1. Project Background and Justification
MISSION: A secure, extensible, easy-to use MIS framework for SHGs, SHG federations and other community-based financial institutions.
1.2. Project Background
Over the last twenty years, since the emergence of the Grameen Bank in the 1970s, micro-finance has proven to be a valuable and effective tool for poverty alleviation and local economic development. Most micro-finance institutions (MFIs) in India are built upon the grassroots infrastructure of a self-help group (SHG). These are small village-based groups within which micro-finance transactions are conducted. SHGs access capital on the basis of mutual liability between members of the group.
SHGs are cooperative community-based financial institutions, owned and managed by the local members themselves. SHGs can group themselves into structures of 20-25 groups called clusters, which are further grouped into larger structures called federations. Federations can legally be registered as non-profit, for-profit or cooperative entities. They provide organizational support to these networks of SHGs, including training and capacity building, access to external sources of funds, linkages to other SHGs and to the formal banking sector. Federations are owned by the member groups themselves, and managed by an elected representative body.
As a SHG matures, there is requirement for increased transparency to external regulatory agencies and funding organisations. Due to programs such as NABARD’s SHG-bank linkage program
[1], these groups are increasingly being seen as a viable market for financial services in rural India. Therefore SHGs require proper accounting standards and financial management tools if they are going to do business in the formal capital market. This is also required if the SHG is to provide a variety financial services to its members, including insurance, voluntary savings and fixed term deposits.
This usually proves to be an unmanageable burden for most SHGs for a number of reasons. First, the volume of transactions is so high that data management and reporting can become intractable. Given the remote locations and limited financial means of these small SHGs, computerization appears to be out of the question. Moreover, group leaders do not have the training or education to properly maintain records or produce regular reports, not to mention the ability to use computerized systems.
In SHGs transactions occur during weekly or monthly meetings of the group, which are typically conducted within the village itself. The costs of external staff required from local social service organisations to manage and record these transactions simply cannot be sustained within the local economic system. Most SHGs operate in far-flung rural areas, making travel cumbersome and costly. This is one of the major overhead costs involved with fostering SHGs in rural areas and a major reason for its perceived lack of sustainability.
All of these factors lead to the conclusion that having a distributed yet integrated top-to-bottom management information system (MIS) for managing SHG operations would be an attractive possibility, if it could be implemented in a way that would require minimum investment in terms of local resources or capacity. This could allow SHG’s to ‘outsource’ most of the data processing and management tasks to more capable remote staff, while maintaining the overall ownership and management of their institution. In this model SHGs could be provided with timely access to accurate and relevant financial data, while sharing the costs across a network of SHGs using the same information services framework.
In the MISSION project, we are building just such a system, by developing modular, secure, easy-to-use tools for information capture, processing and presentation. Our solution consists of the following major components:
- Standardized document formats for data collection and records – standardized, accessible formats for recording data in the field
- Accessible mobile-phone based system for remote information capture – a system using mobile phones to quickly and efficiently capture physical document records
- Robust web applications for data processing and reporting– flexible XML-based back-office system that can process incoming data in a variety of formats, and produce reports and analyses useful for SHG management, members and external agencies
In the next section, we will describe the design and current status of each of these components, along with our plans for future development.
2. Project Objectives
Objective 1: Standardized data formats for information collection and recording
The members of these micro-finance groups have been using notebooks and ledgers to record information for many years. Even semi-literate users have learned to “read” these formats, leveraging numeric and other partial literacies, and through repetition and memorization. These records serve as a communal repository of information for the group, closely guarded via an evolved social network of trust and responsibility. Besides these benefits of social context and familiarity, the simple economics of most SHG groups only afford the use of manual paper records at the group level.
However, the current design of these data formats leave a lot to be desired in terms of the structure, organization and accessibility. Most SHGs in Tamil Nadu, one of the states in which we are working, structure their records according to standard government formats. This consists of seven proscribed records (general ledger, cash book, resolution book, loan ledger, savings ledger, voucher, and receipt). Based on accounting standards for existing small businesses and government offices, these formats are widely considered to be too complicated and include too much redundant information to be useful for SHGs. In practice SHGs record their transactions in only one of these books, the cash book, and later, with the help of local NGO staff, or an educated local resident (for a fee), these records are transcribed into the other ledgers and documents.
As part of the MISSION project, we are redesigning these records to consolidate all of the most important monthly information in a single, easy-to-use sectional notebook. SHGs can record different kinds of transactions and records in separate sections, allowing for streamlined data entry and reference. Leveraging our earlier successes in designing
computer interfaces for semi-literate users
[2], we are specially designing these
paper interfaces to be more understandable by semi-literate and uneducated users. We are also structuring the formats to be easily consolidated in order to produce reports and other analytical documents.
