Case Study: Adoption of Mifos as a platform for mobile money at Kenya Entrepreneurship Empowerment Foundation (KEEF)

Transcription

1 Empowerig people. Chagig lives. Iovatig for the world s poor. Case Study: Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

2 About Gramee Foudatio Gramee Foudatio empowers the world s poorest people, especially wome, to escape poverty through access to fiacial services, iformatio, ad viable busiess opportuities. Fouded i 1997 by a group of frieds who were ispired by the work of Muhammad Yuus ad the Gramee Bak i Bagladesh, our iovatios, programs, ad resources have helped millios of people i Africa, Asia, the Americas, ad Middle East North Africa begi their jourey out of poverty. With microfiace ad techology as our foudatio, we coect people ad local istitutios across the globe that share our visio of shatterig the barriers for the oe billio people tryig to live o less tha a dollar a day. About The MasterCard Foudatio The MasterCard Foudatio advaces microfiace ad youth learig to promote fiacial iclusio ad prosperity. Through collaboratio with committed parters i 42 coutries, The MasterCard Foudatio is helpig people livig i poverty to access opportuities to lear ad prosper. A idepedet, private foudatio based i Toroto, Caada, The MasterCard Foudatio was established through the geerosity of MasterCard Worldwide at the time of the compay s iitial public offerig i For more iformatio, please visit Ackowledgemets This report, udertake through a partership betwee The MasterCard Foudatio ad Gramee Foudatio, reflects outcomes of a learig iitiative aimed at presetig the cost beefits realized by deployig Mifos at four microfiace istitutios. It was writte by Marie Valdez, with support from Joe McNulty, Nicole Ide, ad Brya Barett. We are grateful for the iput ad commets from the Keya Etrepreeurship Empowermet Foudatio (KEEF). Gramee Foudatio, USA. All rights reserved. 3 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

3 CONTENTS Executive Summary...2 Itroductio...4 Istitutio Profile...6 Mifos at KEEF...7 Iitial Deploymet...7 Cosortium ad Mobile Itegratio...7 Operatioal Beefits to Cliets ad to KEEF...14 Outcomes...16 Layig the Foudatio...16 Loa Officer Efficiecy...16 Improved Security ad Reduced Fraud...18 Icreased Cliet Satisfactio...18 Key Observatios ad Coclusio...19 Appedices A: Products...21 B: Group Meetig Process, Before ad After Mifos ad M-PESA Itegratio...22 C: Mobile Moey Cliet Survey Form ad Istructios

4 EXECUTIVE SUMMARY I 2007, the Keya Etrepreeurship Empowermet Foudatio (KEEF) implemeted Mifos with a local techical service provider as a commuity deploymet, without the Gramee Foudatio s direct ivolvemet. Although KEEF used Mifos for the ext three years, the implemetatio was ot very successful ad the istitutio was uable to properly maage its operatios with the platform. I 2010, KEEF became a Mifos cosortium member. As a beefit i that cosortium, the Gramee Foudatio s Mifos team provided KEEF with a stadard package of techical ad busiess cosultig services to help the istitutio optimize its curret busiess processes ad develop a IT strategy for the loger term. At the same time, KEEF had egaged the Gramee Foudatio s Mobile Fiacial Services team to help itegrate Safaricom s M-PESA mobile paymets service ito KEEF s operatios. The two efforts were merged ito a sigle project to develop ad pilot a mobile moey system as part of a larger IT strategy ad process improvemet. The cosortium ad mobile moey project resulted i may lessos leared for both KEEF ad the Gramee Foudatio. Of these lessos, the three most importat were the followig: The Gramee Foudatio s evolvig opesource hypothesis has bee reiforced. Mifos, as a ope source system, ca be dowloaded ad implemeted by a microfiace istitutio (MFI) with miimal cost. I order to succeed, system deploymets must be coupled with optimizatio of busiess processes ad the staffig eeded to support ad use the system effectively. A cloud-based MIS greatly reduces the IT burde o a MFI, givig the istitutio access to a level of techical service ad support that it would otherwise be uable to afford. Proper implemetatio of Mifos ca result i cosiderable beefits. Mobile moey, if implemeted properly, is a viable techology for servig microfiace cliets i Keya. M-PESA, a widely used mobile moey service i Keya, is a acceptable form of delivery for microfiace cliets as log as the cliet beefits outweigh the costs of usig the service. Oce KEEF was properly traied to use the fuctios of Mifos, the time eeded for processig ad report geeratio was reduced, which helped icrease the efficiecy of loa officers. Mobile moey brigs added efficiecies to MFIs by elimiatig tasks related to cash hadlig, such as cash coutig ad recordig, for cliets at group meetigs ad at the head office. The efficiecies are 2 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

