total ATMs installed in

the country. Out of 27277 ATMs set up by the public sector banks 15038 ATMs comprising

9861 on-site and 5177 off-site ATMs were set up by nationalized banks forming 35.1% of total

ATMs set up by public sector banks and 34.4% of total ATMs set up by all scheduled

commercial banks in the country.

Among public sector banks SBI and its associates had set up 16062 ATMs in the country out of

which there were 7146 on site and 4193 off site ATMs forming 36.8% of total ATMs in the

country.

Total ATMs (43651) set up by all scheduled commercial banks formed 67.6% of total branches

(64608). The ATMs (27277) set up by public sector banks constituted 49.2% of total branches of

public sector banks and 62.4% of total ATMs set up by all scheduled commercial banks.

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Among nationalized banks, IDBI Bank Ltd, Corporation Bank, Canara Bank, Union Bank of

India, Oriental Bank of Commerce were leading banks in setting up ATMs forming 176.5%,

99.7%, 73.2%, 69.6% and 59.4% of their total branches respectively. Other nationalized banks

were laggard in setting up ATMs in proportion to their branches which ranged between 9.55

minimum (Allahabad Bank) and 50.9% maximum (Andhra Bank).

Of all the ATMs (43651), 24645 ATMs were on-site and 19006 ATMs were off-site forming

56.5% and 43.5% of total ATMs respectively. Among nationalized banks, Andhra Bank and

IDBI Bank Ltd had set up 65.8% (highest) and 58.7% off site ATMs in proportion to their

branches. Other nationalized banks had set up off site ATMs which ranged between 16.4%

minimum (Syndicate Bank) and 49.4% maximum (Corporation Bank).

From the above analysis it may be concluded that there is lot of scope left for setting up of

ATMs in the country as ATMs (total numbering 43651) formed only 67.6% of total branches of

all scheduled commercial banks. It may be said that this was beginning only considering the

network of banks in the country as a whole and the magnitude of population served by them.

Table 3.2.4: Branches and ATMs of Scheduled Commercial Banks (Continued) (As at end-

March 2009)

Sr.

No.

Name of the

Bank

Branches ATMs % of

Off-site

to total

ATMs

Per cent of

ATMs to

Branches Rural Semi-

urban

Urban Metrop

olitan

Tota

l

On

-

site

Off-

site

Tota

l

1 2 3 4 5 6 7 8 9 10 11 12

Private Sector

Banks

1,113 2,638 2,715 2,411 8,87

7

6,9

96

8,32

4

15,3

20

54.3 172.6

Old Private Sector

Banks 842 1,554 1,344 933

4,67

3

1,8

30 844

2,67

4 31.6 57.2

1

Bank of Rajasthan

Ltd. 99 92 142 125 458 84 27 111 24.3 24.2

2

Catholic Syrian

Bank Ltd. 19 194 100 47 360 87 51 138 37.0 38.3

3

City Union Bank

Ltd. 36 61 72 40 209 117 5 122 4.1 58.4

4

Dhanalakshmi

Bank Ltd. 21 80 52 28 181 59 13 72 18.1 39.8

5 Federal Bank Ltd. 39 321 152 99 611 345 271 616 44.0 100.8

6 ING Vysya Bank 83 83 147 131 444 172 179 351 51.0 79.1

7

Jammu and

Kashmir Bank

Ltd. 220 83 124 64 491 182 68 250 27.2 50.9

8 Karnataka Bank 90 94 138 129 451 133 37 170 21.8 37.7

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Ltd.

9

Karur Vysya Bank

Ltd. 33 95 113 69 310 263 61 324 18.8 104.5

10

Lakshmi Vilas

Bank Ltd. 36 86 81 44 247 88 16 104 15.4 42.1

11 Nainital Bank Ltd. 24 24 22 22 92 – – – – –

12

Ratnakar Bank

Ltd. 24 26 17 17 84 9 – 9 – 10.7

13

SBI Commercial

and

International Bank

Ltd. – – – 2 2 2 – 2 – 100.0

14

South Indian Bank

Ltd. 68 236 130 85 519 212 68 280 24.3 53.9

15

Tamilnad

Mercantile Bank

Ltd. 50 79 54 31 214 77 48 125 38.4 58.4

New Private

Sector Banks 271 1,084 1,371 1,478

4,20

4

5,1

66

7,48

0

12,6

46 59.1 300.8

16 Axis Bank Ltd. 30 189 314 253 786

1,0

04

2,59

1

3,59

5 72.1 457.4

17

Development

Credit Bank Ltd. 4 14 13 50 81 73 43 116 37.1 143.2

18 HDFC Bank Ltd. 67 325 468 548

1,40

8

1,7

49

1,54

6

3,29

5 46.9 234.0

19 ICICI Bank Ltd. 138 461 400 410

1,40

9

1,8

63

2,85

0

4,71

3 60.5 334.5

20

IndusInd Bank

Ltd. 5 36 88 53 182 174 182 356 51.1 195.6

21

Kotak Mahindra

Ltd. 14 37 48 121 220 212 175 387 45.2 175.9

22 Yes Bank Ltd. 13 22 40 43 118 91 93 184 50.5 155.9

– : Nil/Negligible.

Source: RBI data bank, 2009

Amongst private banks, ICICI Bank has largest number of ATMs (4713) followed by Axis Bank

(3595) and Federal Bank (616). The private banks having least number of ATMs were installed

by International bank (2) and Ratnakar Bank (9). Although International bank has only 2

branches which were 100% computerised.

Private sector banks have more ATMs in terms of percent of ATM to branches. 172.6 % ATM

were found per branch in case of private sector banks that means 1.7 ATM per branch which is

three times as compared to public sector banks. There was large variation amongst private banks

in terms of percent of ATMs to branches. Highest percent of ATMs to branches was found in

case of Axis bank (457.4%) followed by ICICI bank (334.5%) and HDFC bank (234%).

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Some of the private banks were having very less percent of ATMs to branches. Ratnakar Bank

has only 10.7% of ATMs to branches. Other banks viz. Bank of Rajasthan, Catholic Syrian

Bank, Laxmi Vilas bank have less than 50 % of ATMs to branches where as city union bank,

Dhanlaxmi bank private limited, Tamil Nadu mercantile bank has more than 50% but less than

100% of ATMs to branches. These banks should expedite to establish ATMs to serve the

customer in better way.

3.2. 5 : Branches and ATM in foreign banks

Table 3.2.5: Branches and ATMs of foreign Banks (As at end-March 2009)

Sr.

No.

Name of the Bank Branches ATMs Per cent

of Off-site

to total

ATMs

Per

cent of

ATMs

to

Branc

hes

Rural Semi-

urban

Ur

ban

Metro-

politan

Tot

al

On-site Off-

site

Tota

l

1 2 3 4 5 6 7 8 9 10 11 12

Foreign Banks 4 4 52 233 293 270 784 1,05

4

74.4 359.7

1 AB Bank Ltd. – – – 1 1 – – – – –

2

ABN-AMRO Bank

N.V. 2 – 9 19 30 34 88 122 72.1 406.7

3

Abu Dhabi

Commercial Bank

Ltd. – – – 2 2 – – – – –

4

American Express

Banking Corp. – – – 1 1 – – – – –

5 Antwerp Bank Ltd. – – – 1 1 – – – – –

6

Bank Internasional

Indonesia – – – 1 1 – – – – –

7

Bank of America

NA – – – 5 5 – – – – –

8

Bank of Bahrain

and Kuwait B.S.C. – – – 2 2 – – – – –

9 Bank of Ceylon – – – 1 1 – – – – –

10

Bank of Nova

Scotia – – 1 4 5 – – – – –

11

Bank of Tokyo-

Mitsubishi UFJ

Ltd. – – – 3 3 – – – – –

12 Barclays Bank PLC – 1 2 2 5 6 5 11 45.5 220.0

13 BNP Paribas – – – 9 9 – – – – –

14 Calyon Bank – – – 6 6 – – – – –

15

Chinatrust

Commercial Bank – – – 1 1 – – – – –

16 Citibank – 1 11 29 41 54 415 469 88.5 1143.9

17 DBS Bank Ltd. 2 2 – 6 10 – – – – –

18 Deutsche Bank AG – – 6 7 13 12 20 32 62.5 246.2

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19 HSBC Ltd. – – 9 38 47 71 107 178 60.1 378.7

20

JPMorgan Chase

Bank – – – 1 1 – – – – –

21

JSC VTB Bank

Ltd. – – – 1 1

22

Krung Thai Bank

Public Co. Ltd. – – – 1 1 – – – – –

23 Mashreqbank psc – – – 2 2 – – – – –

24

Mizuho Corporate

Bank Ltd. – – – 2 2 – – – – –

25

Oman International

Bank S.A.O.G. – – 1 1 2 – – – – –

26 Shinhan Bank – – – 2 2 1 – 1 – –

27 Societe Generale – – – 2 2 – – – – –

28 Sonali Bank – – 1 1 2 – – – – –

29

Standard Chartered

Bank – – 12 78 90 92 149 241 61.8 267.8

30

State Bank of

Mauritius Ltd. – – – 3 3 – – – – –

31 UBS AG – – – 1 1

– : Nil/Negligible.

Source: Master office file (latest updated version ) on commercial Banks.

It is obvious from the table that branches of foreign banks are concentrated mostly (79.52) in

metropolitan area. Standard Chartered Bank has highest number of branches followed by HSBC,

City bank and ABN Amro. Percent of ATMs to branches was 359.7 which means 3.6 ATMs

were available per branch. Number of ATMs was highest in case of City bank followed by

Standard Chartered bank and ABN –AMRO bank.

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3.2.6: Financial indicators of banks in India

Table 3.2.6: Finance Indicators for India, 2001-08

Indicator 2001 2002 2003 2004 2005 2006 2007 2008 Benchmark

(OECD)

Access to finance

Demographic

branch

penetration (

branches per

100,000

people)

6.42 6.33 6.25 6.26 6.33 6.37 6.35 6.6 10—69

Demographic

ATM

penetration (

ATMs per

100,000

people)

1.63 1.93 2.4 3.28 47--167

Deposit

accounts per

1000 people

416.77 420.84 418.67 426.11 432.11 442.87 459.52 467.35 976-1671

Loan accounts

per 1000

people

50.99 53.93 55.84 61.88 71.42 78 83.59 89.03 248-513

Geographic

branch

penetration (

branches per

1000 km2)

22.18 22.26 22.41 22.57 22.99 23.46 24.13 25.49 1-159

Geographic

ATM

penetration

(ATMs per

1000 km2)

5.93 7.11 9.11 12.68 1-437

Performance and Efficiency

Return on

Equity (%)

13.8 17.3 21 23 16.9 17 17.31 17.34 1.90--28.10

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Return on

Assets(%)

0.9 1.1 1.5 1.7 1.3 1.31 1.43 1.57 0.10--1.80

Staff Cost

Ratio(%)

68.1 64.7 62.1 60.17 58.29 56.9 54.54 51.55 14.87--54.63

Net Interest

Margin (%)

2.98 2.66 2.85 3.07 3.07 3.01 2.99 2.61 0.40-2.93

(Source: Kiatchai Sophastienphong , Anoma Kulathunga (2001) ―Getting Finance in South Asia 2010‖,

The World Bank)

Note: The Benchmark Indicator ranges are for selected high-income OECD member countries (Australia,

Canada,France, Germany,Italy,Japan, the republic of Korea, New Zealand and the United States)

From the above table it may be observed that demographic branch penetration in India during the

period 2001-08 was comparatively very low and ranged between 6.25 to 6.6, as compared to

OECD bench mark 10-69. During the year 2001 it was 6.42 and thereafter it declined to 6.33

during 2002 and further declined to 6.25 during 2003 but thereafter it started rising and was 6.26,

6.33, 6.37, during 2004, 2005 and 2006 respectively. Again the penetration went down from 6.37

during 2006 to 6.35 during 2007. However, it registered the highest penetration indicator at 6.6

during 2008 for the period 2001-08.

Demographic ATM penetration in India was found to be low in the range of 1.63 to 3.28 during

2005 to 2008 as compared to OECD benchmark 47-167. However, it had shown rising trend.

Deposit accounts per 1000 people, although showing rising trend from 416.77 during 2001 to

467.35 during 2008 (except the year 2003 in which it had declined to 418.67 from 420.84 during

2002) but it was also very low as compared to OECD benchmark 976-1671.

Loan accounts per 1000 people had continuously registered rising trend from 50.99 during 2001

to 89.03 during 2008 but it was also very low as compared to OECD benchmark 248-513.

Geographic branch penetration showed uptrend from 22.18 during 2001 to 25.49 during 2008

which could be categorized as modest performance but was very low when compared to higher

OECD benchmark at 159.

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Geographic ATM penetration was rising at a faster rate and had gone up from 5.93 during 2005

to 12.68 during 2008. However, it was too low from OECD higher range (benchmark) at 437.

Return on equity of banks in India was hovering around 17 and was quite high from lower range

benchmark (OECD) at 1.90 but was much lower than higher range (benchmark OECD) at 28.10.

So far as return on assets was concerned, it ranged between 0.9 to 1.7 during 2001-2008 and was

near to higher benchmark (OECD) at 1.80. Staff cost ratio of Indian banks was consistently very

high. However, it had shown declining trend and it was 51.55 during 2008 which was lower than

higher benchmark range at 54.63. Net interest margin of Indian banks was consistently good

which can be favourably compared with OECD higher benchmark at 2.93.

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3.3: Use of various technologies by selected banks and mFIs

The responses of use of different technology were collected from sampled banks (10) and

microfinance institutions (20) are presented in table 3.3.1. Microfinance institutions were

selected representing various region of the country. The south region was given more

representation because of concentration of more number of microfinance institutions and more

technology adoption in southern region of India. The purpose of this section is to analyse

awareness about modern technology among MFIs and bankers, compare the impact of use of

technology on cost structure, outreach and delivery efficiency and adaptability for banks and

MFIs.

Table 3.3.1: Officials response on use of following technology

Sl.

No.

Name of

Technology Banks/MFIs

Used Not Used Planning Stage

1 24 hour on call

service

Banks 7 3 0

70.0% 30.0% 0.0%

MFIs 3 16 1

15.0% 80.0% 5.0%

2 Automated Teller

Machine (ATMs)

Banks 8 2 0

80.0% 20.0% 0.0%

MFIs 0 20 0

0.0% 100.0% 0.0%

3 Biometric Card

Banks 7 3 0

70.0% 30.0% 0.0%

MFIs 3 15 2

15.0% 75.0% 10.0%

4 Charge Card

Banks 3 7 0

30.0% 70.0% 0.0%

MFIs 0 20 0

0.0% 100.0% 0.0%

5 Credit Cards

Banks 8 0 2

80.00% 0.00% 20.00%

MFIs 0 20 0

0.0% 100.0% 0.0%

6 Credit Scoring

Banks 6 3 1

60.0% 30.0% 10.0%

MFIs 3 14 3

15.0% 70.0% 15.0%

7 E-Payment of Banks 7 0 3

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utility bills and

taxes 70.0% 0.0% 30.0%

MFIs 8 6 6

40.0% 30.0% 30.0%

8

Interactive Voice

Response

Technology

(IVR)

Banks 4 6 0

40.0% 60.0% 0.0%

MFIs 1 18 1

5.0% 90.0% 5.0%

9 Internet Banking

Banks 8 2 0

80.0% 20.0% 0.0%

MFIs 9 11 0

45.0% 55.0% 0.0%

10 Mobile Banking

Banks 6 3 1

60.0% 30.0% 10.0%

MFIs 6 13 1

30.0% 65.0% 5.0%

11 Personal Digital

Assistant (PDA)

Banks 6 4 0

60.0% 40.0% 0.0%

MFIs 4 14 2

20.0% 70.0% 10.0%

12 Point of Sale

(POS) Terminals

Banks 6 4 0

60.0% 40.0% 0.0%

MFIs 3 15 2

15.0% 75.0% 10.0%

13 Computer

Banks 10 0 0

100.0% 0.0% 0.0%

MFIs 20 0 0

100.0% 0.0% 0.0%

14 Software

Banks 10 0 0

100.0% 0.0% 0.0%

MFIs 17 2 1

85.0% 10.0% 5.0%

Source: Primary Survey

The organization status regarding the technology use could also be a major parameter to judge

how far the technology usage was beneficial for those financial organizations. In case of MFIs,

the technology usage was comparatively less. This could be the area to work on and increase its

usage. All the banks and MFI officials said that they are already using computers for the day to

day functioning. The other major technology which was in use in almost all the organization

surveyed was software. 100% of the bank surveyed and 85% of the MFIs were already using

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software. MFIs have not started yet with the ATM. Only 15% of the MFI official surveyed said

they are using the biometric cards. Charge cards were not used in the most of the banks. Only 3

out of 10 bank officials surveyed said that their banks were using charge cards. Canara Bank, and

Syndicate Bank staff were the banks already using the charge card. None of the MFIs were using

the charge card. Few technologies like E-payment of utility bills and taxes, credit scoring was on

the planning stage in some of the banks and MFIs.

It may be concluded that there is need for improvement in geographic branch penetration, ATM

penetration. Staff cost ratio has to be reduced. Technology may be one of the solution to reduce

the staff cost. Demographic branch penetration in India is very low as compared to OECD

standard. It has to be increased. It is not possible to open brick and mortar branch offices at

every place. Banking correspondence and banking facilitator model would be solution to reach in

unreached areas and clients.

Organisation wise details are presented in annexure V

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CHAPTER IV

FACTORS AFFECTING TECHNOLOGY

ADOPTION IN MICROFINANCE

4.1: Factors affecting adoption of technologies

The data were collected from 10 banks officials and 20 mFIs officials to understand factors

affecting technology. The responses of banks were taken from regional and local headquarters

from Bihar as banking operation are uniform through out the country. Microfinance institutions

were selected from Bihar, West Bengal, Andhra Pradesh, Karnataka, and Uttar Pradesh keeping

the various regions into mind. More representation from South India was due to more

concentration of microfinance institutions and most of the microfinance institutions operating in

various parts of India has headquarter in south India eg Andhra Pradesh, Karnataka and Tamil

Nadu. The officials from sampled microfinance institutions were interviewed. The purpose of

this section is to analyze the factors influencing the use of technology in microfinance in India.

