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Micro-finance gets a let-up from IT
Thursday, 12 September 2002, 19:30 IST
BANGALORE: Can micro-finance get the IT edge? Yes, believes Tapan Parikh, a 27-year-old researcher of Indian origin.
Micro-finance, a mechanism to get the poor to help themselves by collecting small sums of money and circulating it as a loan among themselves, will get a leg-up from IT if Parikh and his team have their way.
Their new software is being developed to make it easy for villagers to undertake complex financial transactions. The software is called 'hisaab', or accounts.
The initiative of Parikh, whose parents migrated to the U.S. from India, is an example of a trend of reverse brain drain being witnessed in the country. Persons of Indian origin with skills and talents are keen not just to understand their roots but also to work to improve things here.
Interestingly, what hisaab does is not just to simplify the accounting process but also enable people with low literacy skills to do the job.
"This software has a different kind of user-interface. It has been designed with low-literacy groups in mind," Parikh told Indo-Asian News Service. "Instead of names and text, it uses more numbers. It's obvious, but we often forget that it's easier for the poor to read numbers."
"Users could replace someone's name with a code number. Numbers are also easier to remember. It's also easier to type in a number."
The idea behind micro-finance is to ensure that money gets circulated in the village and that it gets productively used. This simple idea could help the poor, if given that vital IT-edge, feels Parikh.
How micro-credit works seems simple enough, at least in theory, according to Parekh.
"Each month a group of women meet and pool together sums of 
50 to 100 or some other predetermined figure. Money is put back into the common pool and over time it grows. This allows larger loans to be given. The main goal is to rotate the money as much as possible, so that it supports productive activity.
"So, one rupee (a little over two cents but not a pittance in a rural Indian setting) put in gets used not two or three times in a year, but revolves around 10-11 times if possible," explained Parikh.
"Due to their collective liability, the women show better repayment rates because if one person doesn't pay, everyone in the group is less likely to get a loan. Peer pressure being high, repayment rates are as high as 90-95 percent while individual repayments elsewhere could be 40 percent," argued Parikh.
"This is not just theory. It works in practice too. It depends on how strong and well managed the groups are. You need to build capacity in accounting, management and discipline," he said.
Such groups can link up with banks and non-governmental organizations (NGOs) working in the area of micro-finance. Nabard (National Bank for Agriculture and Rural Development) also offers loans to such self-help groups.
To make the software user-friendly for the poor, it's being made textually light, with a larger number of images and graphics. Currently a team of developers from Media Lab Asia and Human Factors International (HFI) are working on it.
HFI is a group headquartered in Fairfield, Iowa, whose slogan is: "We make software usable". It has its India office at Andheri in the Indian commercial capital of Mumbai.
A trial version of the software was demonstrated to potential users in Tamil Nadu. Feedback was positive. The demo version has been done in Flash, while actual development would be done in Java - meaning the software could be run on either the popular Windows platform, or the stable 'Free Software' GNU/Linux operating system.
"We want this to be an empowering tool for villagers and micro-finance groups. By being able to manage their own finances in a more sophisticated way, they will now be able to undertake more complex transactions," said Parikh.
For instance, withdrawals and deposits could be more arbitrary and need-based than would otherwise be possible in a more traditional form of accounting. "You don't have to save fixed sums of money just because it makes accounting easier. More complex financial transactions are possible without accounting hassles," said Parikh.
Bangladesh's Grameen Bank, though criticized by some, has one of the best-known models of micro-finance in the developing world. "Perhaps over time it has got centralized and institutionalized. But we want to ensure that power remains with the local people, and there is minimum external intervention," said Parikh.
Parikh said that his parents migrated from Baroda in Gujarat to the U.S. in 1972 and that he was born in Queens, New York, and grew up around New York City. After graduating in molecular modeling, he got his post-graduate degree in computer science and is currently a working for a doctorate in the University of Washington. He has been on an extended sabbatical since early 2000.
Source: IANS
50 to 100 or some other predetermined figure. Money is put back into the common pool and over time it grows. This allows larger loans to be given. The main goal is to rotate the money as much as possible, so that it supports productive activity.
"So, one rupee (a little over two cents but not a pittance in a rural Indian setting) put in gets used not two or three times in a year, but revolves around 10-11 times if possible," explained Parikh.
"Due to their collective liability, the women show better repayment rates because if one person doesn't pay, everyone in the group is less likely to get a loan. Peer pressure being high, repayment rates are as high as 90-95 percent while individual repayments elsewhere could be 40 percent," argued Parikh.
"This is not just theory. It works in practice too. It depends on how strong and well managed the groups are. You need to build capacity in accounting, management and discipline," he said.
Such groups can link up with banks and non-governmental organizations (NGOs) working in the area of micro-finance. Nabard (National Bank for Agriculture and Rural Development) also offers loans to such self-help groups.
To make the software user-friendly for the poor, it's being made textually light, with a larger number of images and graphics. Currently a team of developers from Media Lab Asia and Human Factors International (HFI) are working on it.
HFI is a group headquartered in Fairfield, Iowa, whose slogan is: "We make software usable". It has its India office at Andheri in the Indian commercial capital of Mumbai.
A trial version of the software was demonstrated to potential users in Tamil Nadu. Feedback was positive. The demo version has been done in Flash, while actual development would be done in Java - meaning the software could be run on either the popular Windows platform, or the stable 'Free Software' GNU/Linux operating system.
"We want this to be an empowering tool for villagers and micro-finance groups. By being able to manage their own finances in a more sophisticated way, they will now be able to undertake more complex transactions," said Parikh.
For instance, withdrawals and deposits could be more arbitrary and need-based than would otherwise be possible in a more traditional form of accounting. "You don't have to save fixed sums of money just because it makes accounting easier. More complex financial transactions are possible without accounting hassles," said Parikh.
Bangladesh's Grameen Bank, though criticized by some, has one of the best-known models of micro-finance in the developing world. "Perhaps over time it has got centralized and institutionalized. But we want to ensure that power remains with the local people, and there is minimum external intervention," said Parikh.
Parikh said that his parents migrated from Baroda in Gujarat to the U.S. in 1972 and that he was born in Queens, New York, and grew up around New York City. After graduating in molecular modeling, he got his post-graduate degree in computer science and is currently a working for a doctorate in the University of Washington. He has been on an extended sabbatical since early 2000.
Source: IANS