5 KEEF loa officers work closely with their cliets to support their busiess efforts. maximized whe the mobile moey trasactios are automatically uploaded ito the MFI s maagemet iformatio system (MIS). Mobile moey ca also help reduce fraud ad miimize the security risks associated with hadlig cash from both the cliet s ad the istitutio s perspective. This case study clearly illustrates two basic truths about implemetig techology projects. First, success requires careful cosideratio of the people ad processes as well as the techology. Techology ca oly yield strategic, fiacial, ad social beefits whe cosidered i the full cotext of a orgaizatio ad how it works. Secod, the fudametals of busiess operatios must be i place before automatio ad iovatio ca succeed. A MFI must already have efficiet ad effective processes before it ca implemet automated systems, ad likewise it must have strog competece ad processes for its basic systems such as MIS before itroducig iovatios, such as Mobile Moey. 3

6 INTRODUCTION KEEF was established i 2004 with the aim of empowerig local commuities by supportig iitiatives that promote wome ad youth empowermet through micro credit by establishig sustaiable micro eterprises i Keya. This was part of a larger ambitio to be a dyamic sustaiable ad viable istitutio of the future where local commuities have access to fiacial services that empower them ecoomically ad socially. 1 KEEF was fouded by Daiel Kimai, who cotiues to lead the istitutio today. From early o, the istitutio has experieced steady ad at times rapid growth. Beig a small istitutio with limited resources, ad kowig it would eed better iformatio systems to maage its growth, KEEF chose to adopt Mifos. iclusio ad joied it i As part of the cosortium program, the Mifos team provided KEEF with a stadard package of techical ad busiess cosultig services, desiged to help MFIs improve their busiess processes ad develop IT strategies for the loger term. At the same time, KEEF was workig with the Gramee Foudatio s Mobile Fiacial Services team to support its adoptio of Safaricom s M-PESA mobile paymets service ad itegrate that ito its operatios. The two efforts were merged ito a sigle project, to develop ad pilot a mobile moey implemetatio as part of a larger IT strategy ad process improvemet program. The history of iformatio techology at KEEF ca be divided ito four phases, illustrated below. First phase: KEEF uses o techology at all. All records are kept o paper. Mifos was developed as a ope-source software project for MFIs worldwide. It was desiged so that MFIs would be able to easily dowload the software ad, with techical assistace from local parters, istall, cofigure, ad ru the software. KEEF was amog the first istitutios to adopt it. With grat assistace from Hivos 2, i 2007 KEEF hired a local techology service provider to assist. Through the ope-source commuity, the Mifos team became acquaited with KEEF ad leared about its history of usig Mifos. Whe the team embarked o its cosortium program, this MFI was a atural cadidate for Secod phase: Mifos is deployed with the assistace of a local parter but without direct ivolvemet of the Mifos team or ay process improvemet or overall IT strategy. Third phase: The Gramee Foudatio team is directly egaged; IT strategy ad process improvemets are developed ad implemeted at KEEF. Fourth phase: Mobile paymets are eabled ad the Mifos team takes over hostig of the MIS for KEEF Maual Record Keepig 2010 FEBRUARY Mifos Cosortium 2011 FEBRUARY Mifos Cloud with Mifos-M-Pesa Bridge 2007 Mifos Commuity 2010 SEPTEMBER M-PESA 1 KEEF (program brochure), retrieved from o 12/15/ Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

