Microfinance Customer and Domain Knowledge Center

Owned by keithwoodlock (Unlicensed)
Last updated: Feb 09, 2011Version comment

Purpose

Technologists that work in the microfinance domain need to be able to talk to domain experts; people out in the field working closely with those that provide and consume microfinance services. This is vital for the following reasons:

  1. We want to imagine, produce and evolve a domain model that provides a ubiquitous language that ties domain experts and technologists together. Our current domain model is expressed to some extent here Mifos Domain.
  2. We want to produce a product that can enable its users to deliver value to those that use their services. 
    1. If we can understand better the core problems MFIs/NGOs have, if we can understand how their staff provide their services day-to-day, we have a better chance of producing technology solutions that are useful

As we gain deeper insight into the field of microfinance, the problems our existing and prospective customers have, we can use this location to document our knowledge to date.

Means of communication

  1. IRC
  2. Skype
  3. Mailing lists (see Existing Mailing Lists and indication of topics for given list Mailing List Topics)

At present, we will probably use the users mailing list (unless it makes sense to setup a new mailing list, a customer-and-domain-knowledge list).

Approach to Knowledge Crunching

  1. Understanding the domain of microfinance better
  2. Understanding our customers better and how they deliver value to their customers.
  3. Understanding Grameen better and how its delivers value to our customers.
  4. Documenting internal and external sources of information

Understanding our Customers

  1. What do MFIs expect from an MIS solution (basic functionality that they could not live without)
  2. What would excite MFIs?
  3. Is there an existing functional gap analysis for existing/prospective customers and our software solution?
  4. How do we solicit feeback from users of our software at all levels of their organisation (data-entry up to board level management)
  5. Do we survey MFIs using our product to understand their key problems areas (not necessarily with the software)
  6. How does a customers existing MIS help improve the day-to-day activities of all staff members?

Uderstanding the Domain

  1. What is Microfinance?
  2. What credit lending models exist among existing and prospective customers?
  3. What savings models exist among existing and prospective customers?
  4. What are the major problem areas in the microfinance industry today?
    1. What are the proposed solutions to these?
  5. ???

Source of Information

There are probably lots of documents, articles, blogs, domain experts etc that exist internally within Grameen or externally. It might be useful to compile this together so people can access them and that these may provoke some discussions.

see Centers and Groups Thread: https://groups.google.com/group/mifosusers/browse_thread/thread/3da9e7bae10e8756?hl=en

MFIs

Q4: Why is it that some MFIs carry out their business operations without the use of centers and some do not?

It can depend on the organization’s target population.

Rural microfinance programs which require loan officers to travel to various rural (and usually informal) locations to conduct loan transactions. In my current organization, we hold meetings in local churches or schools, and groups attend the closest regional meeting even if they are technically from a different geographic region. In a previous organization, loan officers met with three rural groups per day in different locations, usually a group member’s home. In both cases, it didn’t make sense to have an actual center due to the geographic distribution of rural loan clients and the cost of maintaining a fixed center in a rural, low density location.

Microfinance Domain

Definition of Microfinance or Microcredit

MFI/NGO (Organisation)

MFIs/NGOs exist to provide financial services for clients

*client may want to use these services due to:

  • they are very poor and have no collateral and can't getting banking services from other sources
  • the MFI/NGO provide better deal than local loan sharks/banks
  • the MFI/NGO may also provide training/education/advice as part of package.
  • some MFIs/NGOs are poverty-focused and interested in improving the lives of their clients
  • some MFIs are profit-driven and interested in making a profit from provision of their services

MFI/NGOs range is size. They are classified as tiers e.g. tier-1, tier-2, tier-3, tier-4, tier-5 etc

An MFI/NGO can have one or more offices from which financial services are administrated and run. Whilst smaller MFIs can be more focused on a specific region/area, larger MFIs may have branches spanning both urban and rurual locations.

Office (Office Heirarchy)

Client

  • clients typically are very poor and have no or little collateral
  • some clients will have collateral (savings, other) and just require access to funding
  • for those with no collateral, credit or loans are typically provided using the concept of 'joint liability', several clients will form a group and accept 'joint liability' of the loan. The internal peer pressure ensures that clients meet their repayments
  • the provision of loans for clients/groups can be linked to collateral, e.g. if 'joint liability' loan no or little collateral may be required, if individual loan, a higher loan-to-collateral ratio maybe required
  • for clients/groups that exist in rurual locations, its typical for 'field officers' to travel to a 'center' (which is typically some building in village convenient for the members of center/group) where repayments/deposits and new groups/clients are handled
  • for clients/groups in urban locations, its typcial for them to walk into branch and carry out transactions

Center

Q1: What is a center?

Centers are physical locations where MF clients meet to conduct activities associated with the loan cycle, from the loan application process to regular meetings where *repayment* takes place.

The centers imply administrative capacity, like cashier services and record keeping, and are maintained as fixed, staffed offices. Multiple loan officers, managing multiple groups, are associated with a center.

Group

Q2: What is a group?

Groups consist of members that are clients of the MFI, and have some obligation to the other members in that group (like meeting attendance, or solidarity guarantee of loan repayment). I think of groups as the typical unit of microfinance. Groups are managed by a loan officer and depending on the organization and client type, may meet in a center or an informal location, in a meeting with other groups or independently.

Q3: What is the difference between a center and a group?

I would say members within a group are directly linked; for example, financially through loan guarantee. Centers are usually determined by geography and not by direct financial or operational obligation between members.

Exceptions

One MFI has the concept of Centers and clients, no groups. Really, its just a big group (30-40 members), but they call them Centers and also treat them like groups (IE, center responsibility, etc). This also creates interesting situations about how repayments are made (individually, as a whole center through bank deposits, etc.), how disbursals are made (individually by cash, individually by check, one large check, multiple check’s that span multiple clients, etc).

I only highlight this as something to keep in mind when working on new features, to follow what we know but to make sure you leave in some flexibility so we can try to accommodate different models when we run into them. This will help Mifos succeed in the long run.

Methodologies