Article

Information and Communication IIM Kozhikode Society & Management Review

4(2) 106–123
Technology in Microfinance Sector: © 2015 Indian Institute
of Management Kozhikode
Case Study of Three Indian MFIs SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/2277975215607251
http://ksm.sagepub.com

Vijeta Singh1
Puja Padhi2

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.

Keywords
Microfinance institutions, information and communication technology, point of sales, mobile banking, personal digital
assistants, software

Microfinance refers to the provision of broad range of rejuvenates the manner in which traditionally microfinance
financial services, such as, deposit, loans, money transfers is provided to the customers in India, replacing the tradi-
and insurance to the poor and low-income households tional brick and mortar model with technology-driven
and their microenterprises1 (Asian Development Bank models which are faster and can reach economies of scale.
2000). Microfinance is an alternative that can supplement Financial sector has been the prime beneficiary of the
the objective of financial inclusion by providing poor and technological innovations that have been registered by
unbanked with appropriately designed credit along with the ICT sector across the globe. As such the landscape of
other financial products and services. Deployment of microfinance in India has transformed and is speedily
information and communication technology (ICT) in pro- heading towards electronic finance which assures cost-
viding financial services by financial sector has facilitated effective and speedy completion of transaction on a much
financial services to the existing and potential customers larger scale. In this context, the article attempts to explore
in a cost-effective manner. The advent of ICT in financial the role of ICT in microfinance sector within the context
sector in general and microfinance sector in particular will of work efficiency, client and risk management of MFIs.
scale up the access to finance and ensure financial services The rest of the article is organized as follows: The second
to the remotest areas. The use of ICT in microfinance section emphasizes on literature review pertaining to

1
Research Scholar, Department of Humanities and Social Sciences, Indian Institute of Technology Bombay, Mumbai, India.
2
Assistant Professor, Department of Humanities and Social Sciences, Indian Institute of Technology Bombay, Mumbai, India.

Corresponding author:
Vijeta Singh, Research Scholar, Department of Humanities and Social Sciences, Indian Institute of Technology-Bombay, Powai 400076-Maharashtra
E-mail: [email protected], [email protected]
Singh and Padhi 107

the study. The third section deals with data sources and perspective, technological improvement in banking sector
methodology used in the study. The fourth section deals results in declining entry barriers and increased contesta-
with findings from the case study. The fifth section deals bility of banks leading to product/services unbundling and
with conclusion of the case study. subcontracting of financial services. The sustainability out-
reach dilemma finds its solution in adopting technology at
MFIs. Enhanced and effective outreach results in better
Review of Literature client management as acquiring, retaining and providing
various financial products and services becomes easier
The impact and role of ICT is diverse and cuts across and faster for MFIs.
various strand of human life and institutions. Following
literature presents selected viewpoints that highlight the
impact of ICT across different aspects of financial insti- ICT and Organizational Efficiency
tution in general and microfinance institution (MFI) in
particular. Organizational efficiency especially measured in terms
of cost and work efficiency forms important pillar of
organizational growth. The ICT facilitates alteration in
ICT and Economic Growth organizational culture and structure. The studies by Moussa
& Scwhare (1992) and Pigato (2001) has supported the
Investment in ICT promotes and accelerates economic contestation that ICT benefits/deployment to organisations
growth. As the study of Gupta (2000) stressed that on a should be coupled with structural and managerial changes
whole 1 per cent growth in telecommunication services in organisations more so in case of developing countries.
stimulates 3 per cent growth in the economy. Other studies, Financial institutions can achieve economies of scale
such as, Roller and Waverman (2001) and Eggleston, Jensen and provide bundle of products through a single avenue.
and Zeckhauser (2002), pointed out that improvement in Further emphasising upon role of ICT, Berger (2003)
ICT infrastructure leads to reduction in transaction cost, examining economic effects of technological progress on
and various sectors of the economy register increase in banks found that banks experience improvement in cost
output and improve standard of living. Similarly, Pigato and lending capacity owing to improved back-end tech-
(2001) discussed direct and indirect impact that ICT casts nologies and consumer are also benefited from improved
on economy. Under the realism of direct impact, ICT does it front end technologies, and the overall productivity of
in three ways, namely, through increase in education/ banks increases in terms of improved quality and variety of
literacy, improved health indicators and lastly through banking services. While Bakos (1991)2 has emphasised
asset and employment generation in economy. Under upon role of electronic marketplaces in reducing search
the indirect impact mechanism, ICT has transformed the cost for the buyers and resultant efficiency gains from that.
mode in which business is done. It enables the firms to
Focusing the use of ICT in terms of cost efficiency, studies
improve communication with markets as well as with
by Porteous (2006); Weissbourd & Perpetual Motion, Inc.
supply chain, also ameliorate internal information systems
(2002) and Cirasino et al. (2006) emphasized the role ICT
of firms (Duncombe & Heeks, 2005).
in reducing cost and study by Humphrey et al. (2003)
explained that adoption of electronic mode for financial
services delivery reduces the cost by one-third to one-half
ICT and Outreach to one-third in comparison to article-based alternatives. In
ICT has twofold impacts on enhancing outreach by another study, Ivatury (2006) also opined that adoption of
financial sector: first through reaching more number of technology reduces the cost across the banks (here for
customers, and second, more number of firms can enter Bank Administration Institute (BAI) and ICICI Bank in
financial markets, thus creating competitive markets. From India, see Figure 1).
customer’s perspective, geographical inaccessibility hin- Adoption of ICT by the financial institutions (here
ders access to finance for those domiciling in rural and MFIs) facilitates economies of scale, while initial invest-
far-flung areas, but use of ICT assures them an access to ment to be made for the deployment of ICT in an organiza-
financial services while addressing the issue of social tion is substantially huge. However, marginal cost and
exclusion, as it surpasses the geographical barriers, and average cost lower down once the business achieves its
provides them financial services (Warschauer, 2003; Diniz, scale. Study by Orloff (2005) opined that MFIs should
Birochi & Pozzebon, 2012). From financial institutions’ emphasize upon ICT because it increases productivity of
108 IIM Kozhikode Society & Management Review 4(2)

Figure 1. Cost per Transaction by Channel

Source: Ivatury (2006).
Figure 2. The Technology–Organization–Environment
Framework
the employees, duplication of information and task, helps Source: Baker (2012), p. 236.
in speedy decision making and decreases transaction cost.

technology by the individuals. These two theoretical

models have been discussed in brief as follows.
ICT and Risk Management
The Technology–Organization–Environment Framework
Technology-enabled banking aids banking institutions in
The technology–organization–environment framework
accessing liquidity, transforming assets, and it helps in
was conceptualized by Tornatzky and Fleisher in 1990
better risk management through risk monitoring which was
(see Figure 2), which basically aimed at explaining the
rather little difficult in paper-based banking system. In this
factors that influence technology adoption and its like-
context, underscoring the relevance of ICT in risk manage-
lihood.4 This framework describes the processes by which
ment and cost reduction, Porteous (2006) focussing upon
a firm adopts and implements technological innovations
mobile banking stresses that mobile banking reduces trans-
and is influenced by the technological, organizational and
action cost, enhances outreach, manages risk better in
environmental contexts (Tornatzky & Fliesher, 1990)5.
terms of agency relationship (with respect to use of tech-
Technological context comprises technologies (device as
nology) but should also focus on consumer protection
well as process technologies) relevant to firm—both inter-
issues. In addition to this, technology-based credit-scoring3
nal and external, also includes technologies currently used
techniques information enables new entrants as well as
by the firms and those technologies too that are available to
existing firms to exploit/utilize the information about
firms but not used by the firms. As Baker (2012), stated ‘A
customer and assess the credit risk related to them and
firm’s existing technologies are important in the adoption
firms don’t need to engage themselves in maintaining
process they set a broad limit on the scope and pace of
and managing borrower’s account.
technological change that a firm can undertake (Collins,
Hage & Hull, 1988)’. Organizational context comprises of
the characteristics and resources of the firm and includes
ICT and MFI: Theoretical Underpinning size of the firm, complexity in its managerial structure,
quality of human resources available, and amount of slack
There are two sets of theories that forms the theoretical resources available internally to the firm while environ-
background for this article. At the organizational level, the mental context includes the size and structure of the indus-
technology–organization–environment framework created try (including competitors of firm, macroeconomic context
by Tornatzky and Fleisher in 1990 and at the individual and the regulatory environment (Tornatzky & Fleisher,
level (for clients), technology acceptance model (TAM) by 1990). Underscoring the relationship between TOE and
Davis (1989) and Davis et al. (1989). finds relevance. The industry structure, Baker (2012) states ‘industry structure
technology–organization–environment framework deals has been investigated in several ways. For instance, intense
with factors leading to adoption of technology by the firms, competition stimulates the adoption of innovation
while TAM deals with factors leading to adoption of (Mansfield 1968; Mansfield et al. 1977). Also, dominant
Singh and Padhi 109