7 These opportuities must be viewed with cautio, however. For example, while it was possible to documet the situatio at KEEF, icludig how Mifos was performig there, whe the Mifos team first bega assistig KEEF, little is kow about the situatio at KEEF whe it first adopted Mifos several years earlier. Lackig baselie data, it was ot possible to measure the improvemets i KEEF s operatios that were directly caused by the iitial Mifos implemetatio. Nevertheless, the case preseted i this report does lay out the projected results based o the available data. Likewise, because mobile moey itegratio, busiess process optimizatio, ad the Mifos upgrade all developed at the same time, it will be difficult to separate out what cotributios each of these chages made to KEEF s success. KEEF was amog the first microfiace istitutios to idepedetly dowload ad adopt Mifos. As will be clear throughout this case study, evaluatig the impact of Mifos at KEEF presets both opportuities ad challeges. Because KEEF was oe of the first MFIs to complete a full deploymet of Mifos without the direct ivolvemet of the Mifos team, it represets a key test of the origial hypothesis. That hypothesis was that local istitutios could dowload ad deploy the applicatio ad move forward o their ow, avoidig the usual expeses of commercial software. At the same time, because KEEF worked with a local parter, it represets a test of the further hypothesis that local techical support would be required ad would also be available. The fact that Mifos was iitially deployed there without the beefit of improvemets i busiess process ad staffig, which were later itroduced, allows us to evaluate the cotributio that a focus o people, process, ad techology makes to the software istallatio. Ad fially, KEEF s adoptio ad itegratio of mobile moey provides a iitial opportuity to examie the added value that this capability brigs. As is true for may orgaizatios, before a automated system was itroduced the reliability ad quality of KEEF s data was poor. Complicatig this challege, KEEF s curret busiess model icludes a mix of iterest icome, service fees, ad a complex divided-distributio scheme. This mixed approach is much more complex tha the traditioal fiace methodology, which relies heavily o direct iterest from loas. This complexity of ledig methodology ad the absece of reliable historical fiacial ad operatioal data made it early impossible to establish a baselie of operatios from which to measure the beefits of each techology as it was itroduced. At the time of this writig, KEEF was also busy remakig its busiess projectios ad forecasts to reflect recetly plaed ehacemets ad chages to its methodology, iterest rates, ad product mix. As a result of all these challeges ad ucertaities, we are ot able to preset a fiacial retur-o-ivestmet (ROI) aalysis. Noetheless, reviewig the experiece at KEEF provides us with a rich reservoir from which to draw importat lessos. We will therefore preset the challeges ad beefits we have see through the busiess process optimizatio, Mifos upgrade, ad the pilot of the M-PESA itegratio. 5

8 INSTITUTION PROFILE Headquartered i the tow of Kiambu, approximately 20 kilometers orth of Nairobi, KEEF serves cliets i three major areas surroudig the tows of Kiambu, Limuru, ad Thika. It has two programs: the Wome Etrepreeurship Empowermet Program ad the Youth Village Developmet Iitiative. Together these programs work to empower wome ad youth i rural areas with limited access to fiacial services. More tha 80 percet of KEEF s cliets live i rural areas. The istitutio leds to idividuals i solidarity groups, ad as of Jue 2010 it had a total loa portfolio of 33,321,467 KES (416,518 3 USD), 6,014 cliets, ad 4,841 active borrowers. It has bee growig at a rapid rate: durig the past three years KEEF has tripled its umber of cliets each year. Much of KEEF s success stems from its ledig model ad product offerigs. Its cliets belog to solidarity groups that are modeled o traditioal savigs clubs, kow as merry go rouds i Keya. I those clubs, all the members cotribute moey each moth, ad i rotatio each moth oe member takes all the moey i the pot. KEEF has modified that savigs club approach with the additio of credit. Istead of distributig all the moey collected each moth to oe perso, the mothly pot serves as a revolvig loa fud. At mothly group meetigs, all members are required to cotribute a savigs paymet to the commo pool, as well as ay repaymets of outstadig loas. Whe ew groups are formed, or a ew member jois a group, they must make regular cotributios to accumulate savigs before they are etitled to take a loa. The moey thus collected is the immediately redistributed to the members as ew loas. The capital to fud the loas thus comes, i the first istace, from the borrowers themselves, ad it icreases steadily over time as savigs cotributios accumulate. Wheever the amout of moey available at a group meetig is isufficiet to meet the demad for loas, KEEF leds additioal fuds to the group for o-ledig. This additioal fud is called Office Debt. Through loa iterest, savigs cotributios, ad Office Debt, the revolvig fud grows throughout the year. At the ed of the year, group members receive a divided, essetially a retur of some of their savigs, based o a formula that takes ito accout the amout of iterest they have paid over the course of the year. I exchage for maagig the accouts of the solidarity group ad providig supplemetal fudig, KEEF receives a mothly service fee, which depeds o the size of the revolvig fud, as well as a year-ed divided that is tied to the amout of moey KEEF has provided to the group revolvig fud. Oe difficulty KEEF faced was low efficiecy amog loa officers. Group meetigs ted to take a log time because of the amout of time required by each idividual trasactio. Although KEEF cotiues to serve all geographic areas from a sigle office ad groups are widely dispersed, loa officers are required to sped sigificat time travelig by public trasport amog groups, which further limits their efficiecy. A secod challege facig KEEF was a security cocer that the merry-go-roud methodology created for both cliets ad loa officers. Sice all loa trasactios are i cash, the pot o the table at a group meetig ca cotai a very large amout of moey, posig a sigificat security risk. Both of these challeges have icreased as KEEF has grow. KEEF first tured to Mifos largely to address these types of challeges maitaiig ad usig reliable operatioal ad fiacial data, icreasig loa officer efficiecy, providig the techical foudatio to grow the orgaizatio, ad icreasig safety ad security for cliets ad loa officers. 3 The exchage rate used i this report is 1 USD = 80 KES. 6 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

