Rural Microfinance Service Delivery: Gaps, Inefficiencies and Emerging Solutions

Microfinance, the provision of financial services to poor and under-served communities, has emerged as one of the most promising avenues for stimulating rural economic development through local enterprise. In this paper we will discuss some of the major technology gaps faced by rural microfinance institutions, focusing on areas that are most important for the future growth of the industry. This work builds upon six months of field research, including field studies with eight different microfinance organizations located across Latin America and Asia, and discussions with many other organizations worldwide. Historically it has proved difficult to provide sustainable micro-financial services to remote rural clients. As formal financial institutions begin to look seriously at this market, the microfinance industry faces significant challenges in maturing and scaling to sustainability. We will look at three of the major tasks faced by rural microfinance service providers today - 1) the exchange of information with remote clients, 2) management and processing of data at the institutional level and 3) the collection and delivery of money to remote rural areas. Each of these has been a difficult problem to solve for microfinance institutions worldwide, and may offer opportunities for information technology-based solutions. For each of these "gaps" we will look at current best practices, examine the role information technology has (or has not) played in overcoming these obstacles, and discuss promising future directions. In this context, we will discuss the use of handheld technologies for rural data collection, experiences in the implementation of MIS systems at the institutional level and current strategies for introducing electronic banking to remote rural areas. For each of these, we will look at the results obtained thus far and the potential ramifications for the long-term growth and sustainability of the sector