Major factors were availability of finance/Capital, Technological Awareness, Availability of

technology, Timely acquisition of technology, Degree of diffusion of technologies, Demand of

customer, Competition in market, Availability of qualified human resources and Government

Regulation.

Table 4.1.1: Factors that affect the adoption of technologies

Factors Banks/

MFIs

Officials

First Second Third Fourth Fifth Sixth Seventh Eighth Ninth weighted

average

Availability of Finance/Capital

Banks 4 2 3 1 0 0 0 0 0 1.65 (II)

40.0% 20.0% 30.0% 10.0% 0.0% 0.0% 0.0% 0.0% 0.0%

MFIs 10 5 2 2 1 0 0 0 0 3.35 (I)

50.0% 25.0% 10.0% 10.0% 5.0% 0.0% 0.0% 0.0% 0.0%

Technological

Awareness

Banks 3 5 1 1 0 0 0 0 0 1.67 (I)

30.0% 50.0% 10.0% 10.0% 0.0% 0.0% 0.0% 0.0% 0.0%

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MFIs 4 3 3 4 2 3 1 0 0 2.78 (II)

20.0% 15.0% 15.0% 20.0% 10.0% 15.0% 5.0% 0.0% 0.0%

Availability of technology

Banks 1 0 4 2 2 1 0 0 0 1.35 (III)

10.0% 0.0% 40.0% 20.0% 20.0% 10.0% 0.0% 0.0% 0.0%

MFIs 4 3 2 4 3 3 1 0 0 2.74 (III)

20.0% 15.0% 10.0% 20.0% 15.0% 15.0% 5.0% 0.0% 0.0%

Timely

acquisition of technology

Banks 0 0 0 2 2 3 2 0 1 0.94( Vi)

0.0% 0.0% 0.0% 20.0% 20.0% 30.0% 20.0% 0.0% 10.0%

MFIs 1 2 2 3 4 3 3 2 0 2.26 (IV)

5.0% 10.0% 10.0% 15.0% 20.0% 15.0% 15.0% 10.0% 0.0%

Degree of diffusion of

technologies

Banks 0 1 0 2 1 1 2 3 0 0.94 (Vii)

0.0% 10.0% 0.0% 20.0% 10.0% 10.0% 20.0% 30.0% 0.0%

MFIs 0 1 1 2 2 3 3 5 3 1.69

(VIII)

0.0% 5.0% 5.0% 10.0% 10.0% 15.0% 15.0% 25.0% 15.0%

Demand of customer

Banks 0 1 1 0 1 4 2 1 0 1.00 (Iv)

0.0% 10.0% 10.0% 0.0% 10.0% 40.0% 20.0% 10.0% 0.0%

MFIs 0 2 2 2 1 3 4 2 4 1.83 (VII)

0.0% 10.0% 10.0% 10.0% 5.0% 15.0% 20.0% 10.0% 20.0%

Competition in

market

Banks 1 1 1 0 1 1 1 3 1 0.98 (V)

10.0% 10.0% 10.0% 0.0% 10.0% 10.0% 10.0% 30.0% 10.0%

MFIs 0 1 3 1 3 3 2 5 2 1.85 (VI)

0.0% 5.0% 15.0% 5.0% 15.0% 15.0% 10.0% 25.0% 10.0%

Availability of

qualified human

resources

Banks 1 0 0 1 2 0 1 3 2 0.85

(VIII)

10.0% 0.0% 0.0% 10.0% 20.0% 0.0% 10.0% 30.0% 20.0%

MFIs 1 2 4 1 2 1 4 2 3 2.07 (V)

5.0% 10.0% 20.0% 5.0% 10.0% 5.0% 20.0% 10.0% 15.0%

Government

Regulation

Banks 0 0 0 1 1 0 2 0 6 0.61

0.0% 0.0% 0.0% 10.0% 10.0% 0.0% 20.0% 0.0% 60.0%

MFIs 0 1 1 1 2 1 2 4 8 1.43

0.0% 5.0% 5.0% 5.0% 10.0% 5.0% 10.0% 20.0% 40.0%

Weights assigned (for first =10, second =9, ..........................Ninth =2,)

Source: Primary Survey,

The factors that affect the adoption of technology were many. The officials were asked to rate

the 9 major factors according to their preference. Availability of finance/capital and

technological awareness were the major factors that affected the adoption of technology in their

organization. 40% of the bank officials and 50% of the MFI officials ranked availability of

finance/capital as the main factor affecting the adoption of technology. The factors which were

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least important according to the officials were Government regulation, demand of customer and

degree of diffusion of technology. Availability of qualified human resources, timely acquisition

of technology, and availability of technology were having mixed response. Technology

awareness among staff was ranked overall first by bank staff whereas availability of fund was the

first ranked by mFIs staff.

4.1.2: Officials response on reasons for not using the technology

Responses on reasons for not using various technologies were collected from banks and mFIs

officials and are presented in table 4.1.2.

Table 4.1.2: Reasons for not using the following technologies

Sl. No. Name of Technology Reasons

1 24 hour on call service Connectivity, Cost, Not needed/not

ready by mFIs

2 Automated Teller Machine (ATMs) Lack of electricity, High establishment

cost, Lack of knowledge, not needed by

mFIs

3 Biometric Card lack of awareness, high cost, After sale

service/support service limitation,

4 Charge Card High cost, lack of connectivity

5 Credit Cards High cost, financial illiteracy,

6 Credit Scoring Not aware

8 E-Payment of utility bills and taxes illiteracy of customers,

9 Interactive Voice Response

Technology (IVR)

Cost/Implementation problem, rural

client base, lack of knowledge, not

needed

10 Internet Banking High establishment cost, borrowers are

not literate

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11 Mobile Banking Borrowers are not literate enough, lack

of connectivity, poor knowledge of

technology, not needed at present,

12 Personal Digital Assistant (PDA) Cost and lack of trained staff, not

needed/not aware

13 Point of Sale (POS) Terminals lack of Competency of Staff to use

technology, connectivity problem, not

needed

14 Computerisation of branch Lack of skilled staff, lack of funds

15 Software Lack of fund, lack of awareness

Source: primary survey

Several technologies were not still used by these organizations. The problems which are common

to most of the organizations are high establishment/implementation cost, lack of electricity, lack

of technical knowledge, low literacy level of the clients.

Moreover, one of the reasons stated by them was also that the technologies like Automated

Teller Machine (ATMs), biometric card, Charge card, credit cards, e-payment of utility bills,

IVR, PDA, POS terminals were not needed yet or they were not ready for it.

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CHAPTER V

AWARENESS AND IMPACT OF MODERN

TECHNOLOGY IN MICROFINANCE

The data were collected from 10 banks officials and 20 mFIs officials to understand factors

affecting technology. The responses of banks were taken from regional and local headquarters

from Bihar as banking operation are uniform through out the country. Microfinance institutions

were selected from Bihar, West Bengal, Andhra Pradesh, Karnanatka, and Uttar Pradesh keeping

the various regions into mind. More representation from South India was due to more

concecntartion of microfinance institutions and most of the microfinance institutions operating in

various parts of India has headquarter in south India eg Andhra Pradesh, Karnataka and

Tamilnadu. The officials from sampled microfinance institutions were interviewed. The purpose

of this section is to analyze the awareness about modern technology among MFIs and bankers,

compare the impact of use of technology on cost structure, outreach and delivery efficiency,

adaptability etc for banks and MFIs.

5.1: Awareness, use, cost of various technology

Awareness, use, cost of various technology, reasons for non adoption, factors affecting adoption

were collected from banks and mFIs and are presented below.

5.1.1: Awareness of technology

The data on awareness of different technology used in microfinance and banking were collected

and presented in table below:

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Table 5.1.1: Awareness regarding following technology

Sl. No. Name of Technology Banks MFIs

1 24 hour on call service 8 13

80.0% 65.0%

2 Automated Teller Machine (ATMs) 10 20

100.0% 100.0%

3 Biometric Card 10 15

100.0% 75.0%

4 Charge Card 5 13

50.0% 65.0%

5 Credit Cards 10 16

100.0% 80.0%

6 Credit Scoring 8 13

80.0% 65.0%

7 E-Payment of utility bills and taxes 10 14

100.0% 70.0%

8 Interactive Voice Response Technology

(IVR)

8 15

80.0% 75.0%

9 Internet Banking 10 15

100.0% 75.0%

10 Mobile Banking 9 17

90.0% 85.0%

11 Personal Digital Assistant (PDA) 7 14

70.0% 70.0%

12 Point of Sale (POS) Terminals 8 13

80.0% 65.0%

13 Computer 10 20

100.0% 100.0%

14 Software 10 20

100.0% 100.0%

Source: primary survey

The awareness level of Banks and MFI officials regarding the various technologies were

collected. Banks officials were generally more aware about the various technologies than the

MFI officials. ATMs, Biometric Card, Credit Card, E-payment of utility bills and taxes, internet

banking, computer and software have 100% awareness among Bank officials. While the new

technology like charge card had just 50% awareness among the Bank officials.

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Among the MFI officials, 24 hour on call service (65%), charge card (65%), credit scoring

(65%), point of sale (65%) terminals have low awareness level in comparison to ATMs (100%),

Computer (100%) and software (100%). The other relatively new technology like E-payment of

utility bills and taxes (70%) and Personal Digital Assistant (PDA) (70%) were also less known.

5.1.2: Changes on cost structure they have experienced after incorporating technology.

According to officials, the changes on cost structure they have experienced after incorporating

technology are presented below.

Table 5.1.2: Changes on cost structure they have experienced after incorporating

technology

Sl.

No. Parameter

Officia

ls

Before adoption After adoption

High Medium low Reduce

d

Increas

ed

Non –

response /not

clear

1 Transaction

cost

Bank 8 2 0 8 0 2

MFI 12 6 7 10

2 Return on fund Bank 3 6 1 0 8 2

MFI 4 3 13 0 11 9

3 Productivity

per employee

Bank 3 6 1 0 6 4

MFI 1 7 12 1 11 8

4 Productivity

per branch

Bank 3 5 2 2 7 1

MFI 4 5 11 4 13 3

6 Adaptability Bank 4 3 3 0 8 2

MFI 3 5 12 0 12 8

Source: primary survey

When it comes to proper utilization of resources and effective cost structure, usage of technology

plays an important role. Majority of the officials surveyed, were of the view that usage of

technology have reduced the transaction cost, total cost and bad debts. While most of them also

said that after adoption of technology they have experienced increased return on fund,

productivity per employee and productivity per branch. Therefore, overall there has been

favourable response to the technology adoption in terms of cost structure. This in turn increases

the performance of the financial institutions significantly. Actual estimation of increase was

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difficult as lot of other factors like human resource management, competition, and demand for

credit affects the above variables other than technology.

5.1.3: Official’s response regarding change in outreach delivery after incorporating

technology.

View from officials regarding change in outreach, delivery efficiency, recovery and adaptability

after incorporating technology were collected and presented below in table 5.1.3.

Table 5.1.3: Changes on outreach delivery after incorporating technology

Source: primary survey

It is obvious from the table that most of the officials stated that number of clients/ borrowers

have increased after technology adoption. Technology has helped them to satisfy their clients in

better manner through providing quick transaction, loan amount assessment, processing of loan,

transfer of funds and other financial services. There was improvement in disbursement, average

debt per borrower, recovery % because monitoring of borrowers became faster than earlier.

Officials were not able to quantify the impact and some were not clear about actual impact.

Delivery efficiency and adaptability also increased in most of the cases.

Sl.

No. Parameter Officials

After adoption

Reduced Increased Non response /not

clear

1 No of

borrowers

Bank 0 6 4

MFI 0 13 7

2 Disbursement Bank 0 4 6

MFI 0 14 6

3 Average debt

per borrower

Bank 0 5 5

MFI 0 11 9

4 Amount

recovered

Bank 0 4 6

MFI 0 6 4

5 Recovery % Bank 0 5 5

MFI 3 12 5

6 % growth in

business

Bank 0 7 3

MFI 0 10 5

7 Delivery

efficiency

Bank 0 8 2

MFI 0 10 10

8 Adaptability Bank 0 6 4

MFI 0 12 8

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5.1.4: Benefits of technology

The ranking of benefits of various technologies were collected from officials of mFIs and banks

are presented in table 5.1.4. Weighted average of their responses was also calculated.

Table 5.1.4: Ranking for the following Benefits of Technology

Sl.

No. Benefits

Banks/MFIs

Officials First Second Third Fourth

Weighted

average

1 Productivity

Banks 4 2 4 0 2.86

40.0% 20.0% 40.0% 0.0%

MFIs 12 3 3 2 5.93

60.0% 15.0% 15.0% 10.0%

2 Profitability

Banks 3 4 2 1 2.71

30.0% 40.0% 20.0% 10.0%

MFIs 3 5 7 5 4.36

15.0% 25.0% 35.0% 25.0%

3 Competitiveness

Banks 2 2 2 4 2.00

20.0% 20.0% 20.0% 40.0%

MFIs 3 3 5 9 3.64

15.0% 15.0% 25.0% 45.0%

4 Safety/ Security

Banks 1 2 2 5 1.71

10.0% 20.0% 20.0% 50.0%

MFIs 2 9 5 4 4.64

10.0% 45.0% 25.0% 20.0%

Source: Primary survey

It is obvious from the above table that mFis and banks get number of benefits of technology use.

Although it remains to be seen how the officials working with it rate the benefit coming out of

the technology usage. Most of the bank (40%) and MFI officials (60%) said that technology was

beneficial in enhancing the productivity. While some said that profitability was also major

benefit of the technology. While very less official surveyed ranked safety and security as the

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benefit of the technology. Competitiveness had mixed response from the officials. Most of the

officials (40% of Banks and 45% of MFI) placed this at 4th

position.

5.1.5: Costs of adoption of various technologies

According to officials, the cost of adopting following technologies is as follows:

Table 5.1.5: Cost of adoption of different technologies

Sl.

No.

Name of Technology Average

Establishment

cost

Average yearly

operational cost

Average yearly

Maintenance

Cost

1 24 hour on call service 35000 20000 10000

2 Automated Teller Machine

(ATMs)

117500 12000 15000

3 Biometric Card 50000 NA 10000

4 Charge Card NA NA NA

5 Credit Cards NA NA NA

6 Credit Scoring Score board

development

$10000

NA NA

7 Debit Cards NA NA NA

8 E-Payment of utlity bills and

taxes

NA NA NA

9 Interactive Voice Response

Technology (IVR)

$ 10,000 for in

house system

NA NA

10 Internet Banking NA 100000 NA

11 Mobile Banking 2000000 200000 200000

12 Personal Digital Assistant (PDA) 25000 3000 NA

13 Point of Sale (POS) Terminals 16000 NA NA

14 MIS software 3-5 lakhs 50000 to 100000 50000 to 100000

Source: Primary Survey

It is obvious from the table that establishment of MIS software, mobile banking is costly for

small mFIs. ATM establishment also costs high. For RRBs and mFIs the client base is so

scattered that establishment of ATM was not profitable. Rural ATM run by solar or battery

which is comparatively cheaper can be installed in rural areas by banks.

5.1.6: Problems faced by mFIs and banks in adoption of technology

Problems faced by officials of mFis and Bank officials were collected and presented in table

5.1.6.

Table 5.1.:6 Problems faced by mFIs and banks in adoption of technology

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Sl.

No. Problems Banks Percentage MFIs Percentage

1 High Maintenance Cost 2 10.0% 12 60.0%

2

Unavailability of spare

parts

2 10.0% 6 30.0%

3

Vendor's capacity to

provide technical support

2 10.0% 9 45.0%

4

After sales service/Local

service centre

2 10.0% 5 25.0%

5

Capacity building of

employees

4 20.0% 13 65.0%

6

Financial illiteracy of

client

3 15.0% 16 80.0%

7 Infrastructure problems 3 15.0% 15 75.0%

8 Availability of electricity 3 15.0% 18 90.0%

9

Financial problem of

acquiring technologies

4 20.0% 16 80.0%

Source: Primary survey

There were various problems faced by officials related to other supporting system of the existing

software in smooth running of day to day operations. The most common problems faced by MFIs

were financial illiteracy of the clients (80%), financial problem of acquiring technologies (80%)

and non availability of electricity (90%). The other major problems of MFIs were infrastructure

problems (75%) and capacity building of employees (65%). High maintenance cost (60%) was

also one of the major concerns with mFIs.

While in case of banks, the problems were not concentrated to one single issue. They didn‘t find

the problems associated with the supporting system of the existing software to be so severe that

could hinder the smooth functioning of day-to-day operations. Capacity building of the

employees (20%) and financial problem of acquiring technologies (20%) were the few concerns.

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5.1.8: Assistance required in adoption of technology

Response regarding assistance required by banks and mFIs officials were collected and presented

below

Table 5.1.8: Assistance required in adoption of technology

Sl.

No. Items

Banks Percentage MFIs Percentage

1 Financial help for

acquiring technology

4 40.0% 15 75.0%

2 Assistance for

Computerization of the

organization

2 20.0% 8 40.0%

3 Capacity building of

the organization head

7 70.0% 16 80.0%

4 Capacity building of

staff

6 60.0% 16 80.0%

5 Capacity building of

client

6 60.0% 14 70.0%

Source: Primary survey

There were problems in adoption of technologies and those needed to be solved as well. Some

help which are required in adoption of technology are mentioned in the above table. The bank

officials pointed out that staffs should be trained on technology. Capacity building of the

organization (70%) staff (60%) and clients (60%) were most important help required by banks.

About 40% of the bank officials said that financial assistance should be provided for acquiring

technology. MFI officials also were of the same view as bank officials. The help needed by the

MFI officials in adopting technology were capacity building of the organization head (80%),

staff (80%) and clients (70%). Connectivity and infrastructure support are the other major help

required by the officials to adopt technologies.