While we are working on using automated document scanning tools and back office integration for processing these records (see the next section), we intend for the manual component of the system to be complete in its own right. Those institutions that cannot afford or choose not to adopt the other components of MISSION can still use the basic record-keeping formats as a completely self-sufficient manual MIS.
The development of this component of the MISSION project is being supported by USAID under the auspices of the SEEP Network’s Practitioner Learning Program
[3]. The Covenant Centre for Development (CCD), under the technical guidance of ekgaon technologies pvt. ltd., is completing the final design of the formats, and planning their implementation in four SHG Federations near Madurai, Tamil Nadu, India. Subsequently we plan to conduct workshops and training sessions in order to introduce the new formats across the CEFI network of SHG federations, covering 93 federations in eight states.
We are also planning to publish the general version of our MIS formats and operational manuals on the internet, in English, for free use by other institution with similar requirements.
Objective 2: Accessible mobile-phone software for remote data capture
As community financial institutions grow and mature, it is clear that manual bookkeeping methods could not scale to accommodate larger numbers of members or provide the necessary guarantees about accuracy and timeliness. Therefore the need for a low-cost, sustainable method of digital data entry and processing is a clear imperative for the sustenance and scalability of these distributed networks of community-based financial institutions.
In approaching this problem, one must first recognize several obstacles. First, the low literacy and education levels of most members of SHGs, as well as their unfamiliarity with modern IT, makes the design of an accessible user interface a crucial factor to a software system's success and impact. The economics of SHGs and their limited operating margins imply that any technology used for this purpose must be of the lowest possible cost, and amortized across as wide a number of potential users as possible. Many previous attempts to solve this difficult problem have failed due to complicated, inaccessible user interfaces, uneconomical uses of technology and poor systems integration with central data repositories.
In this project we propose to take at aim at both sides of this thorny problem. In this section we will discuss our technology for secure, semi-automated field data capture using a novel type of mobile phone user interface. In the next section we will talk about our approach to providing flexible and scalable back-office services to rural SHGs using XML-based web services.
Years of experience with physical labour have given rural users a closer and more complete connection with the real, tangible world of physical objects than we could ever imagine. This implies that the use of "tangible interfaces", interfaces bridging the physical and virtual worlds, could have great consequences in reaching these user communities. We have already noted the importance of notebooks and ledgers in these groups’ current information management processes. These formats serve as shared, tangible representations of communal data within rural SHG groups.
As part of the MISSION project, we are working on augmenting these paper representations so that they can be semi-automatically processed using a mobile phone camera, greatly reducing the data entry effort and interaction required with the phone’s limited display and keypad. We are achieving this by embedding 2D barcodes specifying processing instructions within the document. When a mobile phone camera equipped with our special software scans these codes, the user is prompted to transcribe the data and upload it to a centralized information server. An image of the entire form is also uploaded as a secure, tangible record of the transaction.
Figure 1: A proposed paper user interface for recording a SHG Deposit
In this way users can have a simple, familiar digital device (a mobile phone) to capture and communicate data, while retaining their familiarity with the existing paper formats. The mobile phone is a mass production consumer electronic designed for detached remote use. In many ways it is a perfect vehicle for the delivery of ICT services to these hard to reach rural areas. The volume of production makes it eminently affordable, and it’s ubiquity makes it at least somewhat familiar to even the most isolated users.
In our proposed system, several phones can be shared across a network of SHGs, making it an economical and scalable method of data capture. It is envisioned that Federation field officers who periodically travel to villages to monitors groups and review records will also use the camera-equipped phones to scan records for later uploading to the central Federation database. We are also investigating the establishment of rural “document processing kiosks”, where SHG members can take their records for scanning and automatic transfer to the Federation office. Another application of this technology is support secure and remote electronic transactions. One Federation we are working with offers a secured line of credit to SHG members at several local groceries. We are designing a version of the mobile phone scanning system to support generalized POS (point of sale) transactions, allowing the Federation to offer completely electronic lines of credits to SHG members.
We are currently working on implementing a prototype of the mobile phone scanning system, along with researchers from the Department of Computer Science at the University of Washington, Seattle, WA, USA. The University is supporting the prototype development through a student fellowship, travel funds and other material support. We are currently seeking additional funds to support the pilot implementation with our partner SHG Federations in Tamil Nadu. We intend on publishing the results of this pilot, along with the details of our technological solution, in the appropriate academic journals.
