Microfinance Institution Grameen Koota Combats Roadblocks with Open Source
Open source proved to be the proverbial magic wand for Bengaluru-based microfinance institution, Grameen Koota, as the company went the FOSS way to avoid exorbitant licensing costs and the huge expense of maintaining infrastructure.
It’s not often that enterprises effectively manage to overcome the odds stacked against them and eventually succeed. But Bengaluru-headquartered Grameen Koota, a microfinance institution that provides financial services to economically weak clients, chose to tread the unexplored open source route to tackle issues like managing its basic operations and massive licensing costs. Today, Grameen Koota has grown to 161 branches and has a clientele of over half a million. The company was also ranked 19th in the first ever list of the top 50 microfinance institutions in the world by Forbes. Suresh K Krishna, managing director of Grameen Koota, talked about the company’s tryst with FOSS.
Making the right moves with FOSS
Since its inception in 1999 to the year 2007, the company was using specialised proprietary software called Portfolio Tracker for its Management Information System (MIS) that had been developed by Grameen Communications, Bangladesh. Grameen Koota received Rs 4.4 million initially as seed capital from the Grameen Trust that works in tandem with the Grameen Bank in Bangladesh. As the number of clients grew over a period of time, the system could not cope with maintaining the transaction data.
It was then that the company stumbled upon an open source financial software, MIFOS (Microfinance Open Source), an initiative by the Grameen Foundation, which is now widely used by the microfinance industry worldwide. The software helps microfinance institutions in client management, portfolio management, loan repayment tracking, fee and savings transactions, reporting and more. As Krishna explains, “Microfinance institutions handle large volumes of data as they cater to the needs of millions of small borrowers on a weekly basis. There was no off-the-shelf software to manage our portfolio. The ones available in the market either were offered by small software companies or there was the option of very expensive high-end banking software. The long term sustainability of the smaller firms was risky and we did not want to get locked in with a software company. The highend banking software was very expensive and we couldn’t afford it. Hence we began thinking about building software ourselves. But the risks were high and we might not have been able to build a state-of-art MIS system that could scale into the
future, as we are not a software company.”
“We found that MIFOS met all our needs. Now, we are not locked-in with any one software vendor and we do not have to pay any licence fees. The software is tailored to microfinance needs, built by specialists from across the world and has been built with advanced state-of-art platforms. So we jumped into supporting it, and became the first and currently the largest user of MIFOS,” says Krishna.
According to Krishna, the biggest reason for the migration was that Portfolio Tracker was based on a decentralised model and the database uploads would be done periodically. With MIFOS, the entire database is centralised and updates are available on a real-time basis. Moreover, MIFOS is also very cost effective as it is open source.
How does MIFOS work?
MIFOS is a Web-based management information system that streamlines the operations of microfinance institutions through its open source technology platform, providing real-time information and the capacity to scale. MIFOS helps microfinance institutions operate more efficiently and to drive a broader and deeper outreach to the poor. “MIFOS works just like any core banking software as far as the loan portfolio management is concerned. The workflows in MIFOS have been defined keeping our group lending processes in mind. All our customer data is aggregated in groups and centres,” says Krishna.
“The entire loan disbursement and collection process is managed on MIFOS. We receive real time information of collections and disbursements as soon as the data is entered and submitted by any user. Reports are also configured and shared with different users to track the disbursement, portfolio and recovery position, every day,” he adds.
Saving moolah with FOSS
Deployment of open source software has removed the need for any licensing costs incurred on the MIS, yet enables Grameen Koota to cope with its current requirements (which include a tremendous increase in data volumes), manage new upgrades and support new product innovations. In short, MIFOS is the backbone of the organisation. “The biggest advantages of the open source model are the licence cost savings, as well as the independence in managing the application and its capabilities. Along with MIFOS, we also use an open source data base. The open source platform also allows easy integration with third party applications, making this process easier and smoother. MIFOS is built and maintained by an open source community. This group of contributors is managed by the Community for Open Source Microfinance (COSM) from Seattle. There are many entities across the world, including software companies like Conflux Technologies, Thoughtworks, Sunguard, Soldevelho, etc, that provide support to us and also help us with modifications and enhancements. The open source community has a road map for upgrading MIFOS and periodically releases updates. Apart from this, our internal technology team manages the regular day-to-day support required for the smooth functioning of operations,” shares Krishna.
Tackling support issues with the help of the open source community
The IT managers of Grameen Koota interact with the open source community on a regular basis and seek help on various support issues. According to Krishna, “For most of the already deployed OSS, we have the internal technology team that manages support requirements. This team handles support issues to the greatest possible extent. In case it faces challenges in resolving things on its own, the team gets in touch with some of the supporting software companies like Conflux, Soldevelho, Sungard, etc, depending on the nature of the support required. We usually get a response from them within 24-48 hours.”
“There is a regular bi-monthly call with the entire development community, in which we participate. We discuss our problems, challenges and needs with them. We also test the pieces of code developed by them and provide them feedback. Apart from this, we have weekly interactions with a couple of community contributors who are working closely with our organisation in building the technology to support our future needs. There is a dedicated team providing us support to make this happen as part of our technology roadmap,” explains Krishna.
Challenges and the roadmap for the future
The biggest challenge for Grameen Koota is the uncertainty of future upgrades and sustained support for MIFOS. “We are continuing to work with the community on building sustained long term support structures around MIFOS. And if you talk about the road ahead, we would say that open source is a great way of bringing down the costs of IT and also being in control of the software. We believe it will continue to play an important role in shaping our technology and in our transformation into an increasingly technology-driven company,” says Krishna as he signs off.
Grameen Koota has made some very smart moves to earn high dividends in the industry it operates in—one of which was to migrate to the open source platform. It would be interesting to see how many more enterprises seize new opportunities with open source technology to back them, which could help them expand their business manifold.