5.1.9: Vision for technology for Microfinance after 5 years:

In order to understand the aspiration of the institutions with regard to technology, the officials of

both banks and MFIs were asked to point out the vision for technology for Microfinance after 5

years.

Few of the responses are as mentioned below:

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Core banking solution of each and ICT based delivery channel to serve the rural customers.

-Samastipur Kshetriya Gramin Bank

“100% financial inclusion through Technology intervention”- - UBI

―Inclusion of young and technology trained people to implement modern banking technology”.

-UCO Bank, zonal Patna

“There would be no use of paper for any kind of financial transaction; mobile banking will beat

all other technology”- PNB, Chanakya Tower, Patna

“Technology which can help the organizations with comprehensive solution for all their

departments to increase productivity, profitability with a user friendly approach and which

reduces human work while maintaining flexibility. Adoption of technology at branch level will

help to reach millions of poor people. ”

-Disha Microfinance Pvt. Ltd.

“All the branches should computerize Mobile and web based technology”-

-Nav Achetana Microfin Services Private Limited

“Our vision for technology for microfinance after five years is to work with 20 branches at an

outstanding of Rs. 60 crores with web based software with tailor system. All branches should be

computerized”.

-Mahashakti Foundation, M. Rampur Kalahandi, Orissa

“Technology in Bihar Development Trust is generally limited to Computers and MIS/Accounting

Software, but should use non-traditional delivery technologies, such as automated teller

machines (ATMs), point-of-sale (POS) networks or other devices in retail outlets which use

debit/credit cards to facilitate electronic payments and transactions and mobile phone banking”.

-Bihar Development Trust

―The cost of the technology is high. It should be made available in less cost and technology

should be such that every aspect of Microfinance should get digitalized and all should come in

one package”. -Agricultural Science Foundation, Hyderabad

“Technology adoption at Sambandh at branch level will reduce the cost of Micro Financial

Services and thus creating a win-win situation for both the clients and the organization”.

-Sambandh Finserve Pvt. Ltd.

―Technology should be available at low cost with high efficiency/performance. User friendly for

all level of users. Also help in company security and productivity”.

-Sarvodaya Nano Financial Services India Private Limited Chennai

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“All the information would be available online and data entry would be done in the field itself

using sophisticated mobile phones/PDA's etc”. -BFSPL

“Training to a vibrant system, it takes case of day-to-day operations and should support the

campus growth with accuracy”- -Spandan Sphoorty finance limited Hyderabad.

“Computerization of all branches, adoption of mobile banking in most of the branches”.

-Basix, Hyderabad

“Organization would be fully computerized with CBS, Rural ATM at branch level, and Full

implementation of mobile technology”.

- IDF Financial service Pvt. Ltd.

“Reach customer door step with technology. HHBM/POS/Mobile banking, Easy access to their

funds and Banking transaction, Cashless transaction using magnetic card like biometric, debit

card, CBS, Rural ATM”. -Ujjivan Finance Service Pvt. Ltd

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5.2: Awareness and impact of modern on microfinance and

bank clients

Awareness and impact assessment of technology were analysed by collecting data from clients of

10 banks banks and 10 mFIs. 20 clients each from selected banks and microfinance institutions

were selected. Clients were selected randomly.

5.2.1: Client’s profile

Clients profile of banks and microfinance institutions were collected with respect to age,

education, gender, marital status, income and occupation and presented in different tables below.

5.2.1.1: Age wise classification of clients

Age wise classifications of clients are presented below.

Table 5.2.1.1: Age- wise classification of clients

Sl. No. Age-Group Bank MFI Total

1 16-25 31 28 59

15.5% 14.0% 14.8%

2 26-35 85 112 197

42.5% 56.0% 49.3%

3 36-45 52 43 96

26.0% 21.5% 24.0%

4 46-55 24 14 38

12.0% 7.0% 9.5%

5 56-65 8 3 11

4.0% 1.5% 2.8%

Total 200 200 400

Source: Primary Survey

Most of the clients associated with either the banks or MFIs are in the young age group. 70% of

the clients associated with MFIs and 58% clients associated with banks are below 35 years of

age. This shows the growing awareness level of younger population towards MFIs. They are now

open to get benefits from the institutions like MFI and make their future bright.

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5.2.1.2: Educational classification of clients

Educational classification of clients of banks and mFIs clients were collected and presented

below.

Table 5.2.1.2: Education received by clients

Sl. No. Education Bank MFI Total

1 Illiterate 12 32 44

6.0% 16.0% 11.0%

2 1 to 5th

class 9 68 77

4.5% 34.0% 19.3%

3 6 to 10th

class 23 86 109

11.5% 43.0% 27.3%

4 12th

class 42 14 56

21.0% 7.0% 14.0%

5 Graduation 114 0 114

57.0% 0.0% 28.5%

Total 200 200 400

Source: Primary survey

Clients associated with the MFIs are not so educated. They usually come from rural background

and don‘t have enough facilities as well as money to attend school and gain education. They

were mainly labourers or farmers. 11% of the clients associated with MFIs were illiterate,

whereas 6% of the clients of banks mostly from RRBs were found illiterate. One third of the

clients of mFIs were educated from class 1 to fifth.

However, the situation is very different in case of clients associated with banks. Around 57% of

the clients associated with banks are graduates. This can also be seen with respect to the target

groups MFIs are targeting. The major clients of MFIs are the unskilled people and the ones who

are not so literate and unemployed.

5.2.1.3: Gender wise classification

Gender wise classifications of the clients are presented below.

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Table 5.2.1.3: Gender-wise classification of the clients

Sl No Gender Bank MFI Total

1 Male 134 44 178

67.0% 22.0% 44.5%

2 Female 66 156 222

33.0% 78.0% 55.5%

Total 200 200 400

Source: Primary survey

Gender wise classification of the clients is quite interesting as well. Clients associated with MFIs

are mostly women (78%), whereas the ones associated with banks are dominated by men (67%).

These showed those females were getting more involved in the financial matters through MFI.

This is actually benefitting the family at large and would help them in being financially strong

through proper utilization of funds received from MFIs.

5.2.1.3: Marital status of the clients

Marital status of the clients of mFIs and banks were collected and presented below in table

5.2.1.3.

Table 5.2.1.3: Marital Status of the clients

Sl No

Marital

Status

Bank MFI Total

1 Married 161 178 339

80.5% 89.0% 84.8%

2 Unmarried 39 22 61

19.5% 11.0% 15.3%

Total 200 200 400

Source: Primary Survey

Around 85% of the clients surveyed, were married. Out of these, 89% of the clients associated

with MFIs were married and 80.5% of the clients associated with banks were married.

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5.2.1.4: Social group wise classification of clients

Social group wise classification of clients of mFIs and banks were collected and presented in

table 5.2.1.4:

Table 5.2.1.4: Social group wise classification of clients

Sl. No. Caste Bank MFI Total

1 SC 35 64 99

17.5% 32.0% 24.8%

2 ST 6 5 11

3.0% 2.5% 2.8%

3 OBC 49 94 143

24.5% 47.0% 35.8%

4 Minority 6 19 25

3.0% 9.5% 6.3%

5 General 104 18 122

52.0% 9.0% 30.5%

6 Total 200 200 400

Primary Survey

When we observed the social group wise classification of clients, we saw that clients associated

with MFIs were mostly from the Scheduled caste (32%) and OBC (47%) category. General

category only composed 9% of the total clients associated with the MFIs. While the clients

associated with banks were predominantly from General (52%) category. OBC and SC category

formed 24.5% and 17.5% respectively.

Therefore, it can be implied that the MFIs are the major sources of fund for the under privileged

class and they are now finding it easy to interact with MFIs and improve their socio-economic

condition. It could be the hassle free path for the not so educated and poor people to coordinate

with MFIs rather than banks.

5.2.1.5: Family Size of the clients

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Table 5.2.1.5: Family Size of the clients

Sl. No. Family Size Bank MFI Total

1 2 to 4 98 67 165

49.0% 33.5% 41.3%

2 5 to 7 94 106 200

47.0% 53.0% 50.0%

3 8 to 10 8 25 33

4.0% 12.5% 8.3%

4 11 to 14 0 2 2

0.0% 1.0% 0.5%

Total 200 200 400 Source: Primary Survey

In the rural area the family size are generally larger than the urban society. It can be seen here

that the clients associated with the MFIs have larger family compared to the ones associated with

banks. Majority of the clients associated with MFIs had a family of 5 to 7 (53%) and 2 to 4

(33.5%) members. Some were also having family of 8 to 10 (12.5%) members. Whereas the

clients associated with banks had mainly nuclear family structure. Families with 2 to 4 members

and 5 to 7 members comprised 49% and 47% respectively of the total clients associated with

banks.

5.2.1.6: Income wise classification of clients

Table 5.2.1.6: Income wise classification of clients

Sl. No. Monthly Income (Rs.) Bank MFI Total

1 No income 17 4 21

8.5% 2.0% 5.3%

2 till 1500 1 44 45

0.5% 22.0% 11.3%

3 1501 to 5000 37 104 141

18.5% 52.0% 35.3%

4 5001 to 10000 27 43 70

13.5% 21.5% 17.5%

5 10001 to 15000 20 5 25

10.0% 2.5% 6.3%

6 15001 to 20000 46 0 46

23.0% 0.0% 11.5%

7 20001 to 25000 13 0 13

6.5% 0.0% 3.3%

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8 More than 25000 39 0 39

19.5% 0.0% 9.8%

Total 200 200 400

Source: Primary Survey

Majority of the clients associated with the MFIs were from the low income group. 76% of the clients

associated with the MFIs had monthly income less than Rs. 5000. They were mainly engaged in

agriculture, labour work or having small shops. They are the ones who need loans for their small

businesses or agriculture and can get it without much problem from MFIs even in small amount. The no

income group people are the ones who are either students or the housewives. The clients associated with

the banks were mostly earning between 15000 to more than 25000 a month (49%). They were mainly in

the profession of banking, Govt. jobs, CA or running private business.

5.2.1.7: Occupation wise distribution of clients

Occupation wise distribution of clients were collected and presented in table below.

Table 5.2.1.7: Occupation wise distribution of clients

Sl. No. Occupation Bank MFI Total

1 Agriculture 7 28 35

3.5% 14.0% 8.8%

2 Accountant 3 0 3

1.5% 0.0% 0.8%

3 Banking Services 15 5 20

7.5% 2.5% 5.0%

4 Labourer 20 30 50

10.0% 15.0% 12.5%

5 Private Business- small shops 65 88 153

32.5% 44.0% 38.3%

6 Job-Teaching, Private firm, Govt. sector 78 24 102

39.0% 12.0% 25.5%

7 Student 6 10 16

3.0% 5.0% 4.0%

8 Housewife 6 15 21

3.0% 7.5% 5.3%

Total 200 200 400

Source: Primary survey

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The clients associated with MFIs were mainly labourers or run small shops of bidis, tea etc. Some of them

were also farmers. While the clients associated with the banks were mostly in govt. sector (39%) or doing

job in private sector organization (32.5%), banking services (7.5%) etc.

5.2.2: Clients response on Awareness and Impact Analysis of Technology

Knowledge of technology is also very essential for the clients so that they can easily understand

the procedure of the financial institutions with which they are associated. The basic motive of

adapting technology in an organization is to increase its efficiency and provide best services to

the customers. Therefore, unless the clients are not aware of the technologies and its benefit, it is

difficult to attain proper utilization of the modern technology. For this purpose, the awareness

level of the clients regarding the various technologies was examined. Twenty clients each from

10 banks and 10 mFIs was taken for interview. Their responses are presented below.

Table 5.2.2.1: Clients response on Awareness regarding following technology

Sl. No. Name of Technology Bank MFI Total

1 24 hour on call service 61 65 126

30.5% 32.5% 31.5%

2 Automated Teller Machine (ATMs) 179 130 309

89.5% 65.0% 77.3%

3 Biometric Card 9 13 22

4.5% 6.5% 5.5%

4 Charge Card 2 7 9

1.0% 3.5% 2.3%

5 Credit Cards 70 79 149

35.0% 39.5% 37.3%

6 Credit Scoring 18 53 71

9.0% 26.5% 17.8%

7 Debit Cards 165 50 215

82.5% 25.0% 53.8%

8 E-Payment of utility bills and taxes 20 17 37

10.0% 8.5% 9.3%

9 Interactive Voice Response Technology

(IVR)

8 3 11

4.0% 1.5% 2.8%

10 Internet Banking 43 23 66

21.5% 11.5% 16.5%

11 Mobile Banking 39 18 57

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19.5% 9.0% 14.3%

12 Personal Digital Assistant (PDA) 6 12 18

3.0% 6.0% 4.5%

13 Point of Sale (POS) Terminals 13 7 20

6.5% 3.5% 5.0%

14 Computer 180 131 311

90.0% 65.5% 77.8%

15 Software 40 10 50

20.0% 5.0% 12.5%

Source: primary survey

It can be seen from the above table that the well established technologies like ATMs and debit

cards are known to the people in general but there is considerable difference in awareness level

of both of these with respect to the clients associated with and banks and MFIs. Clients

associated with banks are more aware of these technologies than the ones associated with the

MFIs. For example, ATMs are known to 89.5% of the clients associated with banks, whereas it is

just 65% for the clients associated with MFIs. Similar is the case with debit cards (82.5% for

banks and 25% for MFIs). The highest level of awareness is for computers. About 77.8% of the

clients are aware of computers. Here also, same pattern was observed. Awareness level was 90%

for the clients associated with the banks and 65.5% for the clients associated with MFIs. This can

be contributed to the socio economic condition of the general public at large. Moreover, lack of

electricity, infrastructure are also other factors for the less use of these technologies contributing

to lower awareness level. Other relatively new technologies (like, PDA, POS, IVR, charge card,

credit scoring, biometric card) are not so popular among clients and therefore, they are not aware

of them.

Table 5.2.2.2: Clients response about the use of technology

Sl. No. Name of Technology Bank MFI Total

1 24 hour on call service 29 51 80

14.5% 25.5% 20.0%

2 Automated Teller Machine (ATMs) 147 0 147

73.5% 0% 73.5%

3 Biometric Card 9 13 1

4.00 6.5%

4 Charge Card 2 4 6

1.0% 2.0% 1.5%

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5 Credit Cards 29 0 77

14.5% 0% 19.3%

6 Credit Scoring 8 48 56

4.0% 24.0% 14.0%

8 E-Payment of utility bills and taxes 3 2 5

1.5% 1.0% 1.3%

9 Interactive Voice Response

Technology (IVR)

4 1 5

2.0% 0.5% 1.3%

10 Internet Banking 13 2 15

6.5% 1.0% 3.8%

11 Mobile Banking 6 6 12

3.0% 3.0% 3.0%

12 Personal Digital Assistant (PDA) 0 6 6

0.0% 3.0% 1.5%

13 Point of Sale (POS) Terminals 11 2 13

5.5% 1.0% 3.3%

14 Computer 68 33 101

34.0% 16.5% 25.3%

15 Software 21 40 25

10.5% 2.0% 6.3%

Source: Primary Survey

Presence of technologies in an organization is important to get its benefit and pass that on to the

customers. However, the clients were not in the best position to answer about the presence of all

the above mentioned technologies in the financial institutions they were attached with. ATMs,

debit cards and computers are the only three technologies about which they were aware to a great

extent and also knew about their existence in the organization they were attached with.

According to the 73.5% of the clients associated with banks, ATMs are already present in their

organizations. And 69% of the clients associated with the banks said that their organizations

were already using debit card facility. Clients‘ associated with MFIs were not so aware about the

use of technology in the MFIs. However, there are number of technologies which are relatively

new and they are not in the knowledge of clients. Those included biometric card, charge card, E-

payment of bills, IVR, PDA, POS etc.

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5.2.2.3: Facilities for which the above mentioned technology are used

Different facilities for which technology was used were collected and presented below.

Table 5.2.2.3: Facilities for which the above mentioned technology are being used

Sl. No. Facilities Bank MFI Total

1 Cash requirement 147 46 193

73.50% 23.0% 48.25%

2 Insurance 27 59 86

13.5% 29.5% 21.5%

3 Savings 42 69 113

21.0% 34.5% 28.3%

4 Remittance 43 17 60

21.5% 8.5% 15.0%

5 Financial Literacy 23 25 48

11.5% 12.5% 12.0%

Source: Primary Survey

The technologies which were used in the financial institutions were useful for various purposes.

According to the clients, cash requirement is the main facility for which the technologies are of

great use. 58% of the clients (73% associated with banks and 43% associated with MFIs)

expressed the view that technology is useful mostly for the purpose of cash requirement. They

use ATMs, debit cards etc to procure cash easily. The other facilities for which the technologies

are useful to the clients were insurance (21.5%), savings (28.3%), remittance (15%), and

financial literacy (12%). They also found technologies useful for shopping, to gain knowledge

about MFIs, banking procedures etc. The clients were definitely benefitted by the technologies

and were finding it to be much effective.

Table 5.2.2.4: Clients response on benefits of use of technology

Sl. No. Benefits of Technology use Banks MFIs Total

1 Easy Accessibility 140 35 185

70.0% 17.500 % 46.25%

2 Cashless transaction 174 51 225

87.0% 25.5% 56.3%

3 Timeliness 185 59 244

92.5% 29.5% 61.0%

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4

Less expensive to open bank

account in remote area 40 42 82

20.0% 21.0% 20.5%

5 Less transaction cost 63 64 127

31.5% 32.0% 31.8%

6 Flexibility 141 99 240

70.5% 49.5% 60.0%

7 Accuracy 178 110 288

89.0% 55.0% 72.0%

8 Acceptability 175 108 283

87.5% 54.0% 70.8%

9 Fund Transfer 63 51 114

31.5% 25.5% 28.5%

10 Remote chance of fraud 72 56 128

36.0% 28.0% 32.0%

Source: primary survey

The clients were also a strong medium to know about the benefits gained by the technology use

in the financial organization. Easy accessibility, accuracy, acceptability were the major benefit

gained from the use of technology.

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CHAPTER VI

MANAGEMENT INFORMATION SYSTEM IN

MICROFINANCE

Management information system has become an essential part of microfinance institutions.

