4. Information and Communication Technology in Microfinance Sector: Case Study of Three Indian MFIs

Abstract

Financial sector has witnessed transformation with the adoption of information and communication technology (ICT) in providing financial services that ensured financial services to distant customers and reduced cost of providing financial services. The advent of ICT in financial system in general and microfinance sector in particular would not only scale up the access to finance but also attempt to ensure provision of financial services to the remotest and far-flung areas. Adoption of technology by microfinance institutions (MFIs) has increased its outreach and achieved cost reduction but confronted numerous challenges especially with respect to regulatory issues and delivery channels used. In this context, this article aims to assess the impact of ICT in client management, risk management and work efficiency of MFIs based on the case study of three MFIs (Cashpor Microcredit, SKS Microfinance Ltd and Utkarsh Microfinance Pvt Ltd). The article finds that the use of ICT has succeeded in bringing efficiency in terms of cost and client management, yet ICT adoption in MFIs needs a policy overhaul especially in terms of regulatory and infrastructure issues taking into account the aspirations and problems of all the stakeholders to microfinance sector.