IBM partners in scheme to reduce poverty

from The Independent On-Line

James Archibald

IBM has announced that it will collaborate with the Grameen Foundation to help microfinance institutions (MFIs) better serve the world's poor communities.

Together they will expand the Grameen Foundation's open source microfinance software platform, Mifos.

The goal is to provide MFIs with software that streamlines the lending process and cuts costs so that they can expand their operations to provide loans to more people and offer a wider range of services.

IBM will assist in building added functionality and making the application more robust.

By providing small loans to the poor, MFIs help reduce poverty by providing starting capital for entrepreneurs to set up or expand very small sustainable business.

This is usually done with no more than the equivalent of $200 (about R1 300). In addition to loans, many MFIs offer other financial and social services such as savings accounts, micro-insurance, education and healthcare.

A study by the Consultative Group to Assist the Poor (CGAP), carried out in 2004, showed that only half of the world's MFIs had automated information systems. Those that did invest in technology were using costly custom-built systems that were difficult to maintain. Many others were still using pen and paper or simple spreadsheets to process loans.

IBM and the Grameen Foundation's collaboration intends to address these issues and drive the industry to work together in building and maintaining a reliable software platform that can automate portfolio processing and be used to build next generation microfinance applications.

The foundation and IBM believe that the benefits of the new Mifos platform will include access to world-class software for all microfinance institutions, global standards in management and reporting and the sharing and scaling of technology innovation.

While the loans themselves are very small, the large number of them means that vast sums are invested into poor communities.

According to the Microcredit Summit Campaign, an umbrella organisation for MFIs worldwide, it is estimated that as of 2006 more than 3 100 MFIs were providing microfinance services to more than 113 million poor people.

In addition, the MFIs listed on the Microfinance Information eXchange reported that they had provided more than $23-billion in gross loan portfolio between 2004 and 2006.

So far five MFIs are using Mifos in India, Kenya, Tunisia and Honduras.