Major task of manager in microfinance institutions is to create a system that shapes the

transformation of data into information. The MIS involves all aspects of gathering, storing,

tracking, retrieving and using information within a business or organization. A microfinance

institution has to prepare filed reports, operational reports, financial reports, and general reports.

These MIS reports are needed to the funding agencies like rating agencies, banks and other donor

agencies

Information Channel in microfinance

Information Channel in microfinance

The purpose of the selection these technology providers were to understand description of the

various technology, its uses and different microfinance institutions adopting their technologies.

They were interviewed to understand technology solution in microfinance.

Secondary data were also collected to know about the various technology providers around the

world.

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Technology providers

1. RM IT solution, Hyderabad

2. Jayam Solution, Hyderabad

3. BASIX /Sathguru, Hyderbad

4. Elitser IT Solutions, Hyderabad

5. Force ten Technology, Kolkata

6. Graditum IT Bangalore

7. Craft Silikan, Bangalore

8. Surya Software Solution, Bangalore

9. EKO financial services, Delhi

10. Zero Mass foundation, Delhi

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Figure 6.1: MIS technologies employed worldwide

Source: C Gap Survey

Worldwide, 46% of MFIs still have very low-tech systems, either manual or spreadsheet-based

MIS. The remaining 56% have more advanced systems, either custom outsourced systems (24%

of the institutions surveyed), systems built in-house (20%), or applications purchased off the

shelf (10%).

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6.2: Microfinance and Banking technology providers in India

Both primary and secondary data were collected by interviewing different MIS technology

providers

Table 6.2: Microfinance and Banking technology providers in India

Software Technology

providers

Institution size Clients

Centralised web based

application

Craft Silikan,

Bangaluru

Small mFIs CEFI Delhi, Sahayaga

Microfinance Jaipur, Lok

Birdari Trust Indore, Vista

livelihood Finance Bangalore,

MIMO Finance Delhi, India

shelter finance Gurgaon,

FIMO Jayam

Solution,

Hyderabad

Small and

Medium mFIs

Saadhana Microfin Society,

Kurnool, AP

AMMACTS, V.Kota, AP

Sharadha's Women's

Association for weaker section,

Hyderabad, AP

Star Microfin Service Society,

Velugodu, AP

CReSA, Rajahmundry, AP and

others

Delphix – Nano

Enterprise Solution for

Micro Finance

BASIX

/Sathguru

Large, medium

and small mFIs

Basix, Chaitnya microfinance

MicroFinancerTM

2.0 Elitser IT

Solutions,

Hyderabad

Small and

medium mFIs

ECLOF - CHENNAI, Chennai

Swayam Shree Micro Credit

Society, Bhubaneshwar

Pragathi Mutually Aided

Cooperative Credit and

Marketing Federation Ltd.,

Warangal, (Elitser has given

hand held device to Pragati)

Business Information

Justified and Logically

Integrated (BIJLI)

Force ten

Technology,

Kolkata

Small and

medium mFIs

Life bank inc ilio phillipines,

Village welfare society, West

Bengal, Sree Ma Mahila

Samity, West Bengal and others

―mf Expert‖ RM IT

solution,

Hyderabad

Large mFIs

Ashmita, Micro -support, Share

Microfinance

MF resolve Graditum, IT

Banglore

Large Bank Axis Bank, PNB – Rural

Software Technology Institution size Clients

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providers

BALM (Bank Asset &

liability Management)

Surya Software

Solution,

Banglore

Large Banks Axis Bank, OBC, United Bank

of India, Sri Sudha Co-operative

Bank

SimpliBank Banking

Platform

EKO financial

Services

Banking

Correspondence

BC of SBI, ICICI

Smart card

Zero Mass

foundation

Banking

Correspondence

BC of SBI

Source: Primary Survey

Brief description of technology providers are presented below.

6.2.1: ―mf Expert‖

RM IT has implemented a sound information system ―mf Expert‖ to help MFIs to make

informed decisions. RMIT solution has domain expertise, in system utility software, CRM,

Micro Finance, Insurance, Loyalty, Education and Accounting among others.

Benefits of using mf expert

Swift development of business.

Thrive to have a better economic organization.

Reduce operating cost.

Reduce unnecessary work.

Help restructure the work force proficiently.

To boost the development and performance of the business.

Extremely portable, adaptable, flexible, scalable and customizable.

Improve Field Level and Branch Level Operational Efficiency.

Help provide better service to clients.

Offer high level of authorization, data security and integrity.

Key Features - Administrative Level

Role Based Access for various Management Levels.

User Management with Enhanced Security Features

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Scheduling and Auto E-Mail

Alert Management System

Portfolio Aging & Quality Analysis

Integrity with Accounting Software

Consolidate Reports from H.O.

Data Access through Online and/or Offline Network

Data Maintenance (Accessing, Storing) through H.O.

Key Features – User Level

Multi-Level Branch Creations

Handling all required financial transactions

Unlimited ‗Branch Group‘ creation

Auto consolidation of all financial statements

Column wise comparative statements

Unlimited templates provision for each financial statement

Branch specific Account Ledger creation

Clients: Ashmita, Micro -support, Share Microfinance

Customisation and set up of MIS package for head office and 5 branches: Rs. 3lakh

Annual maintenance cost – Rs. 1 lakh.

―mf Expert‖ opens the doors to micro finance institutions to operate modern information

technology with the capabilities and the power which was previously only available for larger

banks. Mf-Expert software with window based application software having client-server based

architecture with Microsoft.Net Framework 3.5 as Front end and MS SQL Server 2005/2008 as

the back end. The software uses StimulSoft as reporting tool. The software integrates portfolio

management, HR and Accounting and is flexible to customization of any new product

development. Networking the branches and Head Office server to have real time data with the

service providers like Reliance, Tata Tele Services.

6.2.2 : FIMO

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FIMO software for microfinance institutions has been developed by Jayam Solution. FIMO is a

software package purely designed for the complete needs of the micro finance organizations.

The full form of FIMO ―Financial Information and Monitoring Organizer‖ Package provides

MIS, HRM, Financial Accounting. Micro Finance Organizations can use FIMO to maintain and

update the day-to-day information of their operational activities. The information is analyzed

and the MIS information is provided by FIMO automatically. Progress and the performance will

be checked continuously. It has also have the well-furnished support of the integrated Accounts

module and the HRM module, FIMO supports the Micro Finance Organizations to maintain

Baseline information, Loan Information, Savings Information, Insurance Information, HRM

Information, MIS Information, & Accounts Information through this project. Currently it is

available in English & Telugu languages. Hindi version will be available soon. We are also

providing ‗Help‘, in English & Telugu languages presently.

Hardware requirement:

• Pentium 3 processor or above

• 256 MB RAM

• 1 GB of Free Hard Disk Space (Additional space based on data base size)

• 48 x or higher CD ROM

• 56 K Modem Software

Software:

• Operating System Windows XP with service pack 2

• Development Environment VB

• Reporting Tools Crystal Reports, Text Reports

• Database MS-SQL server

It has the following features:

Baseline and Client Information: Users can record the primary information of their

clients and the baseline information of the hierarchy of the organization such as Area,

Center etc.

Loan Information: Loan system is tracked entirely with loan issues, accurate interest

calculations and automatic generation of the instalment demand.

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Savings Information: FIMO supports both the Voluntary savings and the compulsory

savings that are being used in the MF sector.

Insurance Information: In FIMO, Insurance can be linked with the Loan system.

Insurance amounts can be deducted at the time of Loan Disbursements. Users can

maintain the following information of the Insurance: Insurance Policy numbers of the

members.

HRM Information: Relating to these users can maintain the human resource

information.

MIS Information: MIS is proved compulsory for MFIs. FIMO stands as a source for the

demand of MIS in MFIs. The demand for MIS is driven by the outputs - performance

reports for the funding agencies, analytic reports for management, and operational reports

for the staff and the clients. MIS in FIMO is generated automatically and is automatically

updated with the operational information recorded in the project daily.

FIMO provides the following MIS information.

a. Progress of the organization - such as, how many Members joined newly, how many

loans are sanctioned, how much loan amount distributed, amount collected as on selected

date, etc.

b. Performance of various portfolios of the organization - such as No of Areas in a

Branch, No of Centres in an Area, and No of Groups in a Centre, No of Loans disbursed

per Area or Centre etc.

c. Ageing Analysis reports that gives clear idea on the Loan outstanding status, Portfolio

risk, and Loan Loss reserve to maintain etc.

Partial list of Clients

i. Saadhana Microfin Society, Kurnool, AP

ii. AMMACTS, V.Kota, AP

iii. Sharadha's Women's Association for weaker section, Hyderabad, AP

iv. Star Microfin Service Society, Velugodu, AP

v. CReSA, Rajahmundry, AP

vi. Sharadha MACTS Ltd, Hyderabad, AP

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vii. AWARE MACTS Ltd, Hyderabad, AP

viii. The Max Wealth Trust, Hyderabad, AP

ix. Sagar MACTS ltd, Chittor, AP

x. SEWA federation, Hyderabad, AP

xi. Bhagya nagar MACTS Ltd, Hydrerabad, AP

xii. Sai Ram MACTS Ltd, Hyderabad, AP

xiii. SIRI MACTS Ltd, Kurnool, AP

xiv. Ushodaya Macts, Hyderabad, AP

xv. SKC Macs, Vizag, AP

xvi. Partner Macts, Kadapa, AP

Karnatka

i. Nirantara Community Services, Bidar, Karnatakas

ii. Pravardha, Bidar, Karnataka

Orissa

i. Gramoddan, Orissa

ii. Bhoomika, Orissa

iii. ADIKAR, Bhubaneswar, ORISSA

Uttaranchal

i. MIMO, Dehradoon, Uttaranchal

Assam

i. IIRM, Tejpur, Assam

Customisation and set up of MIS package for head office and 5 branches: Rs. 3.5 lakh

Annual maintenance cost – Rs. 1 lakh.

6.2.3: Nano Enterprise Solution for Micro Finance Industries

An integrated enterprise resource solution for Micro Finance Industry, dovetailing all critical

business process unique to that industry and incorporating some of the best practices adopted in

that industry. BASIX in collaboration with technology service provider, Sathguru Management

Consultants, a software named ―FAMIS: (Financial Accounting and Management Information

Systems) was designed with FOXPRO as a database. It is used as a bridge to transfer all business

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transactions during the day to financial accounting, resulting in scrolls like any other bank. Later

in 2000, inspiration came from our team visit to Desjardins, Canada, where it harnessed their IT

capabilities, in particular their MIS called an ―Alerte‖ system. Inspired by this BASIX launched

its own Core Livelihood Solutions called ―Delphix,‖ Enterprise-wide Resource Planning

software with Developer 2000 as a front-end form on Oracle database. Delphix outputs were

superior due to the adoption of new processes to overcome certain deficiencies in FAMIS. In the

year 2001, RBI gave a banking license to BASIX, and it was decided to buy banking software

and Banksoft of Processware Systems Pvt. Ltd., Bangalore.

The application has the following five modules:

1. Operations

2. Financial Management

3. Human Resources Management

4. Payroll

5. Head Office Consolidation

Operations Module: It covers entire spectrum of lending and borrower management of the

enterprise from the stage of identification to loan closure.

Financial Management Module: It covers entire spectrum of accounting, budgeting, investment

management and financial management.

Business Functionality

Based on industry standard based practices and supports all microfinance models such as

individual, JLG, Grameen, and SHG including institutional lending.

Highly flexible

Multi user and multi- functional solution.

Registration of a Beneficiary

Application for loan request

Recommendation and sanction of loan

Documentation and loan collateral control

Disbursement of loan, direct and through hand held device integration

Managing loan portfolio

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Managing repayment, direct as well as receipt through hand held devices

Auto classification of Non-performing assets, monitoring and reversal thereof

Loan linked and non-linked insurance delivery

Life and Non-life insurance product integration

Portfolio analysis and recovery

Loan closure and release of collaterals

Managing Customer relationship

Portfolio split and merge facility

Variety of control, analysis, review and regulatory reports

Installation charge: 4 lakh (for headquarter + 3 branches)

It has Expert technical support available at Ranchi, Bhubneshwar, Bhopal, Calcutta, Hyderabad.

Execution support team available at Hyderabad.

Hand held device at KBS Branch, Mahboobnagar in Andhra Pradesh, and Jaipur in Rajasthan 17

branches. Basix uses mobile version BASIX 1.5.0M. It is compatible with NOKIA, 3110 and

NOKIA 2710 model. Hand held device had battery backup and online configuration. In mobile

banking HOLOGRAM is pasted in clients pass book. Through this paper consumption was less.

6.2.4: MicroFinancerTM

2.0,

Elitser‘s solutions combine latest technologies, training, consulting and technical support in

microfinance and banking. Elitser IT Solutions India Pvt Ltd‘s has developed MicroFinancerTM

2.0, an integrated software system exclusively designed and developed for Management of

Information and Financial Accounting for Micro Finance Credit Societies. MicroFinancerTM

2.0

provides powerful tools to customers need to succeed in the modern Micro Finance environment.

Microfinancer 2.0 is custom built for Micro Finance Institutions. It caters to large and medium

credit societies where the membership is more than 5000 with large transactions. It can

incorporate various Micro Finance models like Grameen, MACTS, SHG, and Federation. It can

incorporate the latest CGAP ratios and standard Accounting formats. Its Graphical User Interface

(GUI) offers screens in the familiar Microsoft Windows format. It offers customized MIS as per

the requirement of the client and fully supported by a strong after sales Technical Support Team.

Technology Partners: it has technology partners ILITSER ILHA consulting private limited,

Cethar consultancy, Image point, Nova Terra. It has Innovative Solutions for Microfinance

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Operations & General Accounting Solutions and Livelihoods Operations & Monitoring

Software.

Micro Financer - A comprehensive Financial Accounting & MIS software solution

eLOMS - Livelihoods Operation Information System – for Livelihoods promoting funding

agencies and Government Agencies

eGAP - General Accounting Software Solution for all types of Business

Establishment cost: Rs. 3-5 lakh on the basis of specification.

Annual maintenance cost = Rs. 50000 to 1 lakh.

National Clients

i. ECLOF - CHENNAI, Chennai

ii. Swayam Shree Micro Credit Society, Bhubaneshwar

iii. Pragathi Mutually Aided Cooperative Credit and Marketing Federation Ltd.,

Warangal, (Elitser has given hand held device to Pragati)

iv. Sangatitha Federation, Warangal

v. OAZOANE, Aranthangi

vi. Youth For Action, Hyderabad

vii. Krushi AP - , Karimnagar

International Clients

i. Federal Capital Investment and Finance Ltd, Kingston, Jamaica

ii. Life Bank - Philippines

iii. ECLOF - Philippines

iv. Sun Rise Bank – Philippines

v. Golden Bough Inc – Philippines

vi. Bangko – Kabayan – Philippines

vii. Cooperative Rural bank of Bulacan, Bulacan – Philippines

viii. G7 Bank, Naga City – Philippines

ix. Malasiqui Rural Bank – Malasiqui, Philippines

x. Dian Mandiri – Indonesia

xi. Permodalam Nasional Madani Bank – Indonesia

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6.2.5: Business Information Justified and Logically Integrated (BIJLI)

It provides range of services like corporate training, System integration and consultancy,

Software development, Data Processing on any platform and digitization of Engineering

Drawings. The software uses RDBMS development tools, SQL server, Visual basic, and

ASP.net. It helps in Production Plan, Accounts, HR (Payrole and ADMIN), Sales, purchase,

inventory, Microfinance, Insurance, Supply chain

mFIs -Clients

1. Life bank inc ilio Phillipines

2. Village welfare society- West Bengal

3. Sree Ma Mahila Samity - West Bengal

4. Sahara Uttarayan- West Bengal

5. Disari Finnacial services -West Bengal

6. Sahara Utsarga- West Bengal

7. Gram Vikas Kendra – West Bengal

8. Kalighat society- West Bengal

9. Ajiwika- West Bengal

10. Vedika Credit capital- Jharkhand

11. Nav Bharat Jagriti Kendra

12. YUV – Manipur

13. PANI – Faizabad

14. RGVN – CSP – Assam

15. RFVN – Main- Assam

16. Grameen Sahara- Assam

17. NER fin service – Assam

18. NERCOP project Shillong – Meghalaya

19. UNACO- Assam

20. Satin credit care network – Delhi

21. Sikhar Development foundation Delhi

22. Fusion microcredit – Delhi

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23. Sulaxmi Private Limited – Delhi

24. ODC- Orissa

25. Access Foundation – Orissa

26. PSMS- Indore ‗

27. Kamal Auto finance- JAIPUR

28. Disha Finance - Ahmedabad

29. PRAYAS – Ahmedabad

Installation charges: 5-8 lakh depending upon size and features and customization.

Maintenance cost = 1.25 lakh to 2 Lakh.

One of the very interesting about the fore ten technologies is that the company is proving

technology solution not only to Indian Microfinance institutions but also country like

Philippines.

6.2.6: MF Resolve

Gradatim, an international provider of technology services to microfinance institutions and

insurers. Gradatim, which has operations in India, Australia and Singapore, offers which is a

credit and savings management platform for microfinance institutions. Its MFInsure product

offers insurance providers tools for deploying new products, expanding distribution networks

and managing policies in real time.

Component of technology:

MF resolve for banks, mF resolve for mFI,

MF- insurer for insurance

Cost of each component

Hand held devices connected with internet- Rs. 7000 each.

PC- Rs. 40000 to 50000

Internet – Rs. 15000 to Rs. 18000

Establishment cost-Nil

No need to buy hardware/ software

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Working as software as service model on demand platform

Model for 1 lakh clients with 5 branches- hard net – 5, computer 5

Operational cost: Rs. 4 lakh per year.

Charges for managing account Gramin model: Rs. 30 per clients

Asha model – Rs. 40 clients

Individual/ JLG / SHG clients – Rs. 29 clients

Clients: Axis Bank, PNB – Rural

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6.2.7 : Bankers Realm Software developed by Craft Silikan, Bangaluru

Banker‘s realm MFO is full fledged software offering solution for microfinance institutions.

