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Mifos: Ending Poverty One Line of Code at a Time

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Michael Vorburger
Michael Vorburger

Presentation about Mifos OSS Microfinance MIS, given at the Open World Forum's Humanitarian Open Source track on September 23, 2011 in Paris.

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Mifos: Ending Poverty One Line of Code at a TimeHumanitarian FOSS trackat?the Open World ForumParis; September 23rd, 2011Michael Vorburger, for Mifos Community
$ ls ~/presentation/About Microfinance, a short introduction
Impressions – a few photos from an India visit
About Mifos (briefly, more on request!)2Mifos: Ending Poverty One Line of Code at a Time
$ whoamiVolunteer for Mifos since mid 2009, time permitting(java.net / mifosforge.jira.com & Wiki migrations; Workspace 2.0; Executable WAR; conf’s.)
Day job as Development Manager for Eclipse-based design time modeling workbenches at TEMENOSThe Banking Software Company. GIVING THIS PRESENTATION IN PRIVATE CAPACITYON A DAY OFF.
Lives & works in Lausanne, Switzerland.
http://vorburger.ch ● mike@vorburger.ch ● @vorburger3Mifos: Ending Poverty One Line of Code at a Time
$ file /poverty – Hello WorldOf total world population of 6.8 billion:880 million survive on less than USD 1/day (13%)
1.4 billion survive on less than USD 1.25/day (20%)
2.6 billion survive on less than USD 2/day (40%)International “Poverty Line” = USD 1.25 / day?Millions children die of hunger every year.Source: World Bank Development Indicators 2008http://en.wikipedia.org/wiki/Poverty#Absolute_povertyhttp://en.wikipedia.org/wiki/Theories_of_poverty#Poverty_as_restriction_of_opportunities4Mifos: Ending Poverty One Line of Code at a Time
$ man microfinanceMicrofinance, a proven poverty reduction strategy, provides financial services to very low-income “unbanked” clients, who lack access to “traditional” banking services (only “loan sharks”), to “help them to help themselves”, to:
Smooth irregular income flows
Provide cushions for emergencies
Expand economic activities
Prof. Muhammad Yunus(Nobel Peace Price 2006) founded the Grameen Bank in the late 1970s in Bangladesh, and scaled profitable microloans to millions of people. Quote: “Our grandchildren will go to museums to see what poverty was like.” (http://www.grameen-info.org/index.php?option=com_content&task=view&id=338&Itemid=375)5Mifos: Ending Poverty One Line of Code at a Time
$ man microfinanceMicrofinance Institutions (MFI) lend ~ $100-ish amounts (e.g. 12’000 INR), repaid / collected in (bi)weekly over 12/18/24 months, so in 36/50-100 installments.
Microcredit customers are often women only (by MFI choice); money used for things such as bangles shop, family painting business, etc.
Loan Officers go out to meet clients, typically (bi)weekly to collect repayments. Customers don’t come to branch offices to deposit or withdraw. LOs bring the collected money to BOs (and, in some cases, stay and sleep there!)
Typically ~ 98% loan repayment (recovery) rate; e.g. Nirantara in Karnataka/India 99.6% (of 7000 clients with 20’000 Loans)6Mifos: Ending Poverty One Line of Code at a Time
$ man microfinanceSolidarity Lending (Joint Liability model) is common, creating a bond among a Group of clients. - Centers are sets of Groups, managed by a few LOs in a local Branch, org. by Areas. Groups rural, meetings at e.g. group leader home, or a temple or community site; branches few rooms in small towns.
Products offered depend on country and respective regulations: In e.g. India today often only Loans, rarely Savings Deposit, but in e.g. the Philippines Savings accounts is more common. Growing trend towards broader financial services, incl.microinsurance (often life, some health), pensions, etc.
Typically tied to an “educational” programs: Week long Compulsory Group Training (CGT) introduction loaning; also “stories” read out at each group meeting, e.g. reg. infant hygiene.7Mifos: Ending Poverty One Line of Code at a Time
$ man microfinanceMFIs vary significantly in scale and reach: from small NGOs (100s of clients) to mid-size non-profits (tens or hundreds of thousands; e.g. GrameenKoota [GK] in India using Mifos on >500’000 Clients), to for-profits (e.g. publicly listed [non-Mifos] SKS Microfinance in India).
Interest rates in the 20–30% range.?MFIs typically borrow from traditional banks at around 8% - 12% interest (India); adding on top of it their operating costs, which are higher due to shorter collection cycles and almost “doorstep service”.
http://en.wikipedia.org/wiki/Flat_rate_%28finance%29
http://www.mftransparency.org/
Challenges incl. (e.g. in India) regulatory uncertainty (Maligam report), or overheating with “too many loans” by competing MFIs and increasing defaulting problems (compounded by lack of Gov. ID)8Mifos: Ending Poverty One Line of Code at a Time

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Mifos: Ending Poverty One Line of Code at a Time

Editor's Notes

  1. Speak to why an open source platform and why it matters for MFIThey need access to local support, need to be able to localizeNeed to flexibly support multiple productsNeed to connect to credit bureaus, national ID systemsNeed to integrate with mobile banking, atm networks, etc.Need to report back to funders, regulators, etc.