Objective 3: Robust web applications for data processing and reporting
While the new data formats and mobile phone scanning software provide a good solution for the “front office”, we still need “back office” tools to collect and organise this valuable incoming data. For that we are working on developing a scalable, robust XML-based web application framework that that allows for the input and output of data in a variety of formats (via the web, phone, SMS, scanner paper forms, etc.). This design gives institutions the utmost flexibility in where and how to invest in technology, while still maintaining an integrated and efficient MIS system.
For example, some institutions may choose to maintain manual records at the group level, which are physically transported to the Federation to be entered via a standard web interface. Others may choose to use the mobile phone scanning software to capture these physical records remotely for later integration into the database. Still others may choose to post transactions using SMS, or via remote Internet access, using a local information kiosk or tele-centre.
Our solution seeks to support all of these scenarios, using the power and flexibility of the XML meta-language. XML allows us to structure the inputs and outputs of our systems consistently, regardless of the specific medium of information exchange. The system’s core information processing can occur independently of the input or presentation formats.
We are currently developing a web-based accounting and portfolio tracking application for use by community financial institutions based on this general XML services framework. It allows for the collection of data about groups, members, accounts and transactions, and is able to produce consolidated reports at the group, cluster and federation levels. The system maintains a strong distinction between records at the Federation and SHG levels, allowing them to remain as independent financial entities with distinct ownership and management structures and accountability requirements. We are structuring our reporting formats on international financial disclosure guidelines as published by CGAP.[1]
The Federation is planning on offering this application as a paid service to member SHGs. SHGs would provide their records for entry to the Federation database, and receive regular operational and analytical reports to monitor their performance and follow up on potential credit risks. The Federation would also provide audited financial statements on request to banks, government agencies and other interested parties. In effect the Federation is acting as an application service provider (ASP), which fits with the general role of the Federation as a capacity and technical services provider for SHGs.
We have completed the needs assessment and evaluation phases for the development of this software. After determining that there were not any affordable and appropriate solutions available in the market, we have commenced in developing our own system. We are currently seeking funds for the development of this XML services framework for community-based financial institutions. Once our initial implementation is complete, we plan to share the details of our design and implementation with other similar institutions through published documents and software. We also plan to investigate the implementation of other value-added services, such as messaging, communication and personal bookkeeping, using this general information services framework.
3. Project Beneficiaries
This project will benefit thousands of community-based financial institutions around India and the world that currently have difficulty collating, analysing and reporting data collected from the field, as well as the hundreds of thousands of poor clients that these organisations serve. If our experiment proves successful, it will give all of these organisations a standard set of tools to carry out these tasks and therefore compete more effectively in the formal capital market.
The ramifications of this would be enormous. This kind of fine-grained data collection would allow organisations more transparency, streamline the collection of delinquent accounts, and generally improve the sustainability and credit performance of the organisation, while at the same time lowering incremental operational costs. They would thus have enhanced ability to report performance and credit risk to outside lending agencies, opening up unexplored avenues of credit and venture capital. This would allow local people to access larger sources of capital that could then be put to productive income-generation activities and entrepreneurial ventures.
It is a well-known fact that many large banks and financial institutions are interested in lending to these segments of the population, both for social and financial reasons. In some cases the credit risk associated with lending to these borrowers is less than that associated with traditional commercial borrowers. If these institutions could be provided more accurate and complete credit analysis and portfolio-at-risk reports on a client-by-client basis, much of their current hesitation in lending to these groups could quickly be resolved. These community-owned financial institutions could then be seen as reliable and cost-effective channels for financial service delivery in these markets, empowering them with control and authority over their financial futures.
Additionally these tools could allow such institutions to offer more complicated financial products, such as insurance, fixed term deposits and voluntary savings accounts. Due to difficulties in accounting and risk management, these facilities are currently not offered by most micro-finance providers. This is seen as a major growth limitation of this model. Guided by an appropriate software system, these products could safely be offered, tracked and collected, allowing members to access financial services that could be important for their lives.
It is obvious that by making these organisations' data collection and management processes standardized and streamlined, and by allowing for the digital capture of end-to-end transactional information, we would be making a huge stride in the continued financial sustainability and development of such organisations and the poor clients they serve.
4. Project Sustainability
Many community-based financial institutions in India already process tens to hundreds of thousands of US dollar equivalents annually. If we can prove that this system will increase the efficiency and lending capacity of these organisations, increase their ability to recover capital, and decrease their incremental operational costs, there is no question as to the sustainability of the project. This is one of the results we hope to demonstrate as a consequence of this pilot study. Once that has been proved, any local technology service provider can easily deploy this system or an analogous one for a micro-finance institution with mutually agreeable service fees.
