Features IDRC on Microfinance and Poverty IDRC assumes that people on the ground are the real experts. They understand better than anyone does what needs to happen so that they will be freed from poverty. IDRC’s role is to help local researchers to express these needs — and to find solutions that work. The Village Phone Initiative: Connecting Technology and Innovation 2006-11 Rural entrepreneurs from countries such as Bangladesh, Rwanda, and Uganda are using microcredit loans to provide fellow villagers with what is often taken for granted in the developed world — the ...

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George Conard, who leads the Mifos initiative for the Grameen Foundation, announces IDRC’s support for expanding the community of users in sub-Saharan Africa at the official unveiling of Mifos at the Summit. IDRC Photo

New Free Software Supports the Microfinance Phenomenon — IDRC Will Help Establish African User Community

Microfinance has gone macro. The system of very small, short-term business loans for the very poor that won this year’s Nobel Peace Prize for Professor Muhammad Yunus and his Grameen Bank of Bangladesh, is now a worldwide phenomenon. Microbanks and credit cooperatives have sprung up all over the developing world, providing loans to millions of clients. And taking care of all that business has become a big challenge for microbankers.

Microfinance works so well because the money is constantly recycled. As each loan is repaid—usually within six months to a year—the money is recycled as another loan. Money in, money out. Thousands of clients. Hundreds of thousands of small transactions. Keeping track demands computers. They’re affordable, but the specialized software tools for this kind of work—known as management information systems (MIS)—are not. They are expensive, and the essential training and support are either unavailable in the developing world or too costly.

That’s where the Grameen Foundation and its Technology Center come in. They have developed free open-source software designed to revolutionize the way that microfinance practitioners access and use technology to run their operations. Called Mifos, the new system was launched at the Global Microcredit Summit in Halifax, Canada on November 13 2006, where Professor Yunus was among the participants. At the same time, the International Development Research Centre (IDRC) announced that it will partner with the Grameen Foundation to provide support for the establishment of an African community of Mifos users and developers.

As Professor Yunus welcomed Mifos as a tool for microfinance institutions, he spoke about the power of information and communication technologies (ICTs) in helping to raise people out of poverty in the developing world. He offered the example of women in remote villages who quickly learned how to use cellular phones once they realized that these technologies could help them to build small businesses and earn a livelihood.

IDRC has collaborated with Yunus and the Grameen Bank on a number of projects linking the use of ICTs and poverty reduction. George Conard, who leads the Mifos initiative for the Grameen Foundation, announced IDRC’s support for expanding the community of users in sub-Saharan Africa at the official unveiling of Mifos at the Summit.

The Centre’s decision to support Mifos arose out of a workshop held jointly with the Dutch NGO HIVOS in Nairobi, Kenya in September. Here the representatives of more than 80 microfinance institutions explored their information and communication technology needs. A key issue was the inflexibility and high cost of existing commercial MIS software. Typically, microfinance institutions have scarce resources to invest in the purchase, maintenance, and upgrading of MIS systems.

Perhaps the most significant feature of Mifos is that it is open source software. This lowers costs and promotes adaptation: anyone with the right skills can modify the system to meet particular local needs and language requirements. This in turn enables microfinance institutions to better control their information management systems and to use available local technical support.

Mifos incorporates much the same features and functionality as its costly commercial counterparts. These include client management, loan and savings portfolio management, tracking of all loan repayments, fees, savings transactions, and so on. The system is Web-based, which provides a familiar environment for users. It has built-in security and can support different languages and currencies.

More important, it is flexible enough to support technological innovations. “Free and open source software such as Mifos lends itself to adaptation as it is being continuously tested and applied to user needs. These innovations are then available to the global community,” says Heloise Emdon, a senior program officer with IDRC in South Africa who works on information and communications technology for development issues.

IDRC and the Grameen Foundation will partner with Adept Systems, an IT consulting company in Nairobi, and with the East African Centre for Open Source Software (EACOSS) in Kampala, Uganda to encourage and support the growth of an Africa-wide community of Mifos users and developers. This should not be difficult to accomplish because, as Kadija Shamte of Adept Systems points out, “Mifos is an easy system to understand. I was surprised how quickly the microfinance institutions users, with little computer literacy, were able to adapt.” By building a cadre of local technology experts, the Mifos initiative will help microfinance practitioners shape the systems they need through collaboration and adaptation.

Both Adept Systems and EACOSS are experienced in the development of microfinance management information systems. IDRC and the Grameen Foundation will also seek partnerships with like-minded entities in the region, such as HIVOS and the Dutch telecommunications company KPN. Cisco Sytems, Goldman Sachs, Global Partnership, Rockdale Foundation, and Omidyar Network are also among the Foundation’s industry and corporate partners helping institutions have access to Mifos.

2006-11

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The Village Phone Initiative: Connecting Technology and Innovation 2006-11
Rural entrepreneurs from countries such as Bangladesh, Rwanda, and Uganda are using microcredit loans to provide fellow villagers with what is often taken for granted in the developed world — the ability to make a telephone call.