firms within the value chain can influence other value perceive a new product or service as better than its substi-
chain partners to innovate (Kamath and Liker 1994)’. tutes (Rogers, 1983)’ as stated in (Jahangir & Begum,
As mentioned in Baker (2012), ‘the Technology– 2008)’. Various models have been used to explain the
Organization–Environment model has been has been user’s acceptance of technology. Individual’s acceptance
utilized to explain the adoption of innovations in a host and adoption of technology has to be studied in the context
of industries, such as, manufacturing (Mishra, Konana & and character of individual (Compeau & Higgins, 1995;
Barua, 2007), health care (Lee & Shim, 2007), retail, Davis et al., 1989), while some other studies have focussed
wholesale and financial services (Zhu, Kraemer, Gurbaxani on implementation issues at the organizational level
& Xu, 2006)’. The Technology–Organization–Environment (Barton & Deschamps, 1988) and task technology fit
model finds its usefulness and utility in the investigation of (Goodhue, 1995; Goodhue & Thompson, 1995).
a wide range of innovation and contexts and has garnered Theory of TAM fits well in case of microfinance sector
support in empirical work too (Baker, 2012). as it covers both client as well as MFIs perspective.
Microfinance institution would not go for adopting any
Technology Acceptance Model
technology that does not find usefulness and ease of use
Technology Acceptance Model (TAM) is one the most with its customer, considering huge investment made
important theory that finds relevance in context of ICT by MFIs. This perspective gains importance especially
adoption in microfinance sector (see Figure 3). TAM is the when MFIs come up with technological innovation,
extension of Theory of Reasoned Action (TRA) developed such as, mobile banking services, where acceptability
by (Ajzen and Fishbein, 1980; Fishbein and Ajzen, 1975), and adaptability of customer with particular technology
which was concerned with the determinants of consciously device becomes key to its sustained growth. This is also the
intended behaviors. Using theoretical background of TRA, case with customers who would not like to be part of finan-
the basic goal of TAM was to provide an explanation of cial institutions (they may quit or move to other MFIs) if
the determinants of technology acceptance that explains they do not find usefulness and easiness in having transac-
behavior of end-user, which is also parsimonious and tions considering fee and loan instalment it pays to MFIs.
theoretically relevant (Davis et al., 1989).Technology
acceptance model basically emphasizes upon altitudinal
explanation of the aim to employ a specific technology/ Data Sources and Methodology
service in organizations/institutions. However, main deter-
minant that forms the cornerstone of TAM are ‘perceived Data Sources and Sampling
usefulness’ and ‘perceived ease of use of technology’.
The article uses primary and secondary data. Primary
Perceived usefulness is defined as the degree to which a
data have been collected from three MFIs (Cashpor
person believes that using a particular system would
Microcredit, Utkarsh Microfinance Private Limited and
enhance his or her job performance (Davis, 1989). The
SKS Microfinance Limited6). Primary data take into
perceived ease of use is defined as the extent to which
account responses obtained from headquarters (for Cashpor
person would go for using technology/innovation/system at
Microcredit and Utkarsh Microfinance) and regional office
no effort to him (Davis et al., 1989; Gahatani, 2001; Gefen
(at Varanasi) for SKS Microfinance as well as branch and
& Straub, 2000; Mathieson, 1991). ‘At first (Rogers, 1962)
field level (only Cashpor Microcredit and Utkarsh
affirmed perceived ease of use is the term that represents
Microfinance) for MFIs under survey. Besides, this pri-
the degree to which an innovation is perceived not to be
mary data also take into account responses from the
difficult to understand, learn or operate. He further stated
customers of MFIs7 who were availing mobile banking
that perceived ease of use is the degree to which consumers
services from the respective MFIs to elicit their opinion
about technology-enabled financial services to further
argument. For data of individual MFIs, their respective
websites have been explored along with data from the
MIX8 website for financial data of the MFIs.

Research Techniques and Methodology

Two main research techniques were used for data collec-
Figure 3. Technology Acceptance Model tion in the survey, open-ended questionnaire and semi-
Source: Davis et al. (1989), p. 985. structured interviews. Open-ended questionnaire was used
110 IIM Kozhikode Society & Management Review 4(2)

to collect relevant information about variables used in the Utkarsh Microfinance Private Limited
study9. Semi-structured interviews were used for MFI offi-
Utkarsh Microfinance private limited is a non-banking
cials and field staff to get their perspective about ICT-
finance company (for profit) MFI. It provides micro-loans
related aspects in MFI, while focussed group discussion
under joint liability structure to unbanked and poor clients.
with joint liability group members was conducted to
It started operations with micro-loans but now has extended
get insights about their technology-related issues. With
operations in terms of insurance, savings and solar power
respect to methodology, the article uses a case study
projects. Its target population is northern and central India
technique to derive the conclusion and findings from the
data collected from three MFIs over various issues under (for further details see Annexure A).
consideration.
SKS Microfinance Private Limited

SKS Microfinance is a non-banking finance company

Findings from the Case Study whose mission is to provide financial services to the poor
under the joint liability lending approach. It is one of the
The case study was designed to know the impact and
largest MFIs in India and operates in 19 states of India.
effect of introducing ICT in MFIs especially with respect
to work efficiency, risk management and client manage- SKS Microfinance provides range of financial products
ment of MFIs, besides taking into account other considera- and services to its clients (income generation, mid-term
tions well to further the argument. Following are the loans, mobile and housing loans and life insurance).
findings from the case study of three MFIs which starts SKS Microfinance is the only MFI in India that is listed
with brief introduction about surveyed MFIs. on Bombay Stock Exchange (BSE) of India (for further
details, see Annexure A).

Brief Introduction about MFIs

Cashpor Microcredit
Technological Infrastructure of the MFIs

Cashpor Microcredit is a poverty-focused MFI not for- MFIs under survey have well-established technological
profit MFI that provides microloans to below-poverty- infrastructure (device and network technology) and have
line women in eastern Uttar Pradesh and Bihar. It dedicated IT department for ICT issues (see Table 1). With
provides microfinance services in Uttar Pradesh, Bihar respect to device technology, use of internet enabled
and Chhattisgarh using the Grameen bank model of personal computers (PCs) was confined at headquarters
lending. Cashpor Microcredit also serves as banking and to some extent regional offices, primarily because at
correspondent to commercial banks and provides mobile the branch level connectivity and power is absent (with
banking services (see Annexure A for more details). the exception of SKS microfinance which uses internet

Table 1. Device Technology Infrastructure for MFIs (All MFIs)

Device Technology Headquarters Branches Field Staff

Internet PCs Yes No (except SKS Microfinance) No
Laptop Yes No (except SKS Microfinance) No
Personal digital assistants No No No**
Mobile phones Yes Yes Yes
Biometric technology Yes (except Utkarsh Microfinance) No (except SKS Microfinance) No*
Standalone computers No*** No (except SKS Microfinance) No
Source: Survey data.
Note: * At the field level, both Cashpor Microcredit and Utkarsh Microfinance were not using biometrics technology. In case of SKS microfinance,
Mr.Vikas Kumar replied that he was not aware if biometrics technology is used at field level across India.However in the survey area (Varanasi-
Mirzapur district), SKS Microfinance was not using biometric technology at field level.
** Pertains to survey area of Varanasi-Mirzapur Districts only. Both Cashpor Microcredit and Utkarsh Microfinance were not using personal
digital assistants at field level and SKS Microfinance at least in context of field area (Varanasi-Mirzapur) district was not using PDAs though SKS
microfinance have made use of personal digital assistants for its operation as opined by (Vikas Kumar, Senior Regional Manager, Varanasi- SKS
Microfinance).
*** With respect to Utkarsh Microfinance and Cashpor Microcredit standalone computers were not used at headquarters and most PCs
were internet enabled, however with respect to SKS microfinance, respondent Mr. Vikas Kumar was not aware and sure if standalone
computers are used at headquarter level.
Singh and Padhi 111

Table 2. Availability of Network of Communications

Utkarsh Microfinance Cashpor Microcredit SKS Microfinance

Availability of Network
Communication Headquarters Branch Field Staff Headquarters Branch Field Staff Headquarters Branch Field Staff
Local area network Yes No No Yes No No Yes Yes No
Wireless LAN Yes No No Yes No No Yes No No
Broadband Internet Yes Yes Yes Yes Yes Yes Yes Yes Yes
Dial up Internet No No No No No No No No No
Source: Survey data.