Craft Silicon, in recognition of the bright prospects and the opportunities, has developed BRmfs

(Bankers Realm Core Microfinance Solution) that helps manage small to large customer records,

volumes of transactions, portfolios, profits and also analyze the risk factors. BR MFS Solution is

now running on our high end web platform - BR .Net.

Craft Silicon's MFI offering also provides its partners with alternate channels such as POS and

mobile banking that allows businesses to provide online, real time and secure services to

customers even in remote areas. The limitless scope and convenience offered could be testified

by over 200 satisfied Micro Finance Institutions (MFIs), in over 32 countries around the world.

It is providing integrated solution Using our BR Electronic Fund Switch solution and other

switch vendors as well as bridges, our BR MFS solution has been tested and proven to integrate

on financial inclusion with ATM, POS , Internet Banking, Mobile Banking and Other Vendor

solutions.

The software has the following features:

Multi currency/ multilingual user definable

CRM module: captures all customer information

Custom fields and forms

More than 100 standard reports

Regulatory bank reporting

Credit scoring module

Group meetings and schedules synchronization

Client group exits tracking â€― reinstatement and savings refunds

Recurring deposits

Salaried loans eligibility set up

Detailed loan management (from application â€― write off / pay off)

Loan repayment performance highlights

Insurance details tracking

Rescheduling / restructuring loans

Refinancing loans / top-ups

Batch disbursements / rescheduling / pay offs

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Loan history tracking

Customizable Event Driven Interest Procedure (EDIP)

It has following benefits to customers

With easy integration to alternate channels, customers can access the financial services at

their convenience

Faster and convenient processing of transactions, loans and member registration

Flexible interest rates and rescheduling of loans for individual customer

Provides friendly integration of group meetings with group loan schedule for repayments

To Businesses

With a user friendly customer query and dash board, users can view variety of business

and customer information all in one screen

Increased customer margin with easy integration to alternate channels such as POS, ATM

and Mobile banking

Increased customer service efficiency, with faster transaction, loan and group processing

Very fast and easy to import and export data in any format

Customizable interest procedure that allows customers and businesses to enjoy the

changing interest rates in the market.

Accurate and efficient MIS Reports for analysis of profits and loss for the business.

Consolidatable balance sheet for different branches.

Component of technology

Service Model- Servor, Operating System Window Microsoft, data base, connectivity,

Web based solution, Users-computer, connectivity, Software

Cost of each component

Service model: Signup cost----certain portion of portfolio subject to a minimum of

Rs. 2.5 lakh, Monthly subscription-0.05 % of outstanding

Establishment cost of the technology-

Service model Sign up cost based on model and portfolio size -0.5% of Monthly

subscription and profit or non-profit based company outstanding

Maintenance cost/year

Service model-Nil

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Software model-18% of cost

Software: Centralized web based application -BR.Net-

Detailed description of technology

Software as service model-hosted site

All back end is maintained by craft silicon

Maintained at tier IV data centre

Offer to MFI on monthly subscription

1. Problems being faced by users in adopting your technology

Cost effectiveness- use of technology is not cost effective

Awareness and mindset of decision makers

Availability of technical staff-problem in data entry, benefit of it

Clients : CEFI Delhi, Sahayaga Microfinance Jaipur, Lok Birdari Trust Indore, Vista

livelihood Finance Bangalore, MIMO Finance Delhi, India shelter finance Gurgaon, Land

T finance, IASC Coimbatore, Rores microfinance Srinivaspur Kolar, Midland

Microfinance Jalandhar, Ujjivan, Fultron Chennai, India, Swadhar Microfinance Mumbai.

In abroad also it has clients like ACSI Ethiopia, Afribank Nigeria, Asusu Niger, Bimas

Kenya, Eclof Kenya, EZI Nigeria, FBN Nigeria, Fides Namibia, Harambee Kenya.

6.2.8: BALM (Bank Asset & liability Management)

This was developed by Surya Software Solution, Bangalore

Technical Specification: Visual Basic 6.0, SQL Server, MSDE, SQL Scripts

Features: BALM provides a comprehensive set of analytical tools to analyze maturity profile of

a bank‘s cash flows. With its graphical interfaces and what-if‘s facilitates dynamic pricing by

providing complete visibility to market and liquidity risk and reward, at a bank level. Key in

built tools are data extraction, Rule based product definition, Structural liquidity, Interest Rate

analysis, Duration gap, Generalized trend, Scenario and present value analysis.

It has two Component of technology

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a. Not the web based technology- BALM-Bank asset and liability Management

system

b. Web based technology- CARE-Capital adequacy and risk evaluation

Cost of each component

35 lakhs for software development

Initial Establishment need Computer, Server, Internet and Software

Maintenance cost is Rs 5 lakhs per year

Detailed description of technology

Microsoft Platform, CARE is web based, BALM-not on web based

Problem being faced by users in adopting your technology was reluctance to change from

manual system.

Clients

i. Axis Bank

ii. OBC

iii. United Bank of India

iv. Sri Sudha Co-operaive Bank

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6.2.9: Mobiles and biometric card by Zero Mass foundation

ZERO mass is using Mobiles and Biometrics card for Micro Banking.Zero Microfinance and

Savings Support Foundation, a Section 25 Company closely affiliated to ALW, has been

appointed as a Business Correspondent by 15 Banks, and provides field operations for the ZERO

platforms. ZMF manages the field force, account creation, appointment of Customer Service

Points (CSPs), management of cash and other logistics at the last mile. ZMF in turn collaborates

with strongly placed local organizations, district and state administration to ensure smooth

deployment and operations. ZMF creates the last mile operations network in villages, under pre-

defined service agreements with Banks and front-ends the delivery of full-featured transactional

services on behalf of Banks for Financial Inclusion on the ground.

Agreement between ZMF and a bank, ZMF’s scope of services includes

a. Enrolment of customers for no-frills zero-balance savings accounts and other account types

that may be specified by the Bank.

b. Enrolling, training and equipping of Customer Service Points (CSPs) in villages to provide

various kinds of transaction services including but not limited to cash deposit, cash

withdrawal, transfer of money, payment of utility bills, disbursal of loans, collection of loan

instalments, and cashless payments at local and remote merchant establishments.

c. Engaging the CSPs to provide enrolment services for opening no-frills account.

d. Engaging the CSPs to provide various kinds of transaction services including but not limited

to cash deposit, cash withdrawal, transfer of money, payment of utility bills, and disbursal of

loans and collection of loan instalments.

e. Cashless payments at local and remote merchant establishments.

Lending activities on behalf of the Bank (as an MFI) Other service as may be advised by the

Bank in writing to ZMF, and which ZMF agrees to perform

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Features

It is simple enough to be used by woman operator in a village. It uses NFC Mobile with

hardware SAM as application control device instead of PC. Wired or bluetooth serial connection

to one or more peripherals They have utilized serial peripherals Printer; fingerprint scanner; GPS

module; barcode readers; full size keypads; contact, contact-less and mag-strip card readers.

• Offline + Online usage. More storage than most PoS devices is available.

• Local language: Voice prompts. Full graphics allows any language display.

• Very low cost direct mode of GPRS usage (not as modem)

• Color display for customer photo-display. 4 hrs video for training + adds.

• Eliminates need of smart cards for EBT: High security level allows use as store for

fingerprints, photos. They serve multiple banks simultaneously.

• Used for enrollment instead of PC. Limitation: it cannot be used for text entry. Advantage:

Permanent station within the investment of txn device. It is easy to use and portable. It

consumes low power. It has self-contained including network.

• Used for transactions instead of PoS: No limitation.

Advantages: Easy to use, portable, Low power requirement and Self-contained on network.

Clients : SBI, PNB

6.2.10: SimpliBank Banking Platform

It is developed by Eko India Financial Services Pvt. Ltd, New Delhi.

MIS product name: SimpliBank Banking Platform

Technical Specification: J2EE, MySQL, Linux Servers

Features:

It is built on using J2EE framework. Accounting and Portfolio tracking are integrated. Backup

levels RAID 1 applicable for banking correspondents. It has weekly full and daily incremental

EOD reconciliation with the Core Banking platform of the bank. Mobile phones used to carry out

transactions in the field.

Other software are Financial Information Network & Operations Ltd (FINO) using Biometric

Enabled multi-Application Smart Cards and Terminals, Coromandel Infotech India Limited,

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Chennai using Smart Connect, Zero of A Little World, Mumbai, Loan and saving information

management by Kredits, USA, Bangalore, safalFin3.0 (MFI Model)/SafalFin2.0 (SHG Model)

of Safal Solutions, Hyderabad, MFASYS by Snowwood, Chennai, Ganaseva by Atyati

Technologies, Bangalore

Apart from this there is open source software. Open source packages are MIFOS by Grameen

Foundation Octopus Microfinance. ASOMI, an microfinance institutions in Assam using

MIFOS.

6.3: Management information system software used by sampled mFIs & Banks

Software used by mFIs and Banks was collected and presented below in table.

Table 6.3: Software used in the various Banking and MFI institutions

Sl.

No.

Name of the

software

Organization

Banks

1 B@ncs24 Samastipur Kshetriya Gramin Bank

2 CBS by IBM Canara Bank

3 Finware RIG, HDFC Ranchi

4 CBS State Bank of India

5 Provided by

HCL

Uttar Bihar Gramin Bank

6 FINO UBI

7 FLEX – Q Syndicate Bank

8 Finacle

UCO Bank, Zonal Patna

9 PNB, Patna

10 ICICI Bank Patna

Microfinance institutions

11 Bijli, Tally Disha Microfinance Pvt. Ltd.

12 FIMO, Jayam

Solutions

FIMO

Nav Achetana Microfin Services Private Limited

13 Mahashakti Foundation, M. Rampur Kalahandi, Orissa

14 FIMO, MIFOS Ushodaya Integrated Urban and Rural Development

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15 FIMO developed

by Jayam

Solution

Agricultural Science Foundation, Hyderabad

16 FIMO, Tally erp

9.0

Sambandh Finserve Pvt. Ltd.

17 FIMO developed

by Jayam

Solution

Nano Financial Services India Private Limited Chennai

18 FIMO & Tally

erp 9.0

Star Microfin Service Society (SMSS)

19 FAMIS, Tally Bihar Development Trust

20 Rm IT Solution Spandan Sphoorty Finance ltd.

21 Micro vision SRFS

22 Delphix Nano Basix

23 Mf Expert by RM

IT solution

Share Microfinance

24 FINO, Tally Janlaxmi

25 Tally, FINO Gramin Koota

26 Micro Financer IDF financial service Pvt. Ltd.

27 Banker Relm Ujjivan Finance Service Pvt. Ltd.

28 LMS Version 2 Trust Microfinance Services, Muzaffarpur

29 In house

developed

SKS

30 In house

developed

BFSPL

Source: Primary survey

It is obvious from the table that different mFIs uses different software according to their need

and availability of software. Most of the banks except few RRBs have CBS system. Major MIS

software used by Banks was Finacle. Other MIS software was provided by HCL in case of Uttar

Bihar Grammeen Bank, CBS by IBM in case of Canara Bank, FINO used by Union bank of

India, FLEX –Q used by Syndicate bank and B@NCS24 by Samastipur Grameen Bank.

Different mFIs used different MIS softwares. FIMO developed by Jayam Solution was major

MIS software used by different mFIs. Other software were FAMIS developed by BASIX and

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Sathguru, Hyderabad, BIJLI developed by Force ten Technology, Kolkata, mf Expert

developed by RM IT solution,

Other MIS softwares were Banker Realm used by Ujjivan, by LMS version by TMS. Grameen

Koota and Jan Laxmi use Tally and FINO for their MIS management. Basix has developed

Delphix Nano as their MIS application software. SKS and Bandhan Financial services have

developed their own MIS software.

SKS has designed and deployed a web-based Business Intelligence portal using state-of-art

technology and a highly flexible and scalable platform to support the business growth and

operations. SKS Microfinance has also built an integrated and encrypted MPLS communication

network encompassing a world class Data Centre delivering mission critical services and

enhancing collaboration across the organisation, thus ensuring superior service quality to its

customers. SKS has entered into strategic partnerships with various technology leaders and

innovators like Microsoft, Wipro, Reliance, HCL and Sify to establish an agile and scalable

technology architecture that is capable of handling the challenges specific to the microfinance

sector.

6.4: Software used by big microfinance institutions

Secondary Data were collected to understand to study the various Software used by large

microfinance institutions.

Table 6.4: Software used in big mFIs > 50 crores

Organization Name State (HQ) MIS Product

Name

IT Vendor Name

Krishna Bhima Samrudhhi Local Area

Bank Ltd.

AP BALM Surya Software,

Bangalore

Asmitha Microfin Ltd. Bangalore AP Bankers Realm

mfo

Cranes Software

Bharat Integrated Social Welfare Agency

(BISWA)

AP BALM Surya Software,

Knowledgeware,

Noida

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BASIX AP Delphix Co-developed with

sathguru

Management &

Consultant,

Hyderabad

Sarvodaya Nano Finance Ltd Tamil Nadu Delphix Co-developed by

BASIX and

Sathguru

Management &

Consultant,

Hyderabad

BWDA Finance Ltd Tamil Nadu FAXFRO Software Solutions,

Chennai

AMMACTS AP FIMO Jayam Solutions,

Hyderabad

S E Investments Ltd UP Finsoft In-House

KAS Foundation Orissa Flexcube FINO, Mumbai

Bandhan Financial Services (P) Ltd West Bengal In-house MIS NA

SKS Microfinance AP In-house MIS NA

Spandana Sphoorty Financial Ltd AP In-house MIS NA

Bharatha Swamukti Samasthe Karnataka KREDITS Kredits, Bangalore

Mahila Arthik Vikas Mahamandal Maharashtra Manual\Excel

Sheet

NA

SMILE Tamil Nadu Manual\Excel

Sheet

NA

Share Microfin Ltd. AP Microfin In-House

Evangelical Social Action Forum Kerala MiFi Soft In-House software

Grameen Koota Karnataka MIFOs In house handling of

open source package

SMILE Tamil Nadu Manual\Excel

Sheet

NA

Share Microfin Ltd. AP Microfin In-House

ASA Grama Vidiyal Tamil Nadu NA Paripoorna Software

SKDRDP Karnataka NA In-House

Cashpor Micro Credit Ltd UP TR Account In house software

It is clear from the above that there is no uniformity of use of software in different microfinance

institutions. The MIS requirement of microfinance varied widely. There is no uniform reporting

system in India. Due to various natures of microfinance institutions they report to various

agencies. NBFC has to report to RBI and Society has to register with state society registration

act. The other legal form like Co-opeartive and trust has different kinds of compliance system.

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There is need of some uniformity and transparency in various microfinance institutions. This

would help in technology adoption.

6.5 : MIS software used in various countries

Secondary data were also collected to study about the software used by various microfinance

institutions across world. This has been categorised by regions.

6.5 : Software used by mFIs in different countries

Name Client Installation

Location

Institution Size Features

South Asia

Apparent

Microfinance

Manager

South Asia Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Insurance

Collection and Accounting

Common Cents 101

Micro Finance

Software

South Asia

East Asia and the

Pacific

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Southtech Ascend

Banking®

Europe and Central Asia

South Asia

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

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BEACON South Asia Small (less than

5,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Payroll

Insurance

IMP@CT South Asia Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Payroll

Insurance

BankSoft South Asia

East Asia and the

Pacific

Australia

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

Savings Bank,

Term Deposit, Current

Account, Clearing Module,

Share Account, Investments,

Loans & Advances ,Bills ,

Discounting, Cash

Management, Statutory

Reports, Locker Accounts,

Pass Book Printer Interface,

Signature & Photograph,

Retrieval Management

Information Systems, Pigmy

Account, Overdraft Module,

Cash Credit Module, Demand

Draft/ Purchase Order, Inter

branch Reconciliation, Head

Office Automation System,

Financial Reports , RBI

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Reports ,Security Aspects

W-Bank South Asia

East Asia and the

Pacific

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

MFASYS-Mobile

Enabled Micro

Finance...

South Asia Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Payroll

Insurance

Mobile Enabled

Micro Financer

Standard Edition

South Asia Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

ThemeproTM

Universal Micro

Finance Solution

(UMFS)

South Asia Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Insurance

Finance Solutions South Asia

Sub-Saharan Africa

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

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McFinancier South Asia Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Insurance

Microfin360 South Asia Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Medium-Large

(25,000-

50,000),Medium-

Large (25,000-

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Insurance

Micromate South Asia Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Meetings, Loan/Field Officer

Targets, MFI Reports, IEMD,

PDA, Branchless Banking,

WebServices

MiFI - A Complete

Microcredit Finance

Software

South Asia Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Payroll

MMFS South Asia Small (less than

5,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Europe and central Asia

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AchidBanker2 Europe and Central Asia Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Afropack Financial

Enterprise Manager

East Asia and the

Pacific

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

DolFin 1.0 Europe and Central Asia Medium (5,000-

25,000)

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Europe and central Asia

Aspekt Microfinance

Software Solution

Europe and Central Asia Small (less than

5,000)

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

eMerge G103.1. Europe and Central Asia Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

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MF RESOLVE from

Gradatim IT ventures

(I) Pte Ltd.

