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Hi, I'm a finance blogger who is interested in how different financial tools, including microfinance, can deliver real value to consumers.
Published By Kirsten Weiss on September 2, 2009
After twelve years in the field, I found myself a bit behind the tech curve when I returned to my home in the Silicon Valley.Â So after attending Stephen Goodmanâ€™s (from Sun Microsystems) presentation on Emerging Market Models to the SVMN, I decided to circle back and get some questions answered from a Ludditeâ€™s view.
Me (Kirsten): Thanks for taking the time to chat with me Stephen.
Stephen: Of course!
Kirsten: I have to admit, when you said that back-end technological support was one of the key needs in microfinance, I felt like cheering.Â Why is this so hard?
S: In my presentation, Iâ€™d brought this issue up in the context of the mobile platform.Â Â Mobility is so powerful because itâ€™s handheld, itâ€™s simple for communities that havenâ€™t grown up in the PC environment, and there are sophisticated and sleek applications being developed.Â But a lot of the pressure to develop is focused on the front end â€“ whatâ€™s on the screen.Â What MFI professionals must not forget is that thereâ€™s a back end needed, many times a substantial and robust back end. Â Letâ€™s say you do have a smashing success and your client base grows â€“ what are you going to do for, say, storage and security? Many times this aspect of technology deployment isnâ€™t as well thought out as the user interface.Â Mobility is happening, theyâ€™re reaping the successes, but theyâ€™re having growing pains.
K: Maybe Iâ€™m projecting, but it seems that one of the biggest barriers to technology in microfinance is intimidation.Â Implementing new technologies like M-banking, or even a decent management information system, seem overwhelming.Â What steps can microfinance managers take to move forward?
S: I have two answers.Â One is that technology is getting simpler and more powerful at the same time. Simpler in that itâ€™s amazing how you can engage in technology and not be a technologist. Â Around the world there are legions of younger folks and smart entrepreneurs who have technology ingrained into their personal and professional skill set,Â and I think youâ€™ll find there are a lot of people who are less intimidated with technology. Â The technology wave, adoption,Â is getting more powerful so there are communities, like open source, that one can be a part of. And on the other side, solutions, like cloud computing, for those that would never think to set up a system themselves.
I also think that people in the microfinance space shouldnâ€™t feel obligated to become technologists.Â They have a business model to execute on and a need to focus on their enterprise, their customers and I think technology will be that enabler if applicable.Â They wonâ€™t have to spend 40% of their time being a tech manager. Back to the concept of computing becoming more powerful while simpler: cloud computing, a perfect example. Instead of having to buy a bank of servers and hiring IT management, one could use utility computing.
K: Cloud computing sounds like an interesting option for small to mid-size MFIs.
S: It is!
K: Can you tell me a bit about it?
S: Cloud computing isnâ€™t new. You have centralized computing power, a data center, and itâ€™s shared.Â But instead of the computing power being at your desk, itâ€™s in a more centralized place, remote and in the “cloud.”Â Some of the characteristics of cloud are its service model â€“ youâ€™re not buying a product; youâ€™re buying a service.Â You donâ€™t have to buy software.Â Itâ€™s scalable and elastic â€“ you can add more or reduce.Â If all of the sudden your data or client needs expand, you can scale your cloud capacity.Â There are different models of how cloud services are Â paid for but many are metered according to usage â€“ again, helpful in a scaleable SME environment. In the past, youâ€™ll often find a small organization buying computers with huge computing capacity they don’t really use or needÂ â€“ using cloud computing you only pay for what you use.Â It also uses the web and the technology tends to be fairly straight forward and developed. Finally, we can’t forget that the main interface is a web browser, mobile or not, thus increasing accessibility.Â Weâ€™re finding that small and medium sized organizations can really take advantage of it.
K: Do you know of any examples in the microfinance realm of cloud computing?
S: We are just starting to hear about MFI teams using cloud computing. Just like open source, it wouldn’t surprise me that we’ll learn of more cases in the near future. Mifos, an open-source based MFI-centric information management system has received a lot of attention recently. We have yet to hear of the equivalent in the cloud space. Â But with that said, I bet people are using cloud computing and donâ€™t even realize it.Â For example, I know international NGOs using Google docs for their organization as a new and better way of collaborating.