enabled PCs/laptop/standalone computer in many of its choice rather than superimposing choice of the head-
branch offices and all regional offices). At the regional quarters. This has been very helpful to field staff, as in
offices, only SKS Microfinance uses biometric card system some area, a particular choice of Internet connection may
for registering attendance of members/employees while not work leaving staff with no options; however, freedom
both SKS Microfinance and Cashpor Microcredit have bio- of choice relieves the staff from these issues.
metric card system for attendance of members/employees
at their headquarters. At the field/branch level most of the
task to be completed through internet mobile phones. None Extent of ICT Usage in MFIs
of the MFIs field staff under survey were using personal The extent of ICT usage is reflected through various areas/
digital assistants (PDAs) and biometric/smart cards for the
functions in which ICT is used by MFIs (see Table 3).
customers (though SKS microfinance uses biometric/smart
In case of microfinance, large volume and low transactions
card/PDAs in their other area of operation in India but not
form regular features of MFIs, latter needs customized
in the survey area of Varanasi and Mirzapur district of
software to deal with such data and MFIs use specialized
Uttar Pradesh). Cashpor Microcredit had pilot project
software meant for microfinance sector.
using point of sales (POS) device but was abandoned
The decision to use ICT in MFIs forms subset of overall
owing to high cost of project and high consumption of
objectives of MFIs. IT heads of Cashpor Microcredit
electricity by the POS and maintenance-related issues.
Ritesh Srivastava and Anjan Kumar Kar, while replying on
Also IT heads of Cashpor Microcredit stressed that bio-
motivating factor for using technology in MFIs, said:
metric devices/biometric cards/smart cards are not being
much successful as sometimes customers are not willing The overall objective of introducing ICT in organisations
to do their transactions through biometric card/smart depends upon our organisational objectives and strategic
cards/biometric devices, and in many cases, cards are goals. Unless there is any benefit that our MFI gets from intro-
rejected while doing transaction causing frustration to ducing any technology why we would invest in those tech-
field staff and customers. nologies? We have tried various technologies at pilot level,
of them some have been successful and some failures but
In terms of availability of network communications,
we have carried forward successful ones as you can see in
both internally as well as externally, MFIs under question case of BC model of Cashpor–ICCI Bank in partnership with
were using wide-spread use of Internet (wired as well Eko foundation10 in case of mobile banking.
as wireless) (see Table 2 for details). In terms of use of
Internet facilities at headquarter level, MFIs responded that
they mostly rely upon wired local area network (LAN) as Table 3. Extent of ICT Usage in MFIs
they consider it faster, secure and less interruptible in com-
Cashpor Utkarsh SKS
parison to other alternatives available (in case of SKS Function/Areas Microcredit Microfinance Microfinance
microfinance LAN facility was also available at branch
Internal accounting ü ü ü
level). At headquarter level wireless internet facility is also Payroll management ü ü ü
available in MFIs. In case of Cashpor Microcredit leased Staff performance ü ü ü
line connections were used at their regional offices. While Financial statements ü ü ü
externally (mainly at the field level), MFIs have equipped Inventory management ü ü ü
their field staff basically with internet enabled mobile Asset and liability ü ü ü
phones (in some cases with 3G connections to have faster management
operations. Client database ü ü ü
MFIs when providing field staff with Internet facilities Field transactions ü ü ü
always consider the network and cost issues and allow Loan tracking ü ü ü
field-level staff to choose Internet connection of their Source: Survey data.
112 IIM Kozhikode Society & Management Review 4(2)

The MFIs under survey opined that given the scope of develop it internally too and have their technology
operations in which ICT is used by MFIs, the decision partners to meet their software needs (for example SKS
regarding the use of ICT is extremely important having Microfinance avails the services of Wipro and Tulip IT).
implication on financial health of MFIs. Cashpor Microcredit uses the services of ATOM techno-
logies and Eko Foundation for its MFI operations. For
procuring hardware, MFIs follow diverse arrangements,
Type and Sourcing of Software and Hardware ranging from purchasing from specified vendor to multiple
vendors depending upon the hardware needs of the MFIs.
With respect to type and sourcing of software, MFIs under
case study use both proprietary software as well as free
and open-source software depending upon their require- Cost of ICT Usage in MFIs
ments. In case of proprietary software, Utkarsh microfi-
nance uses Craftsilicon11 (core banking solution software The amount of resources that IT budget (including IT
while Cashpor Microcredit uses track account software staff pay) consumes differs across MFIs, as in the case of
(TR a/c), apart from using Microsoft windows (2001, Utkarsh Microfinance, it is approximately ` 4.5 lakhs per
2008) version for MFI-related purposes. With respect to annum (percentage of budget not available), while in case
SKS Microfinance, apart from using Microsoft windows, of Cashpor Microcredit, it is 5 per cent of their total budget/
they also make use of software called ‘Portfolio Track’ expenditure (` 15 lakhs per annum approximate). In case
for their transactions-related issues. In case of free and of SKS Microfinance, the share of IT budget was as high
open source software, Utkarsh Microfinance and SKS as 10–15 per cent approximately considering their vast
Microfinance did not make use of free and open-source expanse across India and volume of the customer base it
software (FOSS), but Cashpor Microcredit made use of serves. Microfinance institutions under study have unani-
FOSS called ‘Open Office’ which is replacement for MS mous opinion that while hardware acquisition cost is an
Office. With respect to type and sourcing of software, outright expense and upfront cost, it is software acquisition
MFIs in question laid importance to the needs of the MFIs and maintenance cost which consumes major chunk of
and have been using customized software to carry out their ICT budget of MFIs. While deploying any technology, its
transactions. According to Gonzalez-Barahona (2000)12 likely impact on other operations of the firms is always
and Ghosh (2005), use of FOSS in MFIs is rational one, taken into consideration, and MFIs go for the acquisition
which ranges from philosophical to practical reasons of technology only when they are confident that it will
and many of the developing countries have adopted it contribute to the revenue and cross the break-even mark.
because of low cost and its ability to have synergetic effect
arose out of result of combination of its characteristics. Constraints in ICT Usage by MFIs
FOSS delivers simplified licence management and customi-
zation of software (redistribution and modification in the There are constraints (classified as major and minor) in
software code). the use of ICT in MFIs as has been spelled out by MFIs,
With respect to procuring/sourcing of software and which have been duly categorized into major and minor
hardware, MFIs have varied arrangements. With respect to constraints (see Table 4 for details), and the extent to
software systems MFIs as purchase from specified vendor, which constraints can be categorized into major/minor

Table 4. Constraints in ICT Usage by MFIs

Description SKS Microfinance Cashpor Microcredit Utkarsh Microfinance

Cost of hardware Major constraint Major constraint Major constraint
Cost of software Major constraint Major constraint Major constraint
ICT literacy of field/branch staff Minor constraint Major constraint Major constraint
Lack of expertise to maintain hardware Major constraint Minor constraint Not a constraint
and software systems
Reliability/authentication of ICT system Minor constraint Not a constraint Not a constraint
Infrastructure issues Major constraint Major constraint Major constraint
Regulatory issues Major constraint Major constraint Major constraint
Ethical/moral issues Minor constraint Minor constraint Minor constraint
Change Management Major constraint Major constraint Major constraint
Source: Survey data.
Singh and Padhi 113