9 MIFOS AT KEEF Iitial Deploymet Early i its history, KEEF adopted Mifos ad partered with a Keya techical service provider. The Mifos team i Seattle had little ivolvemet i the deploymet, although it was aware that the deploymet was takig place ad occasioally aswered questios from the Keya techical service provider as part of its commuity support program. This early period of KEEF s experiece with Mifos came log before ay direct egagemet by the Mifos team, ad KEEF had ot kept reliable data about ay beefits it might have gaied from Mifos durig that time. But, as will be apparet further o, whatever value KEEF got from their iitial deploymet of Mifos was far short of what was eeded or possible. Cosortium ad Mobile Itegratio The secod phase of KEEF s experiece with Mifos begis i February 2010, whe KEEF joied the cosortium program. This phase ivolved four related but distict activities: A review of busiess processes ad developmet of a comprehesive IT strategy, followed by implemetatio of recommeded chages (February Jue 2010) Ivestigatio ad repair of Mifos istallatio ad cofiguratio problems (March April 2010) Chage maagemet, busiess process reegieerig, ad developmet ad pilot of M-PESA (March 2010 March 2011), ad Itegratio of M-PESA mobile paymets with Mifos (July 2010 March 2011). evaluated the curret istallatio of Mifos, ad reviewed the literature o best practices for IT maagemet as they apply to microfiace istitutios. The team the did a gap aalysis to idetify where KEEF s curret ifrastructure, orgaizatio, or busiess process failed to meet the idetified eeds of the orgaizatio, give its geeral goals. The KEEF staff the idetified six detailed busiess goals for the ear ad medium term that would allow the istitutio to keep growig ad meet its istitutioal missio, as follows: 1. Refie products ad pricig structure to build o competitive advatages ad meet cliet eeds. 2. Improve stadardizatio, compliace, documetatio, ad use of techology to esure efficiet operatios. 3. Expad the etwork to seve braches ad sigificatly improve staff productivity. 4. Develop a orgaizatioal structure, staff roles, ad culture to esure a motivated, high performig, competet, well traied staff with ecessary skills ad capabilities. 5. Raise the fuds ecessary to sustai growth, ad build a total loa portfolio of 330 millio KES (4.125 millio USD) by the ed of Positio the orgaizatio to be well respected withi the idustry ad by cliets. To address these goals, the Mifos team proposed a series of IT iitiatives to be completed over three years. I fact, early all of the proposed IT iitiatives were implemeted betwee February 2010 ad March The iitiatives accomplished the followig: IT Strategy I late February 2010, Mifos team members met with KEEF staff over several weeks to idetify the istitutio s primary busiess goals ad documet ad evaluate its critical busiess processes. The team iterviewed all key staff, visited several group meetigs, examied ad The MIS ifrastructure was set up ad upgraded. A LAN was established ad a data etry fuctio was itroduced. The positio of MIS officer was itroduced, ad later it was replaced by a full-time IT maager; both were fully traied. KEEF s was set up to be hosted i Google Apps. 7

