September 01, 2010

We've recorded recently how Grameen Foundation — a U.S.-based nonprofit that builds on the work of Grameen Bank founder Muhammad Yunus to try to "enable the poor to create a world without poverty" through microfinance (very small loans, such as $500) — has enlisted the help of SunGard and ThoughtWorks to scale up its Mifos platform. Mifos is essentially a core banking platform for microfinance institutions, and the organization has brought on four new institutions in the last four months. In an interview a few days ago with George Conard, executive director of Grameen Foundation’s Technology for Microfinance initiative, I learned that Mifos also runs on Amazon's EC2, which provides scalability in terms of compute resources — theoretically a company can run an application on as many of Amazon's computers as it wants, on demand.

Although some banks have balked at putting transaction information on an external cloud due to data security and privacy concerns, Grameen seems to have cleared that hurdle. "Using the Amazon service, we know the datacenter where each individual customer’s data is located (in most cases, this is in an Amazon data center in Northern Virginia; we’re currently exploring using a Singapore datacenter through Amazon EC2 to better serve customers in Asia)," Conard says. "These are highly-secured production data centers with all appropriate backups and maintenance." Grameen works with microfinance institutions to ensure compliance with local laws and regulations and to ensure that they have confidence in the security and reliability of their (and their clients’) data. Conard also points out that 60,000 customers use Amazon Web Services, some of them large banks and pharmaceuticals. The Mifos platform has been globalized in terms of translation into many languages and alignment with local rules.

Mifos is available to any microfinance institution, but surprisingly, Grameen Bank doesn't use it. "They have been around a long time and have developed their own systems that work well for them," Conard says. "We're more focused on tier 2, 3 and 4 fast-growing MFIs who can benefit from advanced technology. We're working with institutions in Mexico, Indonesia, Lebanon, Kenya, India, and the Philippines, institutions that range in size from a few hundred clients up to close to half a million clients for our largest client in Bangalore.

In addition to the Mifos platform, Conard's group is working on business intelligence technology to enable microfinance institutions to measure their financial and social performance more effectively. Such a tool would give the microfinance institution CEO the ability to look at financial performance alongside social performance. To measure social impact, Grameen has developed a "progress out of poverty index" that's based on a questionnaire developed for each country. The questions are simple such as what is your roof or floor made of? and how many of your kids go to school? Grameen also does some work on mobile banking and mobile payments. However, Conard reviews such projects cautiously. "We look at, what is the most effective way to do that to serve the clients better? What is the real benefit to the client?" he says. "There's a lot of potential for mobile banking and branchless banking, but one of the big questions is how do we realize the greatest potential from that technology? What are the use cases that will have the greatest social impact? Is it extending the reach of microfinance into rural areas that are outside the reach of traditional loan officer, is it reducing time of concluding transactions in meetings so they can focus on business development? We're looking at the holistic picture as well as the back end technology piece."

Told of a bank that's making loans in rural Ghana using digital pens in Ghana, Conard notes, "There are lots of interesting technologies that people are playing with. A lot of times a technology looks interesting, like it's going to be extraordinarily powerful, and we get really excited about how we can use digital pens or handheld devices, but we don't always know what it's going to do and what the cost/benefit ratio is there. Putting a $500 device in the hands of loan officers to replace paper doesn't always pay off." He also points out that in some of the rural areas microfinance institutions tend to operate in, mobile devices are vulnerable to dust and getting stepped on by a cow or a goat.

"I spent a year in Rwanda when I first joined Grameen Foundation on a mobile phone project," Conard relates. "You'd be surprised at the number of times cables get cut accidentally or chewed through, or a phone literally gets stepped on by a cow." Although he still gets excited about new technologies and what can be done with them, he focuses on making sure that back at the microfinance institution, the information being captured can be effectively used. "We don't geek out about the technology until we're sure it will work at the back end," he says.