constraints depends upon the MFIs and its regulation and [Our organization is in full knowledge of the fact who are our
ownership structure. clients and from where they come. We would not use any tech-
Cost of ICT adoption by the MFIs also identified as nology that does not find acceptance among our clients and
sometimes if some technology is necessary then we convince
major constraints by the MFIs as it consumes substantial our clients and we have ample instruments to do that.]
portion of their budget and takes time to achieve break-
even mark and is risky venture, as it involves follow-up Further, on the issue of resistance and fear among clients
costs. However, to tackle the software-related issues, MFIs when some new technology or device is introduced to
are coming up with internally built software customized to them, Maqsood, field staff at Kachwa Bajar branch of
meet the specific needs of the firms; however, it is costly Cashpor Microcredit, opined:
exercise and can be afforded by the bigger MFIs only.
Managing change for adopting ICT in MFIs is critical Hamare client kabhi bhi virodh nahi karte hain madam,
issue when it comes to adoption of technology by MFIs. agar humlog koi nayi taknik laate hain toh. Haan lekin who
chintint jaroor hote hain aur hamari koshish hoti hain ki hum
Be it any technology introduction, there would be resist-
unki bhay aur chinta door kare aur hum karte bhi hain. Hum
ance as stated by (Quinn & Mueller, 1982) as ‘human sadasya ko gol ki meeting mein demo dete hain aur samay-
beings what they are, there tends to be resistance to samay par poster chart ka prayog karke bhi batate hain.
change’. The study by Daniel (1999) found ‘a high level
[Our clients never oppose us if we introduce some new tech-
of customer inertia in changing their established bank-
nology but they are surely concerned about that. Our efforts
ing arrangements’, and that is why bringing any change remain to allay their fears and concerns and we do it. We do
of whatsoever nature is a daunting task. In this con- give demo of techniques (devices) in our group meetings and
text, MFIs have been fortunate especially with respect from time to time we use posters and charts to educate our
to branch/field staffs and acceptance of ICT applications. clients.]
Microfinance institution staff feel that tech-enabled opera-
tions has reduced article work to a larger extent and Acceptability of new technology is not contested by
productivity per staff increases as the field staff can handle field staff, but they opine that training and ecosystem in
more number of customers at the same time; additionally, which field staff works should be kept in mind before
there is better synchronization between MFI–branch– introducing new technology. With respect to issue whether
field staff as data dissemination and feedback are faster. staff opposes any technological changes (here field staff),
However, field staffs opined that (Cashpor Microcredit and the field staffs opine that they do not oppose but expect
Utkarsh Microfinance) they would not prefer complicated organization to be sensitive to the cause of field staff.
technologies (e.g., PDAs/POS) and will prefer simpler As Sanjay Kumar, field staff of Utkarsh Microfinance at
technologies (e.g., mobile phones) since they are quite Harhua branch, said:
accustomed with that technology. When asked why PDAs/
POS are seemed to be complicated, field staff emphasised Madam, baat virodh karne ki nahi hain hum toh sirf staff hain
humko apna kaam karna hi hain. Lekin hum is baat ki aasha
that it takes longer time to learn it and execute functions
rakhte hain ki hamari MFI is baat ka dhyan rakhe ki hamari
with those technologies, moreover customer's need to be aur client ki bhi kuch limit hain. Aur aap hamare aas paas ka
also taken into account. In case of mobile phones both cus- mahaul toh aap dekh hi rahi hain. Dekhiye hum to jaise taise
tomer and field staff are quite familiar with using mobile sikh lete hain aur apna kaam kar lete hain lekin har client ko
phones. Moreover, customer acceptance of particular tech- samjhana bahut muskil hain. Hum poori koshish karte hain ki
nology is paramount to the success of the MFIs in their client samjah jaye lekin 100% safal nahi ho pate hain. Isliye
operational area. The field staffs of the MFIs stressed hum hamesha chahte hain ki chahe card, mobile ya kuch bhi
client ko usko use karne mein ghabrahat nahi honi chahiye.
that customers are not very comfortable with technologies
involving complex operations and resist from using such [It’s not about resistance we are only staff and we have to do
technologies. Commenting on whether MFIs would face our job but hope that our MFI understand that clients and staff
have some limits. And you can see the environment around us.
resistance from client if they try some new technology or
Look we manage to learn any new technology anyhow but it’s
device, Vinod Kumar, field staff at Mirzamurad Branch of very difficult to make it understand to customer. We try our
Cashpor Microcredit, said: best but don’t succeed 100%. So we always want whether it
is card or mobile or anything, client should not feel perturbed
Hamare sanstha ko is baat ki poori jaankari hain ki hamare while using it.]
client kaise hain aur kahan rehte hain, who koi bhi aisi taknik
ko client ke liye nahi use nahi karenge jise client sweekar na
At the MFI level, expertise needed to maintain hardware
kare. Lekin kabhi kabhi aisi koi taknik jaroori hoti hain jo
sanstha aur client ke liye accha ho tum client to convince karte and software systems installed at MFIs is identified as a
hain uske prayog ke liye aur hamare pass bahut se tarike aisa major constraint for only SKS Microfinance, as according
karne ke.
114 IIM Kozhikode Society & Management Review 4(2)

to them given the vast operations they have, it is costly shikyat karte hain par kuch hota nahi hain. Hum jis bike
exercise for them to have separate IT department at each of par jate hain sadke kharab hone ke wajah se uski servicing
par accha-khasa kharcha aata hain aur hum apne jeb se dete
their regional offices and sometimes they end up having
hain usko.
sub-standard performance of the IT department, while in
case of Cashpor Microcredit and Utkarsh Microfinance, it [Roads are in utterly poor condition, most of the roads are
kuccha and in rainy season it causes problem to us. Many
was not an issue that needed to be given much importance
times wheel of my motorcycle gets stuck in muddy roads.
and they opined that IT department at their MFIs performed There are also chances of accidents due to this, but we are
quite well. helpless. The village people complain to administration but
Reliability of ICT systems13 for MFI operations affects nothing happens. My bike which I use for field visit gets
performance of MFIs, as surveyed MFIs expressed their damaged quite often and I have to give it for repairing, and
cost of repairing is paid from my pocket.]
confidence in the reliability of the ICT systems in their
organizations and opined that barring few instances, they
In another case, describing the poor state of infrastructure
believe in the authenticity of the ICT system deployed and
affecting field staff and branch operations, Rohit Singh,
MFIs have put in place proper check and balances to ensure
field staff of Kachwabazar at Cashpor Microcredit, said:
that the ICT systems remains secure and leak proof
(especially with respect to cases of hacking and stealing of Sadak aur bijli ki samasya sabse zyada hain yahan par. Din
confidential financial and client database). mein 12–14 ghante light nahi hoti hain aur garmi ki dinon
Regulatory issues have been identified as major con- mein toh usse bhi zyada bijli katuati hain. Bijli ki samasya
straint as according to the MFIs under survey, regulatory ke karan humara kaam prabhavit hota hain. Aur sadak ka toh
poochiye hi mat, door-daraz ke gaon ke sadak ki halat bahut
stipulations put by RBI has affected their operations espe-
hi khasta hain.
cially with respect to interest rates and in these circum-
stances before taking up any major IT investment MFIs are [Roads and electricity are the biggest problem here. There is
no power for 12–14 hours in a day and during summers power
being very cautious/careful. According to the MFIs under cuts are more. Due to power shortage our work is affected.
survey, investment in ICT by MFIs comes with cost and And don’t ask about roads in far-off villages, they are in very
even a slight change in the regulatory provision can distort bad condition.]
the revenue–expenditure matrix of the MFIs. On the issue
of regulation, Vikash Kumar, senior regional manager Lastly, with respect to ICT literacy and ethical issues
(Varanasi) at SKS Microfinance, commented: involved in adopting ICT in MFIs, ethical/moral issues are
identified as minor constraint as technology in itself is a
Regulation either by RBI or government off-course is a major neutral concept and wherein proper use of ICT systems
issue to MFIs. We expect stable and comprehensive policy depends upon moral and ethical values of the individual
especially over interest rates determination and over financing
related issues from the government. Substantial investment of
handling the transaction. ICT staffs in particular and other
ours is in ICT infrastructure and we surely don’t want to be staff in general need to be sensitized and be given training
jeopardized due to flip-flop in regulations. with respect to handling moral/ethical issues. ICT literacy
of staff (field/branch) is also identified as constraint having
Infrastructure (especially power, road and communi- effect on operations on MFI, more importantly in case of
cation network) is recognized as major constraints by field staffs who come from rural background, are
all the MFIs under survey. It is the field staffs who are moderately educated and have low exposure to technology
most affected by the poor infrastructure as they are con- related issues.
necting link between customers and MFIs and have to
visit far-off villages for their operations. Poor quality of
roads and non-availability of power hampers the field Work Efficiency and ICT in MFIs
staff and also operations at branch offices. On the issue of The introduction of ICT in MFIs has improved its work
poor quality of roads and non-availability of power, Rahul, efficiency, which is measured in terms of deadline given
field staff at Rajatalab branch of Cashpor Microcredit, for task execution, time for execution of transaction and
said: service delivery time and number of customers handled
by MFI staff/loan officers. The MFIs under case study
Madam, road bahut hi kharab hain gaon mein, sadak adhik- reiterated the point that with the introduction of techno-
tar kacchi hain aur barish ke dino mein bahut dikkat hoti
hain. Kitni baar hamari gaadi (bike) ka chakka mitti mein
logy on an average there is 30–40 per cent reduction in
phas chukka hain. Isse durghatana ki bhi sambhawna hoti time taken to execute transaction especially at the field staff
hain, lekin hum majboor hain. Gaon wale parashan hoker level which handles client (personnel and financial) data.
Singh and Padhi 115

On the issue of capacity and efficiency of MFIs parti- Risk Management and ICT in MFIs
cularly, field staff, Rajesh Yadav, branch manager at
Mirzamurad branch of Cashpor Microcredit, said: All the MFIs under case study have reported that with the
introduction of ICT, risk14 management by the MFIs have
Madam, dekhiye taknik jitni saral aur fast ho to humko bhi become easy, such as, gathering data about client’s social–
aaram hai, kyunki kaam jaldi aur bina pareshani ke ho jata
economic profile has become easy, the risk of unpaid loans
hain. Staff ki bhi kshamta badh jaati hain. Jaise ki jab se hum
hamara client wala data online ho gaya hain tab se hamare (default risk) has decreased (see Chart 2), deposit/insurance
kaam ka bojh bahut kam ho gaya aur paper work to 30%–40% of tracking of customers has improved and chances of
tak kam ho gaya hain. Staff apna time aur dhyan Cashpor ke fraud/misappropriation of cash/funds have decreased with
dusre kaam mein bhi laga sakta hain. Branch aur field ke level instant information and that also propelled prompt decision
par toh bahut suvidha hui hain. Staff ko zyada kagaz-patri nahi making by higher management. Using ICT for client
dhona padta hain aur branch ka office mein ab zyada jagah bhi
hain, warna pehle toh file aur register ka ambar laga rehta tha.
monitoring and supervision also reduces percentage of
portfolio at risk for MFIs.
[Look, the more easier and faster the technology, the more On the issue of risk management and technology,
comfort it provides to us because work is done in fast way
without any problems. Capacity of staff also increases. For
Dhananjay Singh,15 project manager business corres-
example, our client data has become online that has reduced pondent relations at Cashpor Microcredit, said:
our work pressure and paper work reduced by 30%–40%.
Now our staff can devote their time and energy in other MFI We take the help of High Mark16 and Equifax17 to check the
works. At the branch and field level we have greatly benefit- credit report and status of our clients. We have proper pro-
ted. Staff does not have to carry more of papers while going cedure to check credit status of our clients. It has made our
to field work and our branch office is more spacious now, oth- task very easy and also client data has gone online which is
erwise earlier papers–registers used to occupy office space.] updated on day-to-day basis. In any case our loan defaults are
negligible.
With increased work efficiency, MFIs have been able to
diversify and expand their operations horizontally as well However, SKS Microfinance does not believe fully on
as vertically. Tech-enabled operations have also improved insularity of ICT against misappropriation/fraud of funds
employee/staff/loan officer productivity (measured through as tech-savvy staff can manipulate data and wipe off entire
loan officer/staff per borrower or loan) over a period of data and forge with transactions.
time (see Chart 1); however, it could not be established Using ICT, prediction about customer operations has
empirically. According to Jawadi, Jawadi and Ziane (2010), become easier with the support of database from Credit
microfinance professionals positively recognize the role Information Bureau Limited (CIBIL).18 It has become
played by ICT to enhance work efficiency by reducing much easier to gather timely data about loan records
time on work activities. of clients (though use of CIBIL facilities is voluntary).