5. Project Time-Line
Month 1 - Month 2: Software Design and Specification
During the first two months of the project, we will finalize the design of the back-office web application, including the accounting, portfolio tracking and reporting modules. We will also plan for the integration with the existing web and phone-based data entry components. This will also be the time where we search for candidates to fill the open positions on the project team, concluding our hiring process by the end of the second month.
Month 3 - Month 10: Software Implementation
During this period we will develop the XML-based back office software as described earlier. We will also implement the necessary interfaces for web-based and phone-based data entry. The team will consist of one software developer and one interface designer, and will be managed by the existing ekgaon project manager. This new team will work closely with existing teams already working on the project. The team will have to meet regular development milestones, and will be asked to run routine regression tests and other testing protocols to ensure the reliability of the software they are developing.
Month 11 - Month 12: Testing and Quality Assurance
During this period we will conduct in-depth testing and quality assurance protocols to ensure the reliability of the system once it is deployed. It is important that we uncover as many potential bugs as possible at this early stage. Once the system has been deployed it would be expensive and potentially cause users to lose faith in the system if we had to handle many such problems in the field.
Month 13 - Month 14: Preparation of Training Materials and Software Documentation
We will develop appropriate local-language training materials for the system, both for the field level data collection units and the central data management system. We will also plan the prototype testing strategy - i.e. which self-help groups and federations will be included in the tests, how the data will be collected and returned to the central office, which staff will be involved in training and support, etc. During this period we will continue debugging the software systems extensively.
Month 15-16: Training and Initial Testing
In this period we will begin the training of the field and central office staff in how to support and manage the system. We will also begin to bring the data collection units to the villages to allow the staff and members to become familiar with the unit. We will start testing the entry of transactional data in the village, and uncover any software or configuration glitches. This will be another period of extensive debugging of the system.
Month 17-23: Final Implementation and Evaluation
For seven months we will deploy the system in a real-world setting in the chosen SHGs and Federations. We will record field observations of the end users, as well of the CCD support staff and organisational management. We will track the data collection from end to end, monitoring how quickly and effectively data is being collected and stored in the central database. We will also observe how well this data can be processed in the central office, what tools are used, and what tools are still required to be developed. As the testing period will be short, we may not be able to gather conclusive information about the impact of the system on the overall operational performance of the organisation, but we will try our best to observe the short-term effects, particularly in terms of risk analysis and delinquency tracking.
Month 24: Collation of Observations and Final Report Creation
During this period we will collate our field observations, and discuss amongst staff, end users, project advisers and observers the results and conclusions of the pilot. We will discuss limitations of the testing strategy, and successes and failures of the program. We will debate avenues of improvement and our impressions of the overall feasibility and importance of an end-to-end digital data management system given our yearlong experience in implementing and testing the same. With all of this feedback and information, we will complete a full and comprehensive project report that will be freely downloadable for others to learn from our experience. We will also publish some portions of our report in the standard research literature, both in the technology and the development communities.
6. Project Outputs
The project output, as described above, will be a detailed and comprehensive project report, and topical publications in the research literature for the relevant fields. The kinds of things to be discussed in this report include: 1) a description of our software design so that it can be easily duplicated by other practitioners, 2) detailed descriptions of our testing methodology and implementation strategy, 3) raw observations from training and testing phases and 4) detailed analysis and final conclusions about the project results.
We also plan to freely distribute our detailed hardware designs and software implementations to anyone who requests them. In this way any similar organisation who is considering implementing such a system, or wants to decide on it's efficacy, will have ample empirical evidence to make a sound decision, and the tools to implement such a system should they choose to do so.
Similarly, if any technical service provider would like to offer these types of services to local micro-finance organisations in their region, or to develop a special-purpose system to meet these needs, all the requisite information would be ready at hand. In this open, non-competitive way we hope to bolster the development of more professional, organised and technology-savvy micro-finance institutions around the world.
7. Project Monitoring
We will be monitoring the project development quarterly with intermediate bi-monthly achievement targets set for the entire team. We would report quarterly to the funding agency, providing the status of the funds used and the progress made in project activities and deliverables. The evaluation of the project will be done at the end of each quarter to assess the direction in which the project is going. We would also include statistical and financial information wherever appropriate.
[1] CGAP Home Page, http://www.cgap.org/assets/images/FSGuidelines-final.pdf
[1] NABARD home page, http://www.nabard.org/roles/mcid/shgbanklink.htm
[2] Parikh, Ghosh, Chavan, Syal and Arora, Design Studies for a Financial Management System for Micro-credit Groups in Rural India, http://www.cs.washington.edu/homes/tapan/papers/p0314-parikh.pdf
[3] SEEP Network Home Page, http://www.seepnetwork.org/section/programs_workinggroups/plp/
