Volume 14, Number 4 Article by Rahul Bhattacharya December, 2002
Award Winning Student Essay : Microfinance in India and the Role of IT :
Microfinance has proved to be extremely effective as a means of improving the economic condition and empowering the rural poor through participatory credit lending schemes. In an award winning student essay, Rahul Bhattacharya explains that microfinance helps the poor in various ways, not only by improving their economic condition, but also by means of the attendant benefits that a higher income level has on factors like health, education, economic and social status of women, and the general standard of living.
The basic institutions involved are self-help groups (SHGs) and micro finance institutions (MFIs). SIDBI and NABARD are prominent Indian apex organisations through which the government is funneling its investments in micro finance. NABARD and SIDBI follow different models for making credit available to MFIs. Commercial banks, regional rural banks and cooperatives have also ventured into this field because of the high rates of repayment (above 85%) in micro credit activities. With the growing effectiveness and popularity of micro credit, MFIs have spread their networks far and wide in an effort to service more people. This results in the present Management Information Systems (MIS) coming under pressure. MIS used at present in MFIs are either manual or relatively primitive software. Presently, there is no standardised software developed specifically for microfinance activities in India. Through field visits and telephone calls, Rahul identified the needs and expectations of MFIs. The study revealed that what MFIs really need is an inexpensive, user friendly, customisable and rugged software system, which can record social parameters for further analysis at the macro level. The aspect of security is extremely important. Other vital requirements are that the system should be upgradable, adaptable to portable systems like smart cards and hand-held devices, and networked for transfer of data over the Internet or telephone to a central server. Once the pressing IT needs of the microfinance sector are met, it can extend its reach and range of activities and improve its functioning, thus playing a major role in poverty alleviation.
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