Chart 1. Work Efficiency of MFIs

Source: MIX Market.

116 IIM Kozhikode Society & Management Review 4(2)

Chart 2. Portfolio at Risk for MFIs

Source: MIX Market.
Note: SKS Microfinance not included as data of PAR is not available.

Commenting on the issue of loan defaults and benefits borrowing has not been handled by MFIs effectively as
of technology, Rahul Dey, head of audit, IT and loan at reporting to CIBIL is voluntary and many of the smaller
Utkarsh Microfinance, said: MFIs do not report to MFIs and women avail loans from
these MFIs without the knowledge of the other MFIs.
No amount of infusion of technology in MFIs can check 100% Hence, tracking over-borrowing is contentious issue that
loan default and you are well aware of those reason why, but could lead to credit risk affecting MFIs. In the context of
I can say with surety that it (IT) has greatly improved risk
SKS Microfinance, they opined that despite the intensive
management across all MFI not only ours especially in
terms of client credit status reporting and also to some extent use of ICT by MFIs, there is a room for further reform for
multiple borrowing by clients. MFIs when it comes to handling credit risks and operational
risks by using technology.
Highlighting on the issue how better credit reporting has
infused financial discipline among Cashpor Microcredit
clients, Pramod Kumar Singh, area manager for Mirzapur ICT and Client Management in MFIs
region at Cashpor Microcredit, said:
With the increased use of ICT facilities, it has become easy
Aisa nahi hain ki sirf humko (MFI) fayda hua isse lekin client for the MFIs to expand its outreach (measured through
bhi ab jagrook ho gayi hain aur zyada chalaki nahi dikhati hain. number of active clients/gross loan portfolio) and access
Unko maloom hain ki unka poora hisab-kitab hamesha up-to- customers (see Chart 3). Moreover, time needed to get
date hain aur bahana banane koi fayda hi nahi hain. Aise bhi aap
information about customer has decreased to a considerable
dekhe toh hamara (MFI) loan arrear bahut hi kam hain.
extent. With respect to client management, MFIs register
[It’s not that only we (MFIs) are benefitted but even the clients benefits in terms of handling large volume of transactions,
have become conscious and do not attempt to be clever. They
reduced paper work, easy and speedy contact with clients
know that their financial records are up-to-date and there is
no point giving excuses. And anyway you see our (MFI) loan and easier grievance-handling procedure. Offering of new
arrears are very low.] products and services over a single platform helps in
scaling up cost-effective technology. Further, with the use
However, vulnerabilities still remain there especially with of toll-free numbers, customers can contact concerned
respect to operational risk on the part of field staff and authorities any time and settle their grievances and
strategic default by borrowers. The issue of multiple complains.
Singh and Padhi 117

Chart 3. Outreach of MFIs

Source: MIX Market.

On the issue of accessibility of clients, Shailendra ICT in MFIs: Perspective from the Field Staff
Singh, field staff of Cashpor Microcredit at Mirzamurad and MFI Clients
Branch, said:
Field staff and MFI clients have diverse opinion ranging
Madam, client ko contact karna ab bahut hi aasaan hain from conflicting to agreement on various issues. Failure
kyunki lagbhag sabke paas mobile phone hota hi hain aur to connect to network with central servers is biggest
Cashpor wale toh toll free number bhi diye hain, sab client problem for field staff, as 35 per cent of field staff under
ko taki koi bhi kabhi bhi call kar le. Aksar client der-saber
survey were not satisfied with network connections and
call karte hain apni samasya ke liye aur hum jawab bhi dete
hain. Jis client ka pass mobile banking hain unko SMS bhi central server facilities. Their discontent mainly comes
chala jata hain unke transaction ka aur unko intazar nahi karna from data backlog and increased work load as a result
padta hain. Isme toh sabka hi fayda hain. of network failures. Commenting on the network-related
[To contact client it’s very easy now, as almost everyone has
issues, Dina Nath Yadav, branch manager at Rajatalab
mobile phone now and Cashpor has given toll free number to Branch of Cashpor Microcredit, said:
all its clients so that latter can contact anytime. Often clients
call us for their problems and we do respond too. Those clients Madam, network ka bahut problem yahan par, bahut hi zyada.
who have mobile phones, they get SMSs for their transaction Hamara office thoda sheher wale area mein hain to humko
quickly and don’t have to wait. Everybody is benefitted due utni dikkat nahi hain, lekin hamare staff ko dur-daraz ka gaon
to this.] mein jana hota hain, wahan network ka bahut issue hain, kabhi
ek company ka network kaam karta hain to doosre ka nahi
karta hain. Staff ko bahut pareshani hoti hain isse, lekin hum
Microfinance institutions do believe that it takes con-
zyada kuch nahi kar sakte iske liye.
siderable amount of time to authenticate the data received
from clients, as there are lot of inconsistencies and cross- [Network (mobile and iinternet) is a big problem here.
Our office is in sub-urban area so we don’t face much problem
verification takes ample amount of time. It could also be
but our staff has to go in far-off villages where network issues
well argued through measure of physical distance and are there. Sometimes mobile network of one company works
impact of ICT on MFI operations. Microfinance institu- and then others don’t work. Staffs are really hassled by this
tions under survey have unanimous view that with the but we can’t do much about it.]
advent of technologies in MFIs, physical distance has
withered away to a large extent, and reporting of data, dis- In another instance, sharing his experiences over the
semination and approvals have become faster. It becomes network (mobile and Internet) woes, Satish Kumar, field
pertinent in case of large MFIs like SKS Microfinance staff of Cashpor Microcredit at Kachwa Bazar, said:
that have pan-India operation and coordination of tasks
Mobile banking wala ya kabhi koi aur transaction agar woh
across all branches, which is a daunting task. However,
nahi ho pata hain toh customer humko call karte hain, baar-
at the field level, distances do matter and constrains the baar poochte hain ki kya hua Hum unko aswasan dete hain
outreach of MFIs, if the geography is rough and marred dete hain lekin woh mane tab na. Nateeja yahi hain ki hamara
by lack of infrastructure. bojh badh jata hain aur sabse zyada dimagi tension ho jata
118 IIM Kozhikode Society & Management Review 4(2)

