CreditSMS: The Future of Microfinance (www.creditsms.org)

FIONA said on September 24, 2009

great idea.
what you need to do is seriously market it especially for the rural communities. my impression is that they would rather line up in a bank than use for instance the atm facilities

sandyb said on September 16, 2009

I like the idea of reducing transaction costs. However, what education and support will be provided to loan recipients - especially first timers - with regard to business and money management practices? Often the group payment meetings provide this opportunity, which can reduce default rates. I would like to hear your approach.

Mensah said on August 28, 2009

Great Idea, but would it work Africa?
Maybe only in some parts of Africa........

Hannbaykeeper said on August 20, 2009

Great idea..but we are talking about Africa where 85% of the population is rural and have no access to computers...The implementation of this project will be very difficult!
Cheers

thk2c said on August 5, 2009

Great project and great idea!!!!!!!!!

Michael J Starks said on July 30, 2009

Great idea! M-Pesa in Kenya is easy to use and affordable...and nearly every Kenyan, it seems, understands cell phone technology and sms! Will be interesting to see how/if this works in extremely rural communities and countries that don't support sms money transfers. Good luck.

CreditSMS said on July 26, 2009

Below is an article written for ProjectDiaspora.org (also available via the CreditSMS blog):

"Increasing Revenue and Impact through Technology"

Aaron Ewedafe wakes up every morning at least one hour before the sun rises. Donning his satchel full of client records and repayment schedules, he hails the nearest okada driver and races into the surrounding countryside to begin a long day of loan group meetings. The trip from headquarters in Oshogbo to the village of Ojudo and back can take all day. Aaron rarely makes it home before nightfall. Altogether, Aaron spends 112 hours and 5,000 naira a week to manage 350 microloan recipients. His profit is negligible.
Although Aaron is fictional, his story is not: representatives of microfinance institutions (MFIs) spend countless hours and energies to reach loan recipients to collect their repayments. In the process, they lose valuable time and money, constraining their potential for portfolio growth and forcing them to pass costs on to clients in the form of interest. In 2006 CGAP estimated the average interest rate charged by MFIs to be 28%, with standard rates varying from 25% to 100%.

Transportation costs constitute the single greatest contributor to high interest. Where potential clients are scattered and infrastructure is weak, the costs of issuing credit are either exorbitant or prohibitive. But what if loan officers could cut transportation costs in half? What if they could simply receive scheduled loan repayments via text message?

They can with CreditSMS.

CreditSMS was developed to create a standard and accessible platform for MFIs to integrate mobile money and airtime transfer systems into their business models. By converging text message management software and local money and airtime transfer systems like M-PESA, Mobile Money, or Me2U, CreditSMS allows loan officers to distribute and manage credit over broad areas from their computer.

The benefits of integrating CreditSMS into the MFI business model are twofold. First, loan officers like Aaron will save hundreds of hours a year in travel time, allowing them to focus their energies on building and managing a larger client portfolio. In turn, MFIs will earn higher net revenues. Second, MFIs will be able to lower interest rates commensurate with saved transportation costs. Lower interest rates will reduce barriers to entry and thus encourage higher participation from bottom of the pyramid (BOP) entrepreneurs. More simply, CreditSMS enables MFIs to pull higher revenue while simultaneously pushing down the cost of credit.

To learn more about CreditSMS and our upcoming pilot programs across Africa, please visit our website (www.creditsms.org) or contact our office at [email protected]. We are happy to accommodate international callers and are available via Skype (username: CreditSMS).

Ramona said on July 25, 2009

Great idea! Did you try already to get into contact with http://www.kiva.org? Sounds to me like your idea could be very helpful for them!

CreditSMS said on July 16, 2009

Thanks to an idea proposed by Prince at The Foundation for Democracy in Africa, we will give implementing MFIs the option to use one cell phone per loan group instead of one cell phone for every loan recipient. Loan group leaders can keep regularly-audited books on location and send group loan repayments in one lump sum. This would reduce both the cost of purchasing cell phones and additional airtime.

Also, we are setting up a system to distribute and track airtime in addition to money. Doing so will allow CreditSMS to be implemented in places that do not have a mobile-to-mobile money transfer system. Loaning airtime will require a setup comparable to the Village Phone Operators system used by both Grameen Bank and MTN.

CreditSMS said on July 16, 2009

The CreditSMS team is currently writing a Five-Year Scope Paper. Once finished, we will release the paper as an addendum to this post.

Feel free to contact us directly at [email protected] to offer comments, suggestions, challenges, etc. Thank you, and please vote for our idea!