Grameen Foundation (GF) provides microfinance and works to alleviate poverty in 22 countries in the developing world, reaching an estimated 11 million people.
 | Village Phone, which allows villagers to earn money selling mobile phone air-time, is one of the Grameen Technology Center's most successful programs. (Photo: Courtesy Grameen Foundation) |
One wing of the foundation, the Grameen Technology Center, focuses on reducing poverty in the developing world with projects such as Village Phone, Village Computing, and through the creation of open-source information management systems for microfinance institutions (or "Mifos").
Peter Bladin, director of the Grameen Technology Center, tells us how information technology (IT) can expand the reach of microfinance institutions and make direct improvements to the livelihoods of poor communities in the developing world.
Mr. Bladin, how important is technology to the spread of microfinance in the developing world?
I think it's very important. There are literally thousands of organizations involved in microfinance around the world, but sooner or later every one of them realizes that in order to run this business and expand, they are going to have to keep track of things in a very transaction-intensive business with lots of clients. There's really no way around it: virtually every single institution is realizing that in order to grow, IT becomes vital.
We need to figure out how to scale microfinance more effectively, and that's where IT becomes a huge tool to create more efficiency. Once you've improved your efficiency, you can reach many more people. I think we need to focus more on that because there are still not enough of institutions that are reaching scale, despite their great potential.
Is it only now that the connection between technology and microfinance is being discovered by microfinance institutions?
I think there were many institutions that put some kind of computer systems in place ten years ago. But I've seen a shift in the many institutions I've worked with - ones that might have once felt that computers and automation were either a "necessary evil" or not-needed. Now, they are saying that IT is important not only to keep track of things. It's gone beyond that. Now it can be a strategic advantage. Institutions can track information about their clients when they move out of poverty, and lots of other things not just related to the loan itself.
 | Photo: Courtesy Grameen Foundation |
You mean designing IT systems that help microfinance institutions conduct business and grow?
Yes. Again, there is a clear realization by every institution that in order to grow, they need it. There are a few solutions out there that people are trying to sell, but microfinance institutions often hesitate to put their whole institution on a system created by a few guys halfway around the world, especially when they don't know if that organization is going to exist six months or twelve months down the road.
So, how do you get around that?
The open source solution - the "Mifos" - will give them a platform. And now we are working very hard to build local technology companies that will be the service, support and implementation resources for microfinance. We are trying to bring the power of the open-source model into microfinance.
The second step that you'll see in the next year or two is the implementation of an open-source solution where you can use a mobile phone as an input device to automate the last mile from the back office out into the village. I personally believe that the mobile phone is the ubiquitous technology that is being rolled out. If you don't have to put new devices into the system, you're much better off.
What is the key to the successful implementation of technology in a rural village?
The key is determining what goods and services people want. What are they willing to pay for? We have seen an SMS-based service in rural Uganda, for example, where you can actually look up market prices on a daily basis by SMS.
When you live on a dollar a day, you're not going to go look up a lot of other stuff, but there are things you want to know and there is information that can affect your situation. It has to be driven by the service needs that people have.
What are the most important benefits of computers for rural communities?
The biggest benefit is access to information. The most-telling example is having access to market information so you can negotiate a better price (for your goods), but I think it goes beyond that. The computer and the Internet can be amazingly powerful tools for people to learn and become empowered. I think the learning side is a big thing.
Another interesting example is with a small video camera, you can do simple things like taking pictures of sick people and their symptoms, and send those pictures to doctors. You can almost do a medical examination from afar. There are plenty of examples of these kinds of things happening today. It's mostly a matter of connectivity costs and device costs dropping, but it is happening. I think in five years things are going to look a lot different.
It sounds like technology - or the combination of microfinance and technology - can help us with more than just the poverty aspect of the Millennium Development Goals. Is that a fair assessment?
What I like about microfinance is that it is providing financing services for the poorest, but what it also does - the positive side-effect, if you like - is it addresses health, education, and nutrition. When a family has a little more money, they usually make sure they have enough food, they keep the kids in school, and they provide basic health care for the family. I think the power of microfinance is that it helps people help themselves, and it's also scaled in a way that it can be financially sustainable.
That said, I also think technology can be a great opportunity to address poverty goals. What I think is important, but sometimes lost in discussions, is that it has to be done in a way where technology is used a tool to address a specific problem.
As opposed to what?
Well, I think it was around 1999 or 2000 when people talked about "bridging the digital divide," and we saw a lot of trials and experiments with putting computers and telecenters in villages all over the world. But you can wire any village you want; you can put in high-speed Internet access; you can do lots of different things, but you have to focus on the business model underlying it. How is this going to pay for itself? Because if you don't focus on the business model, you are not are going to be able to scale it. There are too many villages in the world for anybody's pocket to cover it all.
publishing date: September 22, 2006
editor: VW