hain. Madam, Hum unki dikkat samajhte hain kyunki who Hamare pass bank ka khata hain aur card bhi mila hain (ATM),
zyada padhe-likhe bhi nahi hain aur chote se chote paise ko lekin hum chalana nahi jante aur doosri baat paisa nikalne
bhi ahmiyat dete hain. wala machine bahut door hain, woh bhi bina kisi ki madad
ke hi ho pata hain, isliye hum mobile wala khata kulwa liy, ye
[In case of mobile banking or any other transaction, if it fails
asaan bhi hain aur sasta bhi. Ab hum apna paisa isi mein jama
then customers call us multiple times and ask what happened
karate hain.
to transaction. We do assure them but they are not satisfied.
Result is that our workload increases and more than that it [I have bank account with debit card but I don’t know to oper-
creates mental tension to us. We understand their problem as ate through debit card. And secondly I have to travel far to
they are little educated and care about even for a small sum take out money and that too with the help of other, that’s why
of money.] I have opened mobile banking account and I deposit my
money in this only.]
Moreover, disagreement between clients and staff over
non-issue of receipts for transaction (in case of mobile On issue of whether MFI is sensitive about the needs of
banking), non-acceptance/reluctance to accept biometric customers and imposition of technology or device by
cards/smart cards by clients, non-working/compatibility of MFIs, there are divergent views from clients. As Dharma,
devices during field transactions affects the operations of Cashpor Microcredit client from village Uparwar who
field staff. Most of the respondents do not favour biometric supported the MFIs’ move to inject new technologies/
cards/smart cards or hesitate to use even ATM cards on the devices, said:
issue of acceptability of mobile phones over other devices
Aisa nahi hain agar who kuch naya late hain toh kuch bhala
for banking/microcredit related purposes. According to hi hoga usme. Ab dekhiye mobile wala khata se bank jane
Sita, Cashpor Microcredit client from village Katwarpur ka jhanjhat nahi hain. Aisa nahi hain ki MFI (here cashpor)
who favoured mobile phone banking over biometric cards/ hamare jaroorat ke bare mein sochte nahi hain, woh hamari
smart cards. majoboori aur jaroorat dono ko jante aur samajhte hain.
Aur jab koi bhi naya cheez aata hain toh humko manager
Madam, hum mobile phone se parichit aur chalana jante sahab training jaroor dete hain ki kaise prayog karna hain
hain aur aaj toh har dusre-teesre ghar mein mein mobile machine ko.
phone hain hi. Doosri baat yeh hain ki mobile ek saath bahut
saare kam karta hain, isliye humko mobile thik padta hain [If they (MFIs) bring something new, then it is our advantage.
card nahi. Look due to mobile banking, no need to go to bank frequently
anymore. It’s not that our concerns and needs are not taken
[We are familiar with mobile phones and know how to care about by MFIs (here Cashpor). They understand our
operate it and also it is household name now. Secondly mobile compulsions and needs and if there is any new development
phone can be put to many uses this is why mobile phone suits with respect to technology (here device). Manager Sir gives
us not card.] training to us about its usage.]

Another client, Shital, Cashpor Microcredit client from But another women, Kamravati, Cashpor Microcredit
village Deyipur, expressing her dislike over biometric/ client at village Gorai, resisted the idea of imposition
smart cards said: of technology or device by MFIs without acceptability of
clients. She said:
Humko card se koi dushmani thode hi hain, hamare gaon mein
kuch log iska prayog kar rahe hain, lekin hamare gol (group) Koi hum logo par kuch bhi thoph nahi sakta hain, aakhir
mein koi bhi card ka prayog nahi pasand karta hain. Uske hamari bhi toh kuch jaroorat hain, dekhiye hum log zyada
bahut karan hain jaise ki card kat-phat jana, ya phir hera jana padhe likhe nahi hain agar koi machine jisko chalana mushkil
aam baat hain. Uske baad bahut pareshani hoti hain aur logo ho aur humko samajh nahi aaye toh humko bahut pareshani
mein jagrookta bhi kam hain. Are logo ko card seedha dale ki hoti hain aur kisse kehne jaye bataiye.
ulta who bhi bahut der se samajh mein aata hai ab aise mein
kaun jhamela lega. [Nobody can impose anything on us as even we do have some
needs. Look we are not much educated and if any machine
[I don’t have any enmity with card (biometric card) as in our (device) which is difficult to operate and understand puts us in
village some people are using it. But in our group nobody trouble, and tell us whom do we say/ask.]
likes use of card. There are many reasons to it like cards are
lost, cards getting torn and cut. We have to face problem with With respect to devices used in field operations (mobile
this and also there is less awareness about it among group phones/PDAs/POS), and specifically talking about use of
people. They don’t know how to insert card and learn it very
late then who will take so much trouble.]
POS devices at field level, IT head of Cashpor Microcredit
opined that although POS devices ensure faster and quick
In another case, Chinta, Utkarsh Microfinance client from operations, they are heavier in comparison to mobile
village Jaipal Madaiya, who despite of having debit card phones, takes longer time to recharge its battery, face prob-
chose to have mobile banking, said: lem of instant heating, are small screened and have higher
Singh and Padhi 119

repairing and maintenance cost. In contrast to this, field and conduct training sessions to familiarize customers with
staff using mobile phones face fewer technological issues technology adopted; however, not all times favourable
but customer often accuse of MFI staff adopting complex results are expected. Rogers and Shoemaker (1971) opined
procedure in executing transactions (though that is not that ‘consumer undergoes process of knowledge, per-
the case), non-issue of receipt upon completing trans- suasion, decision and confirmation’ before accepting/
actions, sending short message service (SMS) in English adopting any product/service or/idea. To be more specific,
language rather than vernacular one often irks customer. acceptance or rejection of innovation/system/technology
Taking viewpoint of MFI customers was to supplement the begins when consumer becomes aware of that product/
argument under consideration as 80 per cent of the group service/idea’.
members surveyed complained of non-issue of receipt in
case of mobile banking, procedural difficulties in conduct-
ing transactions, poor grievance redressal and customer Conclusion
care services are some of the issues that confront group
members. Most of the earlier studies done so far focused only upon
Complaining about the procedural difficulties in using MFI-related issues mostly confined to managerial level
mobile banking, Sunita, Utkarsh Microfinance client from issues but this study not only focuses upon the MFIs but
village Khari Raswa, disagreed to the fact that there are no also takes into account the viewpoint of MFI clients and
issues with respect to mobile banking. She stated: attempts to explain what constrains/motivates client from
adopting any technology/device or preferring one over
Hum mobile wala khata liye hain, lekin pareshani yeh hain another. It also addresses the behavioural issues concern-
ki uska chalane ka tarika bahut muskil hain, aur passbook ka
ing adoption of technology by MFI clients. In addition,
kitab samajh mein hi nahi aata hain, sir (staff/manager) se bhi
jyada madad nahi mil pati hain. focusing most importantly on field level issues with respect
to technology introduction/adoption, the study brings out
[I have taken mobile banking account but it’s difficult to oper-
the technology-related field-level issues and perspective
ate it and passbook given to me I am not able to understand it.
Even field staff/manager cannot help me much on this issue.] from the field staffs/managers who are connecting link
between MFI and its clients, and their nature of interaction
Moreover, all the group member had less faith in technology- with technology and clients which affects the success and
enabled transactions primarily because of misappropriation performance of MFIs. Getting perspective from the field
of funds and find it less secure. Negative perception basi- staffs and clients would probably allow MFIs to have
cally comes out of lack of awareness and illiteracy of group technology that meets the cost–benefit parameters con-
members and occasional cases of frauds by field staff of cerning MFIs but also meets client satisfaction and utility
MFIs. Technological frames theory forms perfect case for criteria.
the viewpoints shared by customers as it basically calls From the findings of the case study, it becomes amply
for basic assumption, beliefs and expectation people have clear that MFIs have benefitted from technology adoption
for specific technological application (Davidson, 2002), and in their organizations. With the onset of IT in MFIs, savings
also includes conditions, applications and consequences in of MFI have increased (less paper work), efficiency has
particular context (Orlikowski & Gash, 1994). increased and service delivery has improved; besides this,
Most of these issues arise out of ignorance of customers the MFIs have registered lower transaction cost and have
about specific technology/device; in this context,’ sociali- improved market performance (market portfolio has
zation of technology’ introduced is paramount to the improved). However, it is only large MFIs that have adopted
successful use of ICT in MFIs. This has been aptly pointed ICT as investment involved is huge with risky returns.
out through social shaping of technology emerging in Moreover, ICT does enhance the geographical footprints of
1990s (preceded by MacKenzie and Wajcman,19 1985; MFIs and brings down cost but cannot insulate MFIs from
Pinch and Bijker;20 Callon and Latour21), which viewed strategic default and credit risks as in the case of SKS
social relationship and technology as interdependent phe- Microfinance. Much of the success of ICT adoption rests
nomenon and refuted the notion of technological determin- upon professional skills of field staff, regulatory environ-
ism which states that technology follows its own develop- ment, enabling infrastructure and fulfilling/meeting expec-
ment path devoid of human influences, but affects society. tation of MFI customers. With the evolution of MFI sector,
It basically postulates that relationship between society and MFIs face an increasingly competitive environment forcing
technology is mutual in nature instead of standalone pro- them to balance the dual goals of outreach and sustainabi-
cess. In this context, MFIs must take proactive measures lity; in that case, ICT may be both instigator of this new
120 IIM Kozhikode Society & Management Review 4(2)

scenario and the potential solution to MFI survivability intervention of technologies by the firms and its impact
(Kauffman & Jiggins, 2012). over a period of time.
With respect to limitations of the present study, it
basically focuses on only large MFIs, and number of MFIs Acknowledgements
covered under survey is small. In order to have more com- I offer my sincere thanks to Vikas Kumar (senior regional
prehensive and reflective findings, the present study could manager, Varanasi, SKS Microfinance Ltd), Rahul Dey (head; IT,
be extended on the basis of region-wise and also according audit and loan; Utkarsh Microfinance Pvt Ltd), Dhananjay Singh
(project Manager, business correspondents relations, Cashpor
to the size of the MFIs (large, medium and small). In addi-
microcredit), Mr Ritesh Srivastava and Mr Anjan Kumar Kar
tion to this, it is a cross sectional data study and in order to (IT head) at Cashpor Microcredit, branch managers and field
have more reflective and empirically sound results, longi- staff, MFI clients of the respective MFIs for their cooperation in
tudinal study would be more beneficial as it captures the my survey work.

