13 July 2005

The Web

HP releases open source microfinance banking solution

In partnership with a consortium of seven other public and private organizations, HP announced the global release of an open source microfinance solution that is designed to change the way millions of people in the developing world access credit.
The Remote Transaction System (RTS) – a cost-effective means of tracking loan information even in rural and remote areas with little or no local infrastructure – is the culmination of a two-year collaboration by the group of thought leaders in microfinance, technology and business, and a six-month on-the-ground pilot program in Uganda.
The solution is being made available to developers – with no license fee – through a source code license or as user license executable code. This enables all players in the industry, especially smaller microlenders without the resources to obtain sophisticated software, to benefit from the core technology that was developed and tested by the consortium.
The RTS is composed of a handheld point-of-sale hardware device, a specialized software application, smart cards and an RTS backend system. All transactions captured on the point-of-sale terminal are uploaded to an RTS server, a basic PC. The data then flows from the server to the information management systems of the appropriate microfinance provider.
“True social change will occur when we are reaching hundreds of millions of low-income people with a range of financial services that enable them to build tiny businesses, send their children to school and plan for their future,” said Maria Otero, president and chief executive officer of ACCION International, a member of the consortium. “Mobilizing technology to reach that goal is essential and early results from the HP consortium are very promising.”
Convened by HP, the public-private consortium, known as the Microdevelopment Finance Team, includes ACCION International, Bizcredit, echange LLC, FINCA International, Freedom from Hunger, the Grameen Foundation USA, HP and PRIDE AFRICA. Consortium members have invested more than $2.3 million in grants, direct funding and in-kind support to the initiative. The U.S. Agency for International Development provided an additional $1.2 million in program funding.
“Neither HP nor any of the partner organizations could have accomplished this work alone,” said Janine Firpo, director, Global Multisector Initiatives, HP. “It took the participation of all the members of the consortium to be successful.”
In Uganda, the RTS solution was tested with several different business models and lending methodologies over the course of the pilot program, two of which demonstrated they could return positive value to the microfinance institutions and their clients. A key learning from the pilot was that re-engineering of the entire loan process was as important, if not more important, than technology innovation itself. The maximum benefit of the solution comes when a microfinance institution steps back and reengineers the whole lending process to take advantage of the opportunities – and possibilities – that technology offers.
“The RTS served as a catalyst for our Ugandan affiliate, FOCCAS, to begin a much needed business re-engineering process,” said Beth Porter, vice president, Program Services, Freedom from Hunger. “Even if they had chosen not to proceed with the RTS, what has already been achieved is a remarkable success.”
Also announced today was the incorporation of Sevak Solutions, a new not-for-profit 501(c)3 organization that will provide an open source version of the solution to the microfinance industry. The Microdevelopment Finance Team agreed that passing on key learnings and proven technology to a new group of strategic players would best serve the interests of the microfinance industry and move the effort closer to fulfilling its original vision.
“Sevak Solutions will lead the vision of the microfinance consortium into the future to achieve full breakthrough and impact in scale,” said Laura Frederick, president of consortium member echange, LLC, and who will serve as the acting chief executive officer of Sevak Solutions. “As before, we will continue to work in a collaborative manner to achieve results.”
The announcement was made at the 2005 Financial Sector Development Conference hosted by KfW in Frankfurt, Germany. Titled “New Partnerships for Innovation in Microfinance,” the conference aims to advance partnerships and innovations to grow microfinance delivery and contribute to the UN Millennium Development Goals.

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