East Asia and the

Pacific

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

BancMate Europe and Central Asia Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Small Bank Manager

2.10

Europe and Central Asia Small (less than

5,000)

Accounting

KastellBanker Europe and Central Asia Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

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African countries

Delta-Bank Europe and Central Asia

Sub-Saharan Africa

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

e-Finance Sub-Saharan Africa Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

El Mohassil 1.3 Middle East and North

Africa

Medium-Large

(25,000-50,000)

Loan Portfolio

Client

Information/Relationship

Management

ELOGE BANK Sub-Saharan Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Insurance

Delta Loan Tracking

System

Middle East and North

Africa

Large (more than

50,000)

Loan Portfolio

eMerge 1.0 Europe and Central Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Sub-Saharan Africa

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

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EVOLAN PACK for

Financial Companies

Europe and Central Asia

Latin America and the

Caribbean

Sub-Saharan Africa

Large (more than

50,000)

Accounting

Loan Portfolio

Client

Information/Relationship

Management

Fin@ncia Sub-Saharan Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Medium (5,000-

25,000),Medium-

Large (25,000-

50,000),Large (more

than 50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

FINCORESOFT Sub-Saharan Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

User Management

FinnOne Loans Europe and Central Asia

South Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Middle East and North

Africa

North America

Sub-Saharan Africa

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

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GLOBAL BANK Sub-Saharan Africa Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Kredits 5.5503 Europe and Central Asia

South Asia

East Asia and the

Pacific

Latin America and the

Caribbean

North America

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Insurance

Kredits 5.5539 Europe and Central Asia

South Asia

East Asia and the

Pacific

Latin America and the

Caribbean

North America

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Insurance

LMS (Loan

Management System)

Europe and Central Asia

Middle East and North

Africa

North America

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

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Loan Performer Europe and Central Asia

South Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Middle East and North

Africa

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Insurance

Loan Tracker Europe and Central Asia

Middle East and North

Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Client

Information/Relationship

Management

Insurance

Loan Traking System

(LTS)

Middle East and North

Africa

Small (less than

5,000)

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

M2 Europe and Central Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

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Margill Loan

Manager (MLM)

Europe and Central Asia

South Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Middle East and North

Africa

North America

Sub-Saharan Africa

Margill products, used

in over 25 countries

Small (less than

5,000)

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

MaxiSoftCB Banking

Software

East Asia and the

Pacific

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Medium (5,000-

25,000),Medium-

Large (25,000-

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

MBWin - FAO-GTZ

MicroBanking

System

Europe and Central Asia

South Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Middle East and North

Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Microbank

Information System

2.00

Latin America and the

Caribbean

Sub-Saharan Africa

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

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MICROFINA Sub-Saharan Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Microfins Europe and Central Asia

South Asia

Middle East and North

Africa

Sub-Saharan Africa

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Payroll

Insurance

Mifos South Asia

East Asia and the

Pacific

Middle East and North

Africa

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

MLAS (Microloans

Administration

System)

Sub-Saharan Africa Small (less than

5,000)

Accounting

Loan Portfolio

Client

Information/Relationship

Management

Octopus Micro

Finance Suite

Europe and Central Asia

South Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium (5,000-

25,000),Medium

(5,000-25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

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OMNIEnterprise

Microfinance

Solution

Europe and Central Asia

South Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Middle East and North

Africa

North America

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Orbit Middle East and North

Africa

Sub-Saharan Africa

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Orbit-R Europe and Central Asia

Sub-Saharan Africa

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

ORCHID

Microfinance

Sub-Saharan Africa Small (less than

5,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

PERFECT Sub-Saharan Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

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Perfeczion

Microfinance

Software

West Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

PharaFinance Sub-Saharan Africa Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

PowerFinance Sub-Saharan Africa Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

SASA-PRO VISION

SQ212

Sub-Saharan Africa Medium (5,000-

25,000)

Accounting

Deposits/Savings

Management

SAVCO Sub-Saharan Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Savings Plus Sub-Saharan Africa Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

SIM.net - Sistema

Informático para

Microfinanzas

N/A N/A N/A

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SML VISION SQ212 Sub-Saharan Africa Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

SYSDE SAF Latin America and the

Caribbean

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

The Exceptional

Assistant (TEA)

North America

Sub-Saharan Africa

Small (less than

5,000)

Loan Portfolio

Client

Information/Relationship

Management

Total

Microfinancing...

Sub-Saharan Africa Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

UMVA Bank Sub-Saharan Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

remittances,

international transfers,

HTM process

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Xpertek Loan

Administration

System

Latin America and the

Caribbean

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Client

Information/Relationship

Management

ADbanking Sub-Saharan Africa Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Insurance

Abacus OneWorld Europe and Central Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Sub-Saharan Africa

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Insurance

AICHA Sub-Saharan Africa Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

Bankers Realm Europe and Central Asia

Middle East and North

Africa

Sub-Saharan Africa

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Payroll

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Bankers Realm MFO Sub-Saharan Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Medium (5,000-

25,000),Medium-

Large (25,000-

50,000),Large (more

than 50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Bankers Realm

SACCO

Sub-Saharan Africa Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Bank Micro Europe and Central Asia

Sub-Saharan Africa

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

CorePlus Europe and Central Asia

East Asia and the

Pacific

North America

Sub-Saharan Africa

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Payroll

Fixed Asset

Management,Central Bank

Reporting, Internet Banking,

Mobile Teller, Document

Management, Photo and

Signature verification

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Cubis 8 Europe and Central Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Sub-Saharan Africa

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

Datafinance Sub-Saharan Africa Small (less than

5,000)

Medium (5,000-

25,000)

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Share Management

Insurance

Delphix Europe and Central Asia

South Asia

East Asia and the

Pacific

Latin America and the

Caribbean

Middle East and North

Africa

North America

Sub-Saharan Africa

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Payroll

Insurance

Latin America and Caribbean

BANTOTAL Latin America and the

Caribbean

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

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COBIS Latin America and the

Caribbean

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Conexus Latin America and the

Caribbean

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

CoopLeader Latin America and the

Caribbean

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Insurance

eSIACOM Latin America and the

Caribbean

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

eConx Latin America and the

Caribbean

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

investment

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Emortelle [Formerly

CUMIS Plus]

Latin America and the

Caribbean

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

Human Resource

SIFCO Latin America and the

Caribbean

Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Insurance

Topaz Microfinance Latin America and the

Caribbean

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Orion Latin America and the

Caribbean

Small (less than

5,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Payroll

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SIMCO PLUS Latin America and the

Caribbean

Medium (5,000-

25,000)

Insurance

eConx Latin America and the

Caribbean

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

investment

SIFC Net Latin America and the

Caribbean

Small (less than

5,000)

Medium (5,000-

25,000)

Medium-Large

(25,000-50,000)

Large (more than

50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

North America

Mercury Latin America and the

Caribbean

North America

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

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DownHome Loan

Manager 2.05

North America Small (less than

5,000)

Loan Portfolio

SYSDE BANCA Europe and Central Asia

South Asia

East Asia and the

Pacific

North America

Medium-Large

(25,000-50,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Payroll

Mimota North America Medium (5,000-

25,000)

Accounting

Loan Portfolio

Deposits/Savings

Management

Client

Information/Relationship

Management

Share Management

Source: CGAP

When we analysed the various software‘s found in South Asia major Apparent Microfinance

Manager, Common Cents 101 Micro Finance Software, Southtech Ascend Banking, BEACON

IMP@CT, BankSoft, W-Bank, MFASYS-Mobile Enabled Micro Finance, Micro Financer

Standard Edition, ThemeproTM Universal Micro Finance Solution (UMFS), Finance Solutions

McFinancier, Microfin360.

The various software used in Africa are Delta-Bank, e-Finance, El Mohassil 1.3, ELOGE

BANK, Delta Loan Tracking System, eMerge 1.0, EVOLAN PACK for Financial Companies,

Fin@ncia, FINCORESOFT, FinnOne Loans, GLOBAL BANK, Kredits 5.5503, Kredits 5.5539,

LMS (Loan Management System, Loan Performer, Loan Tracker, Loan Traking System (LTS),

M2, Margill Loan Manager (MLM), MaxiSoftCB Banking Software, MBWin - FAO-GTZ

MicroBanking System, Microbank Information System 2.00, MICROFINA, Microfins, Mifos,

MLAS (Microloans Administration System), Octopus Micro Finance Suite, OMNIEnterprise

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Microfinance Solution, Orbit, Orbit-R, ORCHID Microfinance, PERFECT, Perfeczion

Microfinance Software, PharaFinance, PowerFinance, SASA-PRO VISION SQ212, SAVCO,.

Savings Plus,. SIM.net – Sistema, Informático para Microfinanzas, SML VISION SQ212,

SYSDE SAF, The Exceptional Assistant (TEA), Total Microfinancing, UMVA Bank, Xpertek

Loan Administration System, ADbanking, Abacus OneWorld, AICHA, Bankers Realm, Bankers

Realm MFO, Bankers Realm SACCO, Bank Micro, CorePlus, Cubis 8, Datafinance, Delphix.

In Europe and central Asia also various MIS software are used. Major software is AchidBanker2,

Afropack Financial Enterprise Manager. In Latin America major softwares used are

BANTOTAL COBIS, Conexus, CoopLeader, eSIACOM, eConx, Emortelle, SIFCO, Topaz

Microfinance, Orion, SIMCO PLUS, eConx, SIFC Net etc. In North America the various

microfinance institutions were using various kinds of software. Major software used are

Mercury, Down Home Loan Manager 2.05, SYSDE BANCA, Mimota etc. These software are

suitable for various sizes of microfinance institutions. These MIS software help microfinance

institutions in Accounting, Loan Portfolio management, Deposits/Savings Management, Client

information, Relationship Management, pay roll preparation etc.

It may be concluded that there are various types of management information software used in

various microfinance institutions in India and abroad. There is no uniformity of the software.

These are location specific and designed according to need of its local and regional customers.

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CHAPTER VII

STRATEGY FOR PENETRATION OF

TECHNOLOGY

Technology innovation in microfinance institutions including banks have shown that it is

possible to provide viable financial services to in rural areas especially to the poor. Micro

financial institutions use technology for delivery mechanisms to reduce costs. Technological

innovation is needed in financial institutions to extend the benefits of financial services to wider

rural areas. Despite the fact that the cost of hardware and connectivity is falling, successful use

of technology in microfinance is still the exception rather than the rule. Microfinance institutions

face several challenges that inhibit the widespread adoption of technology to extend financial

service delivery. The information regarding various strategies for adoption of technology was

discussed with various stakeholders eg. Microfinance institutions, banks, technology providers

and clients are summarized below:

Technology awareness: As discussed under factor affecting technology adoption the lack of

awareness about technology among various stakeholders in banks and microfinance institutions

was the major hurdle adoption. The awareness about technology, its benefits in data transmission

and reporting should be emphasised. Awareness creation programme should be organised for

microfinance institutions and banks.

Recruitment of technical staff: Less availability of qualified human resources is one of the

major hurdles in adoption of technology. Recruitment of staff should be done by the mFIs to

handle latest technology.

Availability of finance: The establishment cost of technology is very high. That needs costly

hardware and software‘s. Costs can be shared by assisting technology provider with financial

support which will reduce the cost by scaling up of technology. MFIs may get technology at

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subsidized/ reduced costs. Financial support should be provided to microfinance institution for

technology adoption. NABARD is assisting microfinance institutions through technology fund.

Development of Rural Connectivity: MFIs operate in remote and difficult areas where

communication and power infrastructure do not Microfinance institutions that lack strong

communications and electric infrastructure may have a hard time implementing technology

solutions that rely on internet connectivity—or even electricity. Infrastructure should be provided

in the rural areas to improve connectivity.

Selection of technology providers: Most of the technology providers were from south India

where the concentration of microfinance institutions is high. Microfinance institutions which are

operating in north India faced problem of availability of technology in nearby market. They have

to dependent on supplier who is far from their operation. If any operation problem arises then it

becomes difficult to rectify immediately. mFIs can also share MIS software with other mFis.

Repairs and maintenance of software is one of the area concerns of microfinance organization.

Technology providers should provide repairs and maintenance facilities. In selection of

technology providers, an MFI should make sure that it has complete requirements and

specifications. More research of mFIs who have successfully introduced new technologies and

share the finding with others will help in penetration of technology.

Transparent Reporting System: Many of the microfinance institutions do not have transport

reporting system. The Microfinance sector is still evolving and lacks standardization in its

procedures, methodologies, customer characteristics, type of transactions and reporting. By

introduction of microfinance bill 2010, microfinance institutions have to comply with regular

and transparent reporting. Systems should be introduced for microfinance institutions to make

for transparent reporting regarding their loan portfolio and produce reports. It will help in

technology adoption.

Need based technology solution: Due to variations in size of mFIs, legal structure, financial

capabilities they adopt different types of technology. In India there is regulation in microfinance

sector. Requirement of mFIs differ amongst MFIs according to size, organizational form,

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technical competency and adequacy of the technical staff. Need based solution should be

provided according to the need of mFIs.

Technical support to microfinance Institutions: Capacity of microfinance institution has to be

increased by technical and financial support. There is need of strong partnership with

technology service provider and mFIs staff. Incentive should be provided to mFIs who adopt

technology. It will help them to scale up their business and help in transparency.

Regular Feed back of different stakeholders: Regular feedback should be provided to the

service provider regarding functioning of the software and other technology tools. Technology

provider should address the problem of mFIs promptly.

Viable BC Model: Business viability of the different business correspondents should be given

proper attention. Linking business correspondents and SHGs/JLGs will give a boost to

microfinance programme. Village Panchayat, Community Centre, Vasudha Kendra etc can act

as Business correspondence of the banks.

System of portability: Portability has become one of the issues in microfinance institutions.

Mostly BC (Eko financial Services) does not work with on other than NOKIA mobile. Mobile

user of other than NOKIA faces problem while dealing with BC. System of portability should be

addressed amongst various service providers.

Technology awareness programme for clients: As discussed earlier one of the major problems

in technology adoption is illiteracy of clients of microfinance institutions. They have very poor

knowledge about technology. It is suggested by various stakeholders that technology solutions

should be physically accessible and affordable. Technology should be user-friendly, and should

address cultural sensitivities around gender, class, and privacy. It should be secured for the

clients. Clients trust is major issue in microfinance. Technology should enhance the trust among

the clients. Trust can be enhanced by issuing printed receipts to their clients. By providing

awareness training to clients there will be trust building among clients.

Clients perceive a benefit from the technology, such as easy access, reduced risk of carrying

cash, or the ability to transfer funds from one person to another. Clients should be comfortable

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with, and educated about technology. It may be concluded that technology does have the

potential to transform the microfinance industry, but whether this actually happens will depend

on a number of factors, namely the extent to which MFIs take advantage of the opportunities that

IT provides and integrate technology into an overall business strategy that is creative,

collaborative and keenly focused on clients‘ needs. Consumer protection should be provided to

evade fraud made by microfinance agents.

Government Policy environment: As technology adoption in banks and microfinance expands,

governments and regulators struggle to sort out the implications, for instance, of neighborhood

shops taking deposits from the public without a formal license to do so. Appropriate regulatory

space for the issuance of e-money and other stored-value instruments should be formulated.

Inclusive payment system regulation and effective payment system should reach to proper scale.

Legal and regulatory constraints that impede an MFI‘s ability to implement technology solutions

should be removed. Governments can help expand access by issuing national identification

systems (numerical- or biometric-based) or by distributing welfare payments, pensions, and

salaries through electronic networks. Some of the experiments like project Shakti for MNREGA

project in Bihar has started.

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CHAPTER VIII

SUGGESTIONS AND RECCOMONDATIONS

There are only few studies explaining impact of technology adoption in microfinance institutions

in India. The need remains, however, to examine the use of various technology products and

channels in the delivery of micro finance in India. In Bihar there is hardly any study to

understand local technological and socioeconomic environment to understand the adoption

processes of modern technology. The current study ―Impact Assessment of Technology

Adoption in Microfinance in India‖ is an attempt in this direction.

Major finding of the study are follows

95.7% of public sector banks branches were fully computerized of which 81.4% branches

were under core banking solution and 14.3% were already fully computerized.

Remaining 4.3% branches were partially computerized.

Branches of 17 banks belonging to SBI groups and nationalized banks, viz. Andhra Bank,

Corporation bank, Indian Bank, Oriental Bank of Commerce, Punjab National Bank,

Syndicate Bank, Union Bank of India, Vijaya Bank were fully computerized. Branches of

other nationalized banks (10) were at varied stage of computerization. The branches of

Punjab and Sind Bank and UCO Bank were least computerized.

95 banks out of 171 banks in the country did using NEFT mechanism for transfer of

funds which constituted 55.56% of the entire banking system. Huge sum of 438.97

billion was remitted through this facility involving enormous number of 8.28 million

transactions. Higher number of transactions were undertaken by HDFC Bank (1331411),

followed by CITI Bank (1294726), ICICI Bank (938038) and SBI (653670).

NEFT facility is still out of reach of the vast section of economy as only 55.56% of

banks using this mechanism and out of these banks very few had undertaken transactions

through this facility to their full capacity.

43651 ATMs were installed out of which 24645 were on site and 19006 were offsite all

over the country set up by all scheduled commercial banks. Out of 43651 ATMs, public

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sector banks had set up 17379 on-site and 9898 off-side ATMs all over the country

forming 62.5% of total ATMs installed in the country.

Among public sector banks SBI and its associates had set up 16062 ATMs in the country

out of which there were 7146 on site and 4193 off site ATMs forming 36.8% of total

ATMs in the country.

Among nationalized banks, IDBI Bank Ltd, Corporation Bank, Canara Bank, Union

Bank of India, Oriental Bank of Commerce were leading banks in setting up ATMs

forming 176.5%, 99.7%, 73.2%, 69.6% and 59.4% of their total branches respectively.

Other nationalized banks were laggard in setting up ATMs in proportion to their branches

which ranged between 9.55 minimum (Allahabad Bank) and 50.9% maximum (Andhra

Bank).

Amongst private banks, ICICI bank has largest number of ATMs (4713) followed by

Axis bank (3595) and Federal Bank (616). The private banks were having least number

of ATMs which were installed by International bank (2) and Ratnakar Bank (9).

International bank has only 2 branches which were 100% computerised.

Private sector banks have more ATMs in terms of percent of ATMs to branches. 172.6 %

ATMs were found per branch in case of private sector banks that means 1.7 ATM per

branch which is three times as compared to public sector banks. There was large

variation amongst private banks in terms of percent of ATMs to branches. Highest

percent of ATMs to branches was found in case of Axis bank (457.4%) followed by

ICICI bank (334.5%) and HDFC bank (234%).

In India ATM penetration was rising at a faster rate and had gone up from 5.93 during

2005 to 12.68 during 2008. However, it was too low from OECD higher range

(benchmark) at 437.