K: I worked with a microfinance bank in Pakistan that used open source software, and they raved about the flexibility and low cost.Â But I was left feeling that it takes a large institution â€“ such as a bank â€“ to manage open source software.Â Am I wrong?
S: Yes and no.Â Itâ€™s not black or white; you donâ€™t use all open source or not. And you’ll find open source in all sizes of organizations.Â For example, one of our executives had a meeting with a banker, whoâ€™s very regulated, and the banker said they don’t and couldnâ€™t use open source because of perceived security concerns. Â The sales representativeÂ in the meeting modestly raised his hand and said, â€œActually, we know your team is using open source.Â Weâ€™ve have multiple records of official downloads.â€Â So youâ€™ll see banks use it in some areas and not in other areas. The same goes for MFIs or smaller enterprises. Open source should be part of a smart technology portfolio.Â AnotherÂ misconception about open source is that youâ€™d need a very advanced tech team.
K: Thatâ€™s my concern!
S: If youâ€™re creating and building on it, yes, you need good tech people.Â But there are open source options out there you donâ€™t have to build on, so it really depends.
K: You mentioned in your presentation to the SVMN that Africa is the technology â€œhotbedâ€ these days.Â Why do you think that is?
S: Because necessity drives innovation. There are some genuine problems.Â I donâ€™t say that cynically,Â but it doesÂ createÂ a certain level of motivation.
Our research uncovered something that wouldn’t be a surprise to practitioners working on this geographically and demographically huge continent – there is a lot of new and innovative economic activity going on, now. Investment and commitment is growing. Along with that is growing technology uses and adoption.Â Â Thereâ€™s a wealth of opportunity â€“ of smart, emerging and established universities, of thriving SME sectors, and so what we find is that there are a lot of really dynamic things going on there.
ThoughÂ itâ€™s not a completely blank canvas,Â Africa hasÂ an environment where you can leapfrog technology. Â There are many cases where there is no legacy system of old infrastructure you have to overcome.Â As a result, the newest technology, for example, mobility, is so successful.
You often hear about the hesitation regarding the economic payoff of Africa.Â It may not fit with the US model of quarterly returns, but weâ€™re starting to see long term investments from the past pay off.Â You have to be part of that â€“ to get in the game â€“ to reap the benefits.Â If you donâ€™t invest, you wonâ€™t be able to contribute and share the rewards.
K: What question should I have asked you that I havenâ€™t?
S: Around new engagement models. What are the new and savvy engagement models that corporations are employing?
We’ve learned that in the ICT (Information and Communication Technology) space we’re in enables change, and contributes to positive economic and social utility. It might not be selling product at the base of the pyramid but it will be in helping to build and sustain the ecosystem of these emerging communities.
If you want to be part of this growth of these emerging communities then itâ€™s not always about working with the end consumer of the project, but maybe itâ€™s about supporting the the vendors, policy leaders, MFIs, or municipalities, for example.Â Itâ€™s not enough to focus on the top, bottom, or middle of the pyramid, but the innovators, incubators and influencers which support, which make up the economic growth.
Microenterprise, social enterprise, and, what I call, tech enterprise are the really interesting new business/marketing models.Â If, as a corporate leader, you do not align your sales, marketing, thought leadership, product development, sales channels and other aspects of your business model to intersect at some level with these organizations and, leaders, than you will not evolve as they do. Microenterprise is a different scale, sometimes hard to connect with, but we see SMEs dominate so much of the economic growth in emerging markets it would be foolish not to consider some strategy of engagement.
Iâ€™m excited about the hybrid model of social enterprises because theyâ€™re about building both social andÂ economic opportunities.Â Â Finally tech enterprise â€“ there are a lot of technologists out there building to solve problems, but who might not realize theyâ€™re also building a business.Â Many are associated with universities and labs. Â Better partnership or collaboration could lead to even more wonderful applications of their work.Â A lot of people are talking about building the business, but there are pockets of people who just like building the technology and solving problems.
The point is that there are new and evolving business and marketing models that parallel technology and enterprise innovation, all happening outside western markets. Tap into these transformation and you’ll grow your opportunities, significantly.
Check out Stephenâ€™s presentation to the Silicon Valley Microfinance NetworkÂ on the SVMN website.