Annexure A. Brief Description of MFIs in Case Study

Description SKS Microfinance Cashpor Microcredit Utkarsh Microfinance

Year of establishment 1998 1997 2009
Legal status For-profit NBFC Not-for profit NBFC (NGO) For profit NBFC
Regulation Regulated Regulated Regulated
Funding pattern Mixed funding pattern Mixed funding pattern Mixed funding pattern
Lending method Joint Liability Group Joint Liability Group Joint Liability Group
Lending Lending Lending
Target group of customers Women Women Women
Area of operation Rural and urban Rural and urban Rural and urban
Number of branches on all India basis 1,100 341 230
Nature of branches Brick and mortar branch as Brick and mortar as well as Brick and mortar as well
well as branchless banking branchless banking as branchless banking
Number of districts wherein operation 294 15 64
Total number of staff 8,932 2,443 1,511
Source: website of three MFIs.22

Annexure B. Financial Position and Performance of MFIs (As on 31st March 2014)
 (in USD)
Description of Variables SKS Microfinance Utkarsh Microfinance Cashpor Microcredit
Assets 381156125.7 77054963.54 114450367.4
Liabilities 304696975.51 64688117.53 105257944.6
Return on assets 0.0288 0.0235 0.0327
Return on equity 0.1652 0.1146 0.3783
Operational self-sufficiency 1.1528 1.2345 1.1659
Profit margin 0.1325 0.1899 0.1423
Yield on gross portfolio (real) 0.0531 0.1182 0.0803
Total expense/assets 0.1884 0.1675 0.1969
Source: MIX Market.

Annexure C. Technology Trials by MFIs in India

Institution/Project Location of Project Year Technology used Status

SKS Microfinance India-nationwide 2006 Electronic Money Pilot
CCD Tamil Nadu 2005 Mobile phone imaging Pilot
CASHPOR Uttar Pradesh 2005 GPRS enabled PDA with printer Pilot
BASIX Andhra Pradesh 2005 STEMS- Internet kiosks Pilot
BASIX Andhra Pradesh 2005 Mobile phones Pilot
(Annexure C continued)
Singh and Padhi 121

(Annexure C continued)
Institution/Project Location of Project Year Technology used Status
BASIX Andhra Pradesh 2005 POS Pilot
BASIX Andhra Pradesh 2005 VSAT Pilot
SEWA bank Gujarat 2005 Smart card reader and cash bag Pilot
SEWA bank Gujarat 2004 Internet kiosks Pilot
CASHPOR Uttar Pradesh 2003 Simputer Failure
PRADAN India, nationwide 2003 Computer munshi Success
Akshaya, Kerala Government Kerala 2003 Internet kiosks, e-governance Success
SBI, ICICI, Bank of Patiala, J&K Bank India, nationwide 2001 Mobile banks Failure
BASIX Andhra Pradesh 2001 BASIX POT, smart cards Failure
BASIX Andhra Pradesh 2001 Portfolio manager, PDA Failure
DHAN foundation Tamil Nadu 2001 PC kiosks using WLL technology Success
SKS Microfinance Andhra Pradesh 2000 Smart cards and POS Failure
Gyandoot, n-logue communications Madhya Pradesh 2000 Internet kiosks, e-governance Failure
BASIX Andhra Pradesh 2000 Simputer Failure
Source: CARE (2012).

Notes allow businesses to provide online, real time and secure

services to customers even in remote areas. The limitless
 1. The definition has been taken from http://www.adb.org/ scope and convenience offered could be testified by over
sectors/finance/microfinance. 200 satisfied MFIs in over 32 countries around the world
  2. Here (Bakos, 1991) uses term electronic marketplaces as an (source: http://www.craftsilicon.com/br_mfs.php).
acronym for ICT. 12. Advantages of open-source software available at http://eu.
 3. Credit-scoring techniques are set of decision models and connecta.it/paper/advantages_open_source_soft.html
their underlying techniques that aid lenders in the granting 13. Reliability of ICT systems in this context has been defined as
of consumer credit. These techniques determine who will get secure, leak proof and possesses authenticity.
credit, how much credit they should get and what operational 14. One of the indicators to measure risk management efficiency
strategies will enhance the profitability of the borrowers to of MFIs is portfolio at risk which is proportion of MFIs total
the lenders. Further, they help to assess the risk in lending gross outstanding loan portfolio that is at the risk of default.
(source: http://www.statsoft.com/textbook/credit-scoring). 15. Interviewed in April 2015 as follow-up to this study.
 4. Adopted from http://edutechwiki.unige.ch/en/Technology- 16. High Mark Credit Information Services, a credit information
organization-environment_framework company (CIC) based in Mumbai. It keeps a record of
  5. This definition is sourced from http://edutechwiki.unige.ch/ loan repayment history on credit facilities extended to an
en/Technology-organization-environment_framework individual across the board. The service helps lenders to
 6. The data were collected in the year 2013 for 3 months analyze the risk profile of individuals before extending credit
(1 September to 24 November). (source: www.wikipedia.com).
  7. Total sample stood at 25, of which 18 were from Cashpor 17. It is a joint venture between Equifax Inc., USA and seven
Microcredit (Varanasi and Mirzapur clients) and rest 7 were leading Indian financial institutions which aims to provide
from Utkarsh Microfinance (only Varanasi clients). range of solutions related to credit information, business ana-
  8. MIX refers to the microfinance information exchange, pro- lytics and risk management for clients across India (source:
vides data services, analysis and research on the institutions http://www.equifax.co.in/about_equifax/india/en_in).
that provide financial services to the world’s poor. 18. CIBIL is India’s first CIC founded in August 2000. CIBIL
 9. Field Staffs and Branch Managers who were interviewed collects and maintains records of an individual’s pay-
belonged to Cashpor Microcredit and Utkrash Microfinance ments pertaining to loans and credit cards (source: https://
only. Field staffs and branch managers interviewed at en.wikipedia.org/wiki/CIBIL).
Cashpor Microcredit belonged to Rajatalab, Mirzamurad, 19. It is concerned to explore the material consequences of
Kachwabajar branch while in case of Utkarsh Microfinance different technical choices, but criticizes technological
field staffs and branch manager interviewed belonged to determinism, which argues that technology follows its own
Harhua Branch only. developmental path, outside of human influences and, in
10. Eko foundation is an Indian financial services company turn, influences society (source: www.wikipedia.com).
which provides low-cost infrastructure powered by inno- 20. Social construction theory or social constructionism or the
vation and technology to enable instant, secure and con- social construction of reality (also social concept) is a theory
venient financial transactions (definition adopted from of knowledge in sociology and communication theory that
http://eko.co.in/about-us/). examines the development of jointly constructed under-
11. Craft Silicon’s MFI offering also provides its partners with standings of the world. It assumes that understanding, sig-
alternate channels, such as, POS and mobile banking, which nificance and meaning are developed not separately within
122 IIM Kozhikode Society & Management Review 4(2)

