Mobile phones in microfinance

Missed an excellent Twitter #MifiMon (Microfinance Monday) on July 20. Fortunately there’s a summary.

Microcredit began as character lending. People with no collateral banded in small groups and became jointly responsible for paying back loans. This is the village model of microcredit most familiar to the public.

But when is technology erroneously substituted for human contact, that face to face accountability which ensures timely loan repayment? And when is it used effectively to connect and empower clients? Credit SMS is about to launch a pilot program in which microloan officers receive weekly payments via SMS, rather than traveling to meet all borrowers.

Lively #MifiMon discussion continues on Facebook,  July 27, starting at 8:30 AM Central.

Also, I enjoyed Tapan Parikh’s lecture [iTunes movie] on appropriate technology for the developing world. In his experimental system, paper procedures for microcredit loans are augmented by mobile phones, which are used for data capture through keypad entry and camera image capture. (Mobile phone + wooden box to stabilize phone above paper = scanner!)

Mobile phones work in environments where people are only intermittently connected to the network and to electric power.

Key elements of Parikh’s system:

• Paper based, using forms with scan codes.
• Uses numeric input. Intermediaries read and write on behalf of the village borrowers, but the borrowers themselves are numerate. They can recognize that the number in “their” cell of the paper worksheet is accurately recorded.
• Provides audio feedback in the local language. This fosters group participation, and also reassures the borrower that their transaction was correctly recorded in the system.

There’s good video of the system at the 32 minute mark, and a summary starts at 42 minutes.