Since microfinance is based on small loans with no formal information
and no real guarantees, technology plays a key role in lowering
transaction costs and increasing profitability. In this Brief, we
understand technology in a broad sense, not only focusing on
technological advances in equipment, but in the personnel, processes and
procedures that make use of these advances. This Brief provides an
overview of how the microfinance business is organised at an operational
level and the role that basic technologies have played in making it a
viable activity in Latin America. We also show practices that, when
coupled with an effective use of equipment, have been quite successful,
contributing to the development of microfinance itself, and making
microfinance a business of scale in the region, focusing on operations
related to decentralised decision making, long-term client relationships
and diversified products. Finally, we outline enabling factors that
facilitated the adaptation of technologies and effective operations and
the lessons learned in the process.
Technology needs to be understood not only as the use of IT devices, but
as the right combination of human resource abilities and adaptating IT
to their needs. Capital investments in technology are essential to
reduce risks, but the Latin American experience shows that
organisational innovations in personnel management must be
simultaneously carried out in order to boost productivity.
Latin America shows how both infrastructure development and regulation
play an important role in technological development, making it possible
to use the newest IT, promoting healthy competition and setting the
minimum requirements for operations.
Determination of a technology's specific objectives is essential in
adoption of decisions. An evaluation of benefits and costs of a
particular technological solution is crucial for optimal results.
Jaramillo, M. ELLA Policy Brief: Latin American Innovations in Microfinance Technology. ELLA, Practical Action Consulting, Lima, Peru (2013) 8 pp.