In India various experiments of technology use in micro financing and financial inclusion

has been attempted. Few examples are ICICI Bank‘s partnership with FINO, Business

Correspondent (BC) model- ICICI, ICICI Bank - I-Express, HDFC Bank financial

inclusion programme, SBI ties up with OXIGEN, Financial inclusion by Axis Bank,

Transfer2Home tie up with Standard Chartered Bank for money transfer, Kisosk

Banking of SBI with 3i Infotech Foundation, Solar Powered ATM for Rural India by

Vortex Engineering, GPRS technology by Sanghmitra Rural Financial Services,

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Bangaluru, hand-held service by PUSHTIKAR -a low-cost model, Andhra Pradesh

model of opening no frill account, STEMS— technology pilot from BASIX, Banking

Correspondent for KBS Bank in Chincholi, Technology Assisted Financial Inclusion- by

BASIX, Dhanna X, E-Docs and real time monitoring by Equitas, mobile banking by Eko

financial services as business correspondents of SBI and ICICI, Tata Indicom Green

Money fund Transfer, iwaymedia - SMS based payment solution, ItzCash ties up with Tata

DoCoMo, Mobile banking Cashpor Microfinance, Varanasi and Glodyne Technoserve.

These organizations use various types of technology which had helped micro financing

and financial inclusion.

Only about one-third of the MFIs in Southeast Asia and Africa are computerized,

compared to more than three-quarters of the MFIs in Latin America, Eastern Europe and

Central Asia. Worldwide, 46% of MFIs still have very low-tech systems, either manual or

spreadsheet-based MIS. The remaining 56% have more advanced systems, either custom

outsourced systems (24% of the institutions surveyed), systems built in-house (20%), or

applications purchased off the shelf (10%).

In many countries Palm Pilots, or Personal Digital Assistants (PDAs), are in use in a

growing number of MFIs.

The partnership between Globe Telecom, through its G-Cash mobile banking solution,

and the Rural Bankers Association of the Philippines (RBAP) tries to fill this gap by

offering an effective solution for the repayment of microfinance loans with the use of cell

phones.

ATM networks are being rolled out by a number of banks and have been tested by a

handful of microfinance institutions as well. MFI clients in the Dominican Republic can

even access international ATM networks.

Prodem, a Bolivian mFI, has conducted a pilot project using Smart Cards to replace much

of the paperwork previously needed for transactions.

Asociación Programa Compartamos an MFI, targeting very low-income women in

Mexico is experimenting with Palm Pilot (a brand of PDA).

In Korea Mobile Banking is the hottest area of development in the banking sector and is

expected to replace the credit/debit card system in future.

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Banco Solidario, with support from ACCION International, implemented a PDA-based

application for microfinance purposes. This first generation of ACCION‘s Porta Credit

application was called Credi Palm.

The Correspondent agents (CA) model allows financial institutions to reach remote areas

by using a combination of POS terminals and magnetic strip cards. This model is

currently implemented in several Latin American institutions, including

BANCOLOMBIA-CONAVI in Colombia and Interbank in Peru.

The RTS is a solution that currently allows clients to make savings deposits and

payments of microfinance loans through a network of agents. This system is at the final

stages of its pilot phase at Uganda Microfinance Limited (UML).

OIBM has effectively combined biometric-enabled POS devices and smart cards to

provide banking services to Malawi‘s low- income population. OIBM‘s biometrics and

smart card model overcome the identification problem by using fingerprints.

The K-Rep experience with the use of the mobile phones was brief and did not prove

successful. By implementing a mobile banking system, K-rep wanted to offer services to

its clients through money transfer between accounts and Account balance inquiries, and

Mobile real-time transfers between accounts.

Bank officials were generally more aware about the various technologies than the MFI

officials. ATMs, Biometric Card, Credit Card, E-payment of utility bills and taxes,

internet banking, computer and software have 100% awareness among Bank officials.

While the new technology like charge card had just 50% awareness among the Bank

officials.

Among the MFI officials, 24 hour on call service (65%), charge card (65%), credit

scoring (65%), point of sale (65%) terminals have low awareness level in comparison to

ATMs (100%), Computer (100%) and software (100%). The other relatively new

technology like E-payment of utility bills and taxes (70%) and Personal Digital Assistant

(PDA) (70%) were also less known.

100% of the bank and 85% of the MFIs surveyed were already using software. MFIs have

not started yet with the ATM. Only 15% of the MFI officials were using the biometric

cards. Charge cards were not used in the most of the banks.

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Majority of the officials surveyed, were of the view that usage of technology have

reduced the transaction cost, total cost and bad debts. While most of them also said that

after adoption of technology they have experienced increased return on fund, productivity

per employee and productivity per branch.

Technology has helped them to satisfy their clients in better manner through providing

quick transaction, loan amount assessment, processing of loan, transfer of funds and other

financial services. There was improvement in disbursement, average debt per borrower,

recovery % because monitoring of borrowers became faster than earlier. Officials were

not able to quantify the impact and some were not clear about actual impact. Delivery

efficiency and adaptability also increased in most of the cases.

Most of the bank (40%) and MFI officials (60%) said that technology was beneficial in

enhancing the productivity. While some said that profitability was also major benefit of

the technology. While very less official surveyed ranked safety and security as the benefit

of the technology. Competitiveness had mixed response from the officials. Most of the

officials (40% of Banks and 45% of MFI) placed this at 4th

position.

Availability of finance/capital and technological awareness were the major factors that

affected the adoption of technology in their organization. 40% of the bank officials and

50% of the MFI officials ranked availability of finance/capital as the main factor

affecting the adoption of technology.

The factors which were least important according to the officials were Government

regulation, demand of customer and degree of diffusion of technology.

Major technology provider to microfinance institutions are RM IT solution, Hyderabad,

Jayam Solution, Hyderabad, BASIX /Sathguru Hyderabad, Elitser IT Solutions,

Hyderabad, Force ten Technology, Kolkata, Graditum IT, Bangluru, Craft Silikan,

Bangluru, Surya Software Solution, Bangluru, Financial Information Network &

Operations Ltd, Zero Mass foundation, Kredits, USA, Bangalore (In India), Snowwood,

Chennai, Surya Software Systems, FINO, Mumbai, Eko India Financial Services Pvt.

Ltd, New Delhi, Eko India Financial Services Pvt. Ltd, New Delhi, ClassifEye's solution

etc.

Most of the banks except few RRBs have CBS system. Major MIS software used by

Banks was Finacle. Other MIS software was provided by HCL in case of Uttar Bihar

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Grammeen Bank, CBS by IBM in case of Canara Bank, FINO used by Union bank of

India, FLEX –Q used by Syndicate bank and B@NCS24 by Samastipur Grameen Bank.

Different mFIs used different MIS software‘s. FIMO developed by Jayam Solution was

major MIS software used by different mFIs. Other software were FAMIS developed by

BASIX and Sathguru, Hyderabad, BIJLI developed by Force ten Technology, Kolkata,

mf expert developed by RM IT solution. Other MIS softwares were Banker Realm used

by Ujjivan, by LMS version by TMS. Grameen Koota and Jan Laxmi use Tally and

FINO for their MIS management. Basix has developed Delphix Nano as their MIS

application software. Big mFis like SKS and Bandhan Financial services have developed

their own MIS software.

Recommendations

Infrastructure support like increasing power supply and increasing connectivity may be

adequately provided for increasing use of technology. Capacity of micro financial

institutions has to be increase by providing them technical and financial support.

Awareness about technology should be increased by capacity building of different

stakeholders.

Due to high initial cost micro financing institutions were not able to adopt latest

technology. Costs can be shared by assisting technology provider with financial support

which will reduce the cost by scaling up of technology. mFIs may get technology at

subsidized/ reduced costs. Incentive should be provided to mFIs who adopts technology.

It will help them in to scale up their business.

Appropriately staffing should be done by the mFIs to handle latest technology.

Recruitment of technical staff and their regular training on updates of latest technology

would help in adoption of technology.

Regular feedback should be provided to the service provider regarding functioning of the

software and other technology tools.

Requirement of mFIs differ amongst MFIs according to size, organizational form,

technical competency and adequacy of the technical staff. Tailor made solution should

be provided according to the need of mFIs.

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Systems should be introduced to make for transparent reporting regarding their loan

portfolio and produce reports. It will help mFIs in timely and appropriate decision

making.

In choosing an appropriate technology, it is highly recommended that MFIs get their core

MIS right first before building any kind of delivery system on top of it. Technology

provider should address the problem of mFIs promptly.

mFIs should set realistic expectations with respect to what technology will do and cost.

mFIs should manage the nature and pace of change associated with technology solutions.

Legal and regulatory constraints that impede an MFI‘s ability to implement technology

solutions; should be removed.

Research done on mFIs about those who have successfully introduced new technologies

should share the finding with others which will help in penetration of technology.

mFIs should choose the option that gives them the most cost effective access to their

chosen technology solution.

mFIs should consider kind of quality of software and its price.

In banks one problem with technology like ATM is non-functioning of ATM and very

irregular services in different banks. The improvement in service will help adoption of

technology faster.

Some people feared fraud in banking sector like unauthorised withdrawal of money from

others account is a great concern. Security system should be build-up while handling

technology in banking sector.

It may be concluded that technology does have the potential to transform the microfinance

industry, but whether this actually happens will depend on a number of factors, namely the

extent to which MFIs take advantage of the opportunities that IT provides and integrate

technology into an overall business strategy that is creative, collaborative and keenly focused on

clients‘ needs.

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birth of Equity Building Society in Kenya, MicroSave – Market-led solutions for financial

services, August 2002.

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48. Harma Mahesh K. and Ritvik Dubey, (2009) ―Prospects of Technological

Advancements in Banking Sector Using Mobile Banking and Position of India‖

IACSIT-SC '09 Proceedings of the 2009 International Association of Computer. IEEE

Computer Society Washington, DC, USA 2009 .

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World Wide Web resources:

i. www.adbi.org

ii. www.basixindia.org

iii. http://www.digitaldividend.org/

iv. www.microfinancegateway.org

v. www.microfinancegateway.org/p/site/m/template.rc/1.11.48240/)

vi. www.microsave.org

vii. www.planetfinance.com

viii. www.prodemffp.org

ix. www.cgap.org/technology

x. www.cab.org.in/ICTPortal/Lists/.../icicibank_strategy_promoting.pdf)

xi. http://transfer2home.in

xii. www.prodemffp.com.bo

xiii. Source: www.wizzit.co.za

xiv. www.mifos.org

xv. www.banco-solidario.com

xvi. www. k-rep.org/bank.asp

xvii. www.Visa.com

xviii. www.vortexindia.co.in

xix. www.endarabe.org.tn

xx. www.asomi.co.in

xxi. www.opportunity.net

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Annexure 1

Legal status of the institutions

Sl.No. Organization Type of

organization

1 Samastipur Kshetriya Gramin Bank Bank

2 Canara Bank Bank

3 RIG, HDFC Ranchi Bank

4 State Bank of India Bank

5 Uttar Bihar Gramin Bank Bank

6 UBI Bank

7 Syndicate Bank Bank

8 Ucobank, zonal patna Bank

9 PNB, Chanakya Tower, Patna Bank

10 ICICI Bank

11 Disha Microfinance Pvt. Ltd. MFI

12 Nav Achetana Microfin Services Private Limited MFI

13 Mahashakti Foundation, M. Rampur Kalahandi,

Orissa MFI

14 Star Microfin Service Society (SMSS) MFI

15 Bihar Development Trust MFI

16 Ushodaya Integrated Urban and Rural

Development MFI

17 Agricultural Science Foundation, Hyderabad MFI

18 Sambandh Finserve Pvt. Ltd. MFI

19 Nano Financial Services India Private Limited

Chennai MFI

20 SKS MFI

21 BFSPL MFI

22 Spandan Sphoorty Finance Limited MFI

23 SRFS MFI

24 Basix MFI

25 Share Microfinance MFI

26 Janlaxmi MFI

27 Gramin Koota MFI

28 IDF financial service Pvt. Ltd. MFI

29 Ujjivan Finance Service Pvt. Ltd. MFI

30 Trust Microfinance Services, Muzaffarpur MFI

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Annexure II

Sources of Fund

Organization Source of Fund

Disha Microfinance Pvt. Ltd. Own equity and Debt.

Nav Achetana Microfin Services Private

Limited

Banks and financial institutions

Samastipur Kshetriya Gramin Bank Deposits & Refinance borrowings

Mahashakti Foundation, M. Rampur

Kalahandi, Orissa

Ananya, SIDBI, AXIS, DCB, NABARD, SMCS,

MANABEEYA HOLDING PVT. LTD. FWWB

Star Microfin Service Society (SMSS) Axis Bank Ltd., Ananya Finance, Maanaveeya

Holding and Investment Pvt. Ltd., SIDBI, Reliance

Capital Limited, Star Microfinance India Ltd.,

Bihar Development Trust PNB, Indian Bank, FWWB, TWN, RGVN, BASIX

Ushodaya Integrated Urban and Rural

Development

Own funds, IOB, ICICI Bank, Lord Krishna Bank

Agricultural Science Foundation, Hyderabad State Bank of India, Gadag

Sambandh Finserve Pvt. Ltd. FWWB, ABN, AMBRO, AXIS, DCB, ANNANYA,

SBI, DIA, VIKAS

Nano Financial Services India Private

Limited Chennai

Manaviya, Ananya, SIDBI, HDFC, Aadarsha

Canara Bank Deposit

SKS Multiple

BFSPL SIDBI, Banks ,

RIG, HDFC Ranchi Deposits, loan

Spandana sphoorty financial ltd. Bank loans, equity

SRFS Multiple

Basix Banks, equity

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Annexure ii

Sources of find of financial/ micro financial institutions

Organization Source of Fund

Uttar Bihar Gramin Bank Sponsor Bank, NABARD, Own fund

Share Microfinance Multiple

Janlaxmi loans from different funders including banks, own

fund

UBI Public deposits

Gramin Koota Public deposits

IDF financial service Pvt. Ltd. NABARD, SIDBI, SBI, IOB, RRB, Canara Bank,

Syndicate bank, Corporation Bank

Ujjivan Finance Service Pvt. Ltd. Bank loan, equity

Syndicate Bank Public deposits

Ucobank, zonal Patna Bank lendable funds

WDC Govt. of Bihar

Trust Microfinance Services, Muzzffarpur loans from different funders including banks

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Annexure III

No. of staff in banks and mFIs

Organization Total numbers of Staff

Disha Microfinance Pvt. Ltd. 120

Nav Achetana Microfin Services Private Limited 87

Samastipur Kshetriya Gramin Bank 294

Mahashakti Foundation, M. Rampur Kalahandi, Orissa 102

Star Microfin Service Society (SMSS) 104

Bihar Development Trust 19

Ushodaya Integrated Urban and Rural Development 12

Agricultural Science Foundation, Hyderabad 55

Sambandh Finserve Pvt. Ltd. 50

Nano Financial Services India Private Limited Chennai 100

Canara Bank 1077

SKS 21154

BFSPL 8500

RIG, HDFC Ranchi 2 in Jharkhand

Spandana Sphoorty financial ltd. 12000

SRFS 150

Basix 5058

State Bank of India NA

Uttar Bihar Gramin Bank 3229

Share Microfinance 5408

Janlaxmi 400

UBI 42

Gramin Koota 1800

IDF financial service Pvt. Ltd. 436

Ujjivan Finance Service Pvt. Ltd. 2830

WDC 78

Trust Microfinance Services, Muzzffarpur 16

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Annexure IV: Outreach of the institutions

Sl.

No.

Organization Number of

borrowers

financed

during 09-10

Number of

borrowers

financed

upto 31-03-

10

Total loan

disbursed

during 09-

10

Total loan

disbursed

upto 31-03-

10

(crores)

No. of

Accounts

outstanding

as on 31-03-

2010

Amount

outstanding

as on 31-03-

2010

1 Disha Microfinance

Pvt. Ltd.

5865 5865 7. 2.4 7. 24 5837 51. 3

2 Nav Achetana

Microfin Services

Private Limited

10581 29668 11. 97 27. 69 9804 7.28

3 Samastipur Kshetriya

Gramin Bank

- - - 124. 95 213. 25

4 Mahashakti

Foundation, M.

Rampur Kalahandi,

Orissa

15384 56138 1.60 3.51 24,835 1.43

5 Star Microfin Service

Society (SMSS)

30576 168883 3.87 1 5.6 29,614 2.14

6 Bihar Development

Trust

2033 3117 1.86 2.65 1962 1.13

7 Ushodaya Integrated

Urban and Rural

Development

2295 21482 3.130 12.89 2295 2.07

8 Agricultural Science

Foundation,

Hyderabad

6957 37981 11.29 28.72 932 8.66

9 Sambandh Finserve

Pvt. Ltd.

4560 11400 0.53 1.23 4,504 3.18

10 Sarvodaya Nano

Financial Services

India Private Limited

Chennai

24390 21561 - - 14722 76.15

11 Canara Bank 17393 48009 122.43 303.96 48009 303.96

12 SKS 4,242,946 14387 4242946 2936.17

13 BFSPL 2301,433

1495.08

14 RIG, HDFC Ranchi 1800 2000 N.A. - N.A. -

15 Spandana sphoorty

financial ltd.

41.640 - 3540.5 11799.8 4.77 million 4205

16 SRFS 4432 7462 9.76 63.89 7462 SHG 69.25

17 Basix 1114468 100,3.86 - -

18 State Bank of India - - - - - -

19 Uttar Bihar Gramin

Bank

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Annexure V: Various technologies used by banks and mFIs

Sl.

