Management Information System: Issues and challenges

Management Information System: Issues and challenges 

Source: http://www.sa-dhan.net/adls/microfinance/mis/misissueschallenges.pdf

 

1.0 Introduction

Management Information System (MIS) can be defined ascollecting and processing of raw data into useful information and its dissemination to the user in the required format. It consists of information, which impacts managements to feel the pulse of the organization and take decisions accordingly. In fact a full MIS consistsof all the systems that the institution uses too generate the information that guide management’s decisions andactions. 

Microfinance Institutions (MFI’S), over the past fewyears, have been paying increasing attention to information systems. They are increasingly realizing that information lies at the very heart of microfinance. The practitioners as well as donors have become aware of the vital need for formal and informal financialinstitutions to manage large amounts of data. As a result, there is a massive drive to improve the effective

understanding and use of these data. Needless to say that it is no possible to collect and collate large volumesof data without adopting new technology. As a result the MFIs are watching the developments in informationtechnology very closely. 

1.1 Problem in Developing MIS

Despite the availability of technology today there is a problem in developing a good and problem free MIS software for the MFIs. The diverse nature of microfinance creates an intriguing complexity for softwareapplication development. Some of the complexities in developing a single or a small number of software to meet the needs of the MFIs are discussed below.

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Many Institutional Models: 

The organizational forms is a function of the specific of social , political, economics , regulatory and legal environments throughout the world. There are a variety of organizational forms that are assumed by the MFIs for carrying on their work. The MFIs can be in the form of credit union, cooperatives, Non governmental Organizations (NGO) and even banks. All have their own varied type of requirement for MIS and its automation.

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Different Lending Methodologies:

MFIs have vastly different lending methodologies across the globe and even within the same country. Some MFIs follow individual lending some follow village banking methodology and yet others may be following solidarity group lending . In Indian for example some MFIs

follow the e Grameen Model as per the example of the Grameen Bank, Bangladesh while other follow Self Help Group Model as propagated by the institutions like National Bank for Agriculture and Rural development (NABARD)

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Methodology on Interest Payment: 

The practices for calculating interest and the periodicity for its payment vary according to the product and organisation.

These variations can occur even within the same organisation depending on the product and the area of operation.

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Other varied requirements: 

Tthere are variations in terms of the currencies languages and reporting requirements of the MFIs.

1.2 Inference

All these wide variations complicate the development of software that can be picked off the shelf and implemented in most of the MFIs. It creates great burden on software companies creating quality application that is affordable and meets all the requirements of the MFIs. In fact this is the major problem faced by those responsible for providing automation in the industry. The need of technology cannot be overstated but the complexity and diversity forces one to take a hand look at the following:

• What is the role of MIS in improving the sustainability of MFIs?
• What are the basic components of sound microfinance packages for MFIs?
• Why are there so few solutions available?
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2.0 Role of MIS

2.1 Sustainability

Let us look at what does the MIS do for the sustainability of MFIs? The answer is Nothing., MIS will not do much for the sustainability of microfinance if institutions ignore good business practices. The following are some of the widely stipulated best business practices :

• Focus on profitability
• ƒQuality loans
• ƒProvision for loan loss reserve
• ƒCommunity accepted and appropriate accounting procedures
• ƒGathering and reporting of accurate and timely information.

 

These good business practices should be in place before any MFI even thinks about MIS software. Without quality business practices. MIS will do little if anything to sustain these institutions. In fact, MIS can complicable the situation by creating a financial drain and propagating but allow you to do bad business more efficiently. 

If, however, the MFIs follow good business practices, MIS will go a long way in sustaining these institutions. Some examples of what MIS can do for good MFIs are:

• Increased productivity and efficiency
• ƒLower transaction cost per loan
• ƒGreater outreach in rural and urban areas
• ƒFaster delivery of more products and services
• ƒMore accurate and timely reporting
• ƒBetter decision making

2.2 Uses of MIS

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Since it can be programmed to follow business rules uniformly, MIS reinforces discipline in accounting

and portfolio tracking.

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Computers can link all data pertaining to a customer or customer group hence MIS can provide a

consolidated view of each customer or group.

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MIS allow for single entry of data that can then be used by many people. Data once entered can be accessed, manipulated and used by all users. Thus 

• MIS reduces duplication of effort and increases speed of work.
• ƒMIS integrates information and process.
• ƒMIS supports workflow and procedures for users.
• ƒMIS can be ported to remote areas via laptop or palm technology.
• ƒMIS application can be customized or enhanced to support new products and institutional growth. 

3.0 Components of a Good MIS Solution 

 The catch is that most MIS solutions provide only some of the functionality and capabilities needed for sustainability and outreach.

This can be better understood by knowing the components of a good MIS solution. They can be organized under the following categories:

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• Functionally and Expandability
• Flexibility
• ƒUsability
• ƒReporting
• Standards and Compliance
• ƒTechnical Specification and Correctness