the individual, but in coordination with other human beings Davis, F., Bagozzi, R. & Warshaw, P. (1989). User Acceptance
(source: www.wikipedia.com). of Computer Technology: A Comparison of Two Theoretical
21. Actor–network theory (ANT) is an approach to social Models, Management Science, 35 (8), pp. 982–1003.
theory and research, originating in the field of science stud- Davis, F.D. (1989). Perceived usefulness, perceived ease of
ies, which treats objects as part of social networks. Although use, and user acceptance of information technology. MIS
it is best known for its controversial insistence on the capa- Quarterly, 13(3), 319–339.
city of non-humans to act or participate in systems or Davidson, E. (2002). Technology frames and framing: A socio-
networks or both, ANT is also associated with forceful cri- cognitive investigation of requirements determination. MIS
tiques of conventional and critical sociology (source: www. Quarterly, 26(4), 329–358.
wikipedia.com). Diniz, E., Birochi, R., & Pozzebon, M. (2012). Triggers and
22. Cashpor Microcredit, http://www.cashpor.in/; Utkarsh Micro- barriers to financial inclusion: The use of ICT-based branch-
finance, http://www.utkarshmfi.com/; SKS Microfinance, less banking in an Amazon county. Electronic Commerce
http://www.sksindia.com/. Research Applications, 11(2012), 484–494.
Duncombe, R. & Heeks, R. (2005). Information & Communication
Technologies (ICTs), Poverty Reduction and Micro, Small
References
& Medium-scale Enterprises (MSMEs): A Framework for
Asian Development Bank (2000). Finance for the Poor: Understanding ICT Applications for MSMEs in Developing
Microfinance Development Strategy. Manila, Philippines: Countries. Vienna: United Nations Industrial Development
Asian Development Bank. Organization
Ajzen, I. & Fishbein, M. (1980). Understanding Attitudes and Eggleston, K., Jensen, R., & Zeckhauser, R. (2002). Information
Predicting Social Behaviour. Englewood Cliffs, NJ: Prentice and communication technologies, markets, and economic
Hall. development. In G.S. Kirkman, P.K. Cornelius, J.D. Sachs &
Baker, J. (2012). The technology-organization-environment K. Schwab (Eds), The global information technology report:
framework. In Y.K. Dwivedi, M. R. Wade, & S. L. Readiness for the networked world (pp. 62–75).New York:
Schneberger. (Eds), Information systems theory: Explaining Oxford University Press.
and predicting our digital society (vol. 1, p. 28). Integrated Fishbein, M., & Ajzen, I. (1975). Belief, Attitude, Intention,
series in information systems. and Behaviour: An Introduction to Theory and Research.
Bakos, J.Y. (1991). A strategic analysis of electronic marketplaces. Reading, MA: Addison-Wesley.
MIS Quarterly, 15(3), 295–310. Gahatani, S.A. (2001). The Applicability of TAM Outside
Barton, L., & Deschamps, I. (1988). Managerial influence of North America: An Empirical Test in the United Kingdom,
in the implementation of new technology. Management Information Resources Management, 14 (3), July 2001,
Science, 34(10), 1252. pp. 37–46.
Berger, A.N. (2003). The economic effects of technological Gefen, D., & Straub, D. (2000). The relative importance of
progress: Evidence from the banking industry. Journal of perceived ease of use in IS adoption: A study of e-commerce
Money, Credit and Banking, 35(2), 141–176. adoption. Journal of Association for Information Systems,
Callon, M. (1986). Some Elements of Sociology of Translation: 2(3), 173–191.
Domestication of Scallops and the Fishermen of St. Brieuc Ghosh, R.A. (2005). Free/Libre/Open Source Software for
Bay. In Power, Action, and Belief: A New Sociology of Developing Countries: Skills, Employment and Costs. Paper
Knowledge? (Eds) J. Law, London: Routledge & Kegan Paul. Presented at 2nd National Congress on Software Libre,
Buenos Aires, Argentina, June 7, 2005. Retrieved from http://
CARE (2012). Evolution of Technology Application in Micro-
www.flossproject.org/papers/20050607/rishabGHOSH-
finance. Credit and Savings for Household Enterprise- A
ususuaria05.pdf (accessed on 22 May 2014)
CARE India Microfinance Initiative. Retrieved from http://
Gonzalez-Barahona, J.M. (2000). Advantages of Open Source
www.cab.org.in/ICTPortal/Lists/Knowledge%20Bank/
Software. Retrieved from http://eu.conecta.it/paper/Advantages_
Attachments/36/Evolution%20of%20Technology%20in%20
open_source_soft.html (accessed on 20 October 2015)
MF_20_12_2007.pdf (accessed on 11 September 2015)
Goodhue, D., & Thompson, R. (1995). Task-technology fit and
Cirasino, M. Garcia, J. A., Tresoldi, C., IrideVangelisti, M.
individual performance. MIS Quarterly, 19(2): 213–236
& Zaccagnino, M.C. (2006, May 30–31). Retail payment
Goodhue, D.L. (1995). Understanding user evaluations of infor-
systems to support financial access: Infra-structure and mation systems. Management Science, 41(12), 1827–1844.
policy. Paper presented at Access to Finance: Building Gupta, N.K. (2000). The Business of Telecommunication. New
Inclusive Financial Systems. Brookings Institution and World Delhi: Tata McGraw-Hill Publishing Company Limited.
Bank, Washington. Humphrey, D., Willesson, M., Lindblom, T., & Bergendahl, G.
Collins, P.D., Hage, J., & Hull, F.M. (1988). Organizational and (June, 2003). What Does it take to Make a Payment?, Review
technological predictors of change in automaticity. Academy of Network Economics, 2(2): 1–16.
of Management Journal, 31(3), 512–543. Ivatury, G. (2006, January). Using technology to build inclusive
Compeau, D.R., & Higgins, C.A. (1995). Computer self- financial systems. CGAP Focus Note 32, Washington, DC.
efficiency: Development of a measure and initial test. MIS Jahangir, N., & Begum, N. (February, 2008). The Role of
Quarterly, 19(2), 189–211. Perceived Usefulness, Perceived Ease of Use, Security
Daniel, E. (1999). Provision of electronic banking in the UK and Privacy, and Customer Attitude to Engender Customer
and the Republic of Ireland. International Journal of Bank Adaptation in the Context of Electronic Banking. African
Marketing, 17(2), 72–82. Journal of Business Management, 2(1), 032–040.
Singh and Padhi 123

Jawadi, N., Jawadi, F., & Ziane, Y. (2010). Information and gateway.org/files/23073_Practical_Guide_to_a_Packet_
communication technologies contribution to microfinance Comput erized_MIS.pdf (accessed on 20 March 2015)
institutions performance: An empirical investigation of Pinch, T.J. & Bijker, W. (1984).The Social Construction of
developing and emerging financial markets, 2nd IEEE Facts and Artifacts. In Technology and Society Building
International Conference on Information Management and Our Sociotechnical Future, (Eds). Debroah G. Johnson and
Engineering. Jameson M. Wetmore, MIT Press.
Kamath, R.R., & Liker, J.K. (1994). A second look at Japanese Pigato, M. (2001). Information and communication technology,
product development. Harvard Business Review, 72(6), poverty and development in sub-Saharan Africa and South
154–170. Asia. Africa Region Working Paper Series Number 20, The
Kauffman, R.J. & Riggins, F. J. (2012). Information and Com- World Bank: Washington, DC.
munication Technology and the Sustainability of Microfi- Porteous, D. (2006). The enabling environment for mobile
nance, Electronic Commerce Research and Applications, banking in Africa. London: DFID.
11:450–468 Tornatzky, L. & Fleischer, M. (1990). The Process of Technology
Latour, B. (2005). Reassembling the Social: An Introduction to Innovation. Lexington, M.A: Lexington Books.
Actor Network- Theory, Oxford: Oxford University Press. Quinn, R.B., & Mueller, J.A. (1982). Transferring research
Lee, C. P. & Shim, J.P. (2007). An Exploratory Study of results to operations. In M. Tushman & W.L. Moore (Eds),
Radio Frequency Identification (RFID) Adoption in Health- Readings in the management of innovation (p. 62). Boston,
care Industry, European Journal of Information Systems, MA: Pitman.
vol. 16(6), pp. 712–724. Rogers, E.M. (1962). Diffusion of Innovations (1st Ed.). New York:
MacKenzie, D. & Wajcman, J. (1985). (eds.) The Social Shaping
Free Press.
of Technology: How the Refrigerator Got its Hum. Open
Rogers, E.M., & Shoemaker, F.F. (1971). Communication of inno-
University Press, Milton Keynes, UK.
vations: A cross cultural approach. New York: Free Press.
Mansfield, E. (1968). Industrial research and technological
Rogers, E.M. (1983). Diffusion of innovations (3rded.). New
innovation. New York: Norton.
York: Free Press.
Mansfield, E., Rapport, J., Romeo, A., Villani, E., Wagner, S.,
Roller, L.A., & Waverman, L. (2001, September). Telecommuni-
& Husic, F. (1977). The production and application of new
cations infrastructure and economic development: A simul-
industrial technology. NewYork: Norton.
taneous approach. American Economic Review (American
Mathieson, K. (1991). Predicting user intentions: Compar-
ing the technology acceptance model with the theory of Economic Association), 91(4), 909–923.
planned behaviour. Information Systems Research, 2(3), Warschauer, M. (2003). Technology and social inclusion:
173–191. Rethinking the digital divide. Cambridge: The MIT Press.
Mishra, A.N., Konana, P., & Barua, A. (2007). Antecedents and Weissbourd, R. & Perpetual Motion, Inc. (2002). Banking on
consequences of interest use in procurement: An empirical Technology: Expanding Financial Markets and Economic
investigation of us manufacturing firms. Information Systems Opportunity. Prepared for the Brooking Institution Center on
Research, 18(1), 103–120. Urban and Metropolitan Policy, the Financial Services Round-
Moussa, A., & Schware, R. (1992). Informatics in Africa: Lessons table and the Ford Foundation. Washington, DC. Retrieved
from World Bank experience. World Development, 20(12), from  http://www.rw-ventures.com/publications/downloads/
1737–1752. banking%20on%20technology.pdf; http://www.microfinance
Orlikowski, W.J., & Gash, D.C. (1994). Technological frames: gateway.org/library/banking-technology-expanding-financial-
Making sense of information technology in organisations. markets-and-economic-opportunity
ACM Transactions on Information Technology in Organisa- Zhu, K., Kraemer, K.L., Gurbaxani, V., & Xu, S.X. (2006).
tions, 12(2), 174–207. The process of innovation assimilation by firms in different
Orloff, S.P. (2005). Implementing a computerized management countries: A technology diffusion perspective on e-business.
information system. Retrieved from http://www.microfinance Management Science, 52(10), 1557–1576.