No. Organization

24 hour on call

service

Automated Teller

Machine (ATMs) Biometric Card Charge Card Credit Cards

Used Planning

Stage Used

Planning

Stage Used

Planning

Stage Used

Planning

Stage Used

Planning

Stage

1 Disha Microfinance Pvt. Ltd.

2 Nav Achetana Microfin Services Private

Limited

3 Samastipur Kshetriya Gramin Bank

4 Mahashakti Foundation, M. Rampur

Kalahandi, Orissa

5 Star Microfin Service Society (SMSS)

6 Bihar Development Trust

7 Ushodaya Integrated Urban and Rural

Development ✔

8 Agricultural Science Foundation,

Hyderabad

9 Sambandh Finserve Pvt. Ltd. ✔ ✔ ✔

10 Nano Financial Services India Private

Limited Chennai

✔ ✔

11 Canara Bank ✔ ✔ ✔ ✔ ✔

12 SKS

13 BFSPL

14 RIG, HDFC Ranchi ✔ ✔ ✔

15 Spandawe sphcorty finance

16 SRFS

17 Basix ✔ ✔

18 State Bank of India ✔ ✔ ✔ ✔

19 Uttar Bihar Gramin Bank ✔ ✔ ✔ ✔ ✔

20 Share Microfinance

21 Janlaxmi ✔

22 UBI ✔

23 Gramin Koota ✔

24 IDF financial service Pvt. Ltd.

25 Ujjivan Finance Service Pvt. Ltd. ✔

27 Syndicate Bank ✔ ✔

28 UCO Bank, zonal Patna ✔ ✔ ✔

29 Trust Microfinance Services, Muzaffarpur

30 PNB, Chanakya Tower, Patna ✔ ✔

ICICI ✔ ✔ ✔

Source: primary survey

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Annexure V (continued)

Organization

Credit Scoring Debit Cards

E-Payment of

utility bills and

taxes

Interactive Voice

Response

Technology (IVR)

Internet

Banking

Used Planning

Stage Used

Planning

Stage Used

Plannin

g Stage Used

Planning

Stage

Use

d

Plannin

g Stage

Disha Microfinance Pvt. Ltd. ✔ ✔

Nav Achetana Microfin Services

Private Limited

Samastipur Kshetriya Gramin

Bank

Mahashakti Foundation, M.

Rampur Kalahandi, Orissa

Star Microfin Service Society

(SMSS)

Bihar Development Trust ✔ ✔ ✔

Ushodaya Integrated Urban and

Rural Development

Agricultural Science Foundation,

Hyderabad ✔

Sambandh Finserve Pvt. Ltd,

Hyderabad

Nano Financial Services India

Private Limited Chennai ✔

✔ ✔

Canara Bank ✔ ✔ ✔ ✔

SKS

BFSPL

RIG, HDFC Ranchi ✔ ✔ ✔

Spandawe sphcorty finance ltd.

SRFS ✔

Basix ✔

State Bank of India ✔ ✔ ✔ ✔ ✔

Uttar Bihar Gramin Bank ✔ ✔ ✔ ✔ ✔

Share Microfinance

Janlaxmi

UBI

Gramin Koota ✔ ✔ ✔

IDF financial service Pvt. Ltd.

Ujjivan Finance Service Pvt. Ltd. ✔ ✔

Syndicate Bank ✔ ✔ ✔ ✔ ✔

UCO Bank, zonal Patna ✔ ✔ ✔ ✔

Trust Microfinance Services,

Muzaffarpur

PNB, Patna ✔ ✔ ✔ ✔

ICICI bank Patna ✔ ✔ ✔

Source: Primary survey

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Annexure V (continued)

Organization

Mobile Banking Personal Digital

Assistant (PDA)

Point of Sale

(POS) Terminals Computer Software

Used Planning

Stage Used

Planning

Stage Used

Planning

Stage Used

Planning

Stage Used

Planning

Stage

Disha Microfinance Pvt.

Ltd.

✔ ✔

Nav Achetana Microfin

Services Private Limited

Samastipur Kshetriya

Gramin Bank

Mahashakti Foundation,

M. Rampur Kalahandi,

Orissa

Star Microfin Service

Society (SMSS)

Bihar Development Trust ✔ ✔ ✔

Ushodaya Integrated

Urban and Rural

Development

Agricultural Science

Foundation, Hyderabad ✔

Sambandh Finserve Pvt.

Ltd.

Nano Financial Services

India Private Limited

Chennai ✔

Canara Bank ✔ ✔ ✔ ✔ ✔

SKS

BFSPL ✔ ✔

RIG, HDFC Ranchi ✔ ✔ ✔ ✔

Spandawe sphcorty

finance ltd.

SRFS ✔ ✔

Basix ✔ ✔ ✔

State Bank of India ✔ ✔ ✔ ✔

Uttar Bihar Gramin Bank ✔ ✔ ✔ ✔ ✔

Share Microfinance ✔ ✔ ✔ ✔ ✔

Janlaxmi ✔ ✔ ✔

UBI ✔ ✔

Gramin Koota ✔ ✔ ✔

IDF financial service Pvt.

Ltd.

Ujjivan Finance Service

Pvt. Ltd. ✔

Syndicate Bank ✔ ✔ ✔

UCO Bank, zonal Patna ✔ ✔ ✔

Trust Microfinance ✔ ✔

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Services, MuzAffarpur

PNB, Chanakya Tower,

Patna ✔

ICICI ✔ ✔

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Annexure VI

OFFICES OF COMMERCIAL BANKS IN INDIA from 2005 TO 2009

Bank Group 2005 2006 2007 2008 2009

% change in

2009 over 2005

State Bank of India and its Associates 14006 14294 14651 15814 16731 19.46%

Nationalised Banks $ 35096 35848 37413 39204 40766 16.16%

Foreign Banks 242 259 272 279 295 21.90%

Regional Rural Banks 14763 14776 14812 15029 15384 4.21%

Other Scheduled Commercial Banks 6462 6828 7415 8294 9186 42.15%

Non-Scheduled Commercial Banks 37 41 46 46 46 24.32%

Total 70606 72046 74609 78666 82408 16.72%

Notes: No. of offices includes administrative offices.

$ Includes IDBI Bank Ltd.

Data for 2005 to 2008 have been revised and data for 2009 are provisional.

Source: Master Office File (latest updated version) on commercial banks, Department of Statistics and

Information Management, RBI.

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Annexure VII

STATE AND POPULATION GROUP-WISE DISTRIUTION OF OFFICES OPENED BY COMMERCIAL

BANKS as on March, 31, 2009

State / Union

Territory

Rural Semi-Urban Urban Metropolitan Total % of total

branches

Andaman &

Nicobar

17 20 - - 37 0.04

Andhra Pradesh 2388 1537 1696 1077 6698 8.13

Arunachal

Pradesh

50 27 - - 77 0.09

Assam 788 334 307 - 1429 1.73

Bihar 2356 846 433 281 3916 4.75

Chandigarh 24 1 287 - 312 0.38

Chhattisgarh 654 254 346 - 1254 1.52

Dadra & Nagar

Haveli

5 19 - - 24 0.03

Daman & Diu - 18 - - 18 0.02

Delhi 56 36 - 2219 2311 2.80

Goa 159 265 - - 424 0.51

Gujarat 1486 989 649 1357 4481 5.44

Haryana 691 468 924 118 2201 2.67

Himachal

Pradesh

729 160 72 - 961 1.17

Jammu &

Kashmir

547 192 268 - 1007 1.22

Jharkhand 974 366 410 - 1750 2.12

Karnataka 2166 1208 1343 1274 5991 7.27

Kerala 332 2712 1142 - 4186 5.08

Lakshadweep 8 3 - - 11 0.01

Madhya Pradesh 1756 977 787 569 4089 4.96

Maharashtra 2143 1415 1171 3147 7876 9.56

Manipur 35 21 25 - 81 0.10

Meghalaya 124 30 51 - 205 0.25

Mizoram 55 14 26 - 95 0.12

Nagaland 35 51 - - 86 0.10

Orissa 1654 514 588 - 2756 3.34

Punducherry 28 33 67 - 128 0.16

Punjab 1123 965 743 526 3357 4.07

Rajasthan 1756 993 861 431 4041 4.90

Sikkim 46 25 - - 71 0.09

Tamil Nadu 1709 1839 1445 1140 6133 7.44

Tripura 110 58 51 - 219 0.27

Uttar Pradesh 4806 1776 1731 1568 9881 11.99

Uttarakhand 570 290 246 - 1106 1.34

West Bengal 2319 626 945 1306 5196 6.31

TOTAL 31699 19082 16614 15013 82408 100.00

Source: RBI report, 2009

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Annexure VIII: Various banks in different states in India

Source: RBI data

States and UT

SBI & its

associates

Nationalis

ed banks

Foreign

banks RRBs

Other

schedules

banks

Non –

scheduled

banks

All

commercial

banks

Andaman &

Nicobar Islands 1 10 — — 1 — 12

Andhra Pradesh 7 20 8 5 19 2 61

Arunachal

Pradesh 1 10 — 1 2 — 14

Assam 2 20 1 2 11 — 36

Bihar 3 20 2 4 10 — 39

Chandigarh 6 20 3 — 15 — 44

Chhattisgarh 3 20 1 3 12 — 39

Dadra & Nagar

Haveli 1 6 — — 9 — 16

Daman & Diu 1 7 — — 4 — 12

Delhi 7 20 19 — 21 — 67

Goa 4 20 — — 15 — 39

Gujarat 7 20 8 3 20 — 58

Haryana 7 20 6 2 17 — 52

Himachal

Pradesh 2 19 — 2 8 — 31

Jammu &

Kashmir 2 20 — 3 8 — 33

Jharkhand 3 20 — 2 13 — 38

Karnataka 7 20 12 6 20 2 67

Kerala 6 20 4 2 18 — 50

Lakshadweep 1 1 — — — — 2

Madhya Pradesh 7 20 3 8 14 — 52

Maharashtra 7 20 26 4 21 1 79

Manipur 1 9 — 1 2 — 13

Meghalaya 1 17 — 1 4 — 23

Mizoram 1 8 — 1 3 — 13

Nagaland 1 11 — 1 3 — 16

Orissa 5 20 2 5 15 — 47

Puducherry 4 19 1 1 13 — 38

Punjab 5 20 3 3 15 1 47

Rajasthan 7 20 4 6 18 — 55

Sikkim 1 17 — — 4 — 22

Tamil Nadu 7 20 14 2 19 — 62

Tripura 1 15 — 1 4 — 21

Uttar Pradesh 7 20 6 12 18 — 63

Uttarakhand 3 20 — 3 13 — 39

West Bengal 7 20 9 3 19 — 58

All-india 7 20 32 86 22 4 171

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Annexure IX: Status of National Electronic Fund Transfer (NEFT)

BANK

TOTAL OUTWARD DEBITS RECEIVED INWARD

CREDITS

NO. OF

TRANSACTION

S

AMOUNT

(Rs. Crore)

NO. OF

TRANSACTI

ONS

AMOUNT

(Rs. Crore)

ABHYUDAYA CO-OP BANK

LTD 2341 9.34 8379 26.60

THE ROYAL BANK OF

SCOTLAND N.V 119941 803.62 95470 642.66

ABU DHABI COMMERCIAL

BANK 390 0.97 228 1.48

AHMEDABAD

MERCANTILE COOP BANK 228 1.06 901 2.23

ALLAHABAD BANK 15418 72.57 34762 152.83

ANDHRA BANK 37904 258.94 104624 533.43

AXIS BANK 462383 1620.13 488859 2185.64

B N PARIBAS 25807 131.11 18025 443.05

BANK OF AMERICA 86974 1070.74 5956 221.58

BANK OF BAHARIEN AND

KUWAIT 31664 91.01 586 2.31

BANK OF BARODA 80714 321.82 199523 969.62

BANK OF CEYLON 137 0.27 51 0.14

BANK OF INDIA 63599 231.81 216929 959.03

BANK OF MAHARASHTRA 14749 56.76 63028 322.68

BANK OF NOVA SCOTIA 1871 7.37 417 11.08

BANK OF RAJASTHAN 7288 30.86 19425 75.67

BANK OF TOKYO AND

MITSUBISHI 880 4.34 457 29.62

BARCLAYS BANK 3115 8.33 4641 10.00

BHARAT CO-OP BANK LTD 2047 3.57 5885 23.97

CALYON BANK 545 6.96 264 17.67

CANARA BANK 151548 544.10 223239 1023.14

CATHOLIC SYRIAN BANK

LTD. 8329 46.67 13044 56.01

CENTRAL BANK OF INDIA 17871 66.35 69776 338.71

CHINATRUST

COMMERCIAL BANK 20 0.10 17 0.68

CITI BANK 1294726 8106.53 309270 2617.34

CITIZEN CREDIT

COOPERATIVE BANK LTD 387 2.36 2109 7.74

CITY UNION BANK LTD 8301 24.75 19553 70.77

CORPORATION BANK 55101 174.46 96862 659.07

COSMOS COOPERATIVE

BANK 1281 19.70 11916 53.24

DENA BANK 10771 38.17 38670 209.12

DEUSTCHE BANK 283384 2244.23 71575 795.65

DEVELOPMENT BANK OF

SINGAPORE 3199 18.70 352 8.80

DEVELOPMENT CREDIT 5776 14.95 13413 67.11

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BANK

DHANALAKSHMI BANK

LTD 6467 17.70 11458 37.70

DICGC 1 0.05 6 0.02

DOMBIVLI NAGRIK

SAHAKARI BANK 754 2.32 2488 7.11

FEDERAL BANK 54091 192.38 77301 283.31

GREATER BOMBAY CO-OP

BANK 562 1.14 2708 5.43

HDFC BANK 1331411 5858.16 1086883 6515.38

HSBC BANK 411654 3203.53 151655 1297.49

ICICI BANK LTD 938035 2606.14 1158719 4015.36

IDBI BANK 210463 763.12 140138 967.27

INDIAN BANK 82570 246.71 199907 611.57

INDIAN OVERSEAS BANK 72703 998.93 138584 685.86

INDUSIND BANK 132883 707.76 34559 198.07

ING VYSYA BANK 58617 150.50 63096 329.14

JAMMU AND KASHMIR

BANK LTD 4516 19.98 10488 58.31

JANAKALYAN SAHAKARI

BANK LTD 407 1.30 2695 8.54

JP MORGAN BANK 13456 494.07 366 44.38

KALUPUR COMM

COOPERATIVE BANK 429 1.95 1636 6.36

KALYAN JANATA

SAHAKARI BANK 159 0.45 543 0.97

KAPOLE BANK 52 0.23 453 1.59

KARNATAKA BANK LTD 22508 58.91 37431 138.47

KARNATAKA STATE COOP

APEX BANK 23 0.03 13 0.06

KARUR VYSYA BANK 12422 46.35 56173 178.42

KOTAK MAHINDRA BANK

LTD 121679 389.84 89507 583.55

LAKSHMI VILAS BANK LTD 24145 51.03 10660 40.77

MAHANAGAR COOP BANK

LTD 309 1.40 515 1.59

MAHARASHTRA STATE CO-

OP BANK LTD 193 0.66 1434 6.22

MASHREQ BANK 432 48.80 35 1.05

MIZUHO CORPORATE

BANK LTD 771 2.38 51 0.32

NEW INDIA CO-OP BANK 337 0.68 2177 6.94

NKGSB BANK 439 1.76 3479 14.88

NUTAN NAGARIK

SAHAKARI BANK LTD 131 0.54 1024 2.39

OMAN INTERNATIONAL

BANK 1286 12.34 76 0.83

ORIENTAL BANK OF

COMMERCE 40174 150.51 93050 459.72

PARSIK JANATA

SAHAKARI BANK 114 0.43 1128 2.68

PUNJAB AND 608 1.43 4772 14.16

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MAHARASHTRA CO BANK

PUNJAB AND SIND BANK 1191 23.83 6890 40.82

PUNJAB NATIONAL BANK 78286 348.74 258021 1800.99

RATNAKAR BANK LTD 345 3.15 1100 6.91

RBI,PAD 4068 2347.43 173 4.06

SARASWAT CO-OP BANK

LTD. 2265 13.12 20517 154.75

SBBJ 28932 158.24 52123 231.56

SHAMRAO VITHAL CO-OP

BANK LTD 2100 12.73 6852 58.20

SHINHAN BANK 1781 17.94 126 9.69

SOCIETE GENERALE 125 0.65 68 0.96

SOUTH INDIAN BANK 23982 121.58 38311 151.20

STANDARD CHARTERED

BANK 498182 3138.78 149959 1852.23

STATE BANK OF

HYDERABAD 71715 374.91 121321 514.53

STATE BANK OF INDIA 653670 3429.34 1328914 6296.39

STATE BANK OF INDORE 15310 62.77 31824 240.80

STATE BANK OF

MAURITIUS 88 0.76 137 3.01

STATE BANK OF MYSORE 29876 114.17 60524 222.30

STATE BANK OF PATIALA 16876 84.67 39396 200.05

STATE BANK OF

TRAVANCORE 91649 443.10 112449 345.21

SYNDICATE BANK 38791 136.31 141350 609.87

TAMIL NADU STATE APEX

COOP BANK 230 0.39 466 1.22

TAMILNADU MERCANTILE

BANK 7613 29.33 23374 103.54

THANE JANATA SAHAKARI

BANK LTD 1244 3.17 5624 31.26

UCO BANK 11132 63.34 36546 172.23

UNION BANK OF INDIA 57806 199.67 200546 1245.35

UNITED BANK OF INDIA 14795 60.58 31928 127.06

VIJAYA BANK 25415 105.43 69106 283.60

YES BANK 256127 537.12 16025 125.09

TOTAL 8277084 43897.45 8277084 43897.45

Total in Million & Billion 8.28 million 438.97 billion 8.28 million 438.97 billion

Total Outwrd Debits = Total Outward transactions accepted by NEFT System.

Received Inward Credits = Accounted Inward + Return Inward

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Annexure XI: Banking Infrastructure in Bihar

Particulars Position as on

2009

Position as on

March 2010

% change

Branch network 3809 4173 9.56%

Rural branches 2482 2554 2.90%

Semi urban branches 683 889 30.16%

No of unbanked blocks 4 0 -100.00%

No of no frill accounts 6636571 7123212 7.33%

Amount deposited

( in crores )

331.62 427.39

28.88%

No of BC 17 17 0

No of account open 12979 79649 513.68%

No of villages covered by banks 75 255 240.00%

No of SHG groups linked to bank

credit

148172 178413

20.41%

Amount of credit outstanding

(crores)

655.41 950.46

45.02%

Agricultural credit flow (crores) 8923.39 11915.98 33.54%

CD ratio 31.23 32.13 0.9% NABARD State Credit Focus, 2010.