10 The Mifos cofiguratio was corrected ad upgraded, ad later it was moved to Mifos Cloud. (KEEF is curretly ruig the latest versio, Mifos 2.1.) The accoutig system, Sage Pastel, which had bee purchased previously, was cofigured ad is ow beig used o a daily basis. M-PESA was itegrated with Mifos to automate the trasfer of trasactios betwee the two systems. Busiess process maagemet (BPM) was coducted for a full year, startig with the core busiess operatios ad the itegratig M-PESA ad Mifos with KEEF s operatios. The assigmet of a MIS officer, which evetually led to the hirig of the IT maager, will esure that the basic MIS ifrastructure LAN, hardware, ad systems such as Mifos ad Pastel meets the stadard for reliable use. More importatly, the above chages allowed for the cotiuous use ad ehacemet of Mifos ad set Mifos up as the platform for further growth ad iovatio at KEEF, such as the implemetatio of Mobile Moey. Details regardig how Mifos was upgraded ad moved to Mifos Cloud, how M-PESA was itegrated ad implemeted, ad how busiess process maagemet was improved are icluded below. The MIS ifrastructure ad set-up aloe has brought beefits to KEEF. Establishig a secure ad reliable LAN ad implemetig ati-virus software put ito place basic ecessities that will safeguard KEEF s electroic data. I the past, KEEF had lost historical records due to a virus attack. The use of GoogleApps to host KEEF s improved KEEF s iteratioal commuicatio ad gives KEEF a professioal ad reliable domai ecessary for their image as a well-respected orgaizatio. Before a data ecoder was assiged, KEEF loa officers ofte stayed at the office util 8 pm to eter their data ito Mifos. Because loa officers sped the majority of their day travelig to ad coductig group meetigs, they were oly free to retur to the office ad key data later i the afteroo, whe as may as ie loa officers might be waitig for their turs at a sigle computer. Sice assigig ad traiig a dedicated data ecoder, the loa officers have bee able to go home from work at 6 pm. Busiess Process Maagemet The busiess process maagemet (BPM) iitiative at KEEF started with a two-day workshop to trai KEEF employees i the use of the Gramee Foudatio s simple busiess process maagemet tools. After the workshop, KEEF formed a BPM team to execute the process maagemet. As is ofte recommeded, the busiess processes that are worth improvig first are those that ca offer quick wis to gai mometum ad those that ca close the biggest gaps betwee the curret state ad the busiess s top goals. For example, suppose a busiess goal is to reach 36,000 cliets by 2012, ad curretly the orgaizatio has 10,000 cliets. If historically the umber of cliets recruited per moth is too low to reach that goal, the busiess should examie cliet recruitmet ad the related processes that might be impedig this goal. For example, it should review how loa officers recruit cliets ad ay processes that How Does M-PESA Work? M-PESA (M for mobile ad Pesa for moey i Swahili) is a service offered by Safaricom, Keya s primary telecommuicatios provider. It allows mobile phoe users to trasfer moey via SMS, eve if they do ot have a bak accout. Located i cities, markets ad villages all across Keya, M-PESA agets provide a place where M-PESA customers ca deposit cash ito their M-PESA accout. Oce the accout is loaded, the user ca the sed moey via SMS to ay other M-PESA customer i the system. The recipiet receives a SMS otifyig them that they have received a trasfer. To retrieve the cash, they simply visit ay other M-PESA aget ad ca cash out. 8 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

11 cosume substatial amouts of loa officer time, such as group meetigs, data recordig, ad report writig. The first roud of the BPM iitiative led to four major chages at KEEF, described ext. First, the iitiative led to the developmet of a operatios maual, a accoutig maual, ad a huma resources maual to stadardize the processes. Secod, to improve efficiecy, group meetigs were rescheduled so they would occur i clusters. Durig the BPM exercise, we foud that most of the loa officers time is spet travelig because group meetigs are scheduled i differet tows. Moreover, sice 80 percet of KEEF s cliets are i rural areas, loa officers typically rode at least two matatus 4 to go from oe tow to aother, so that the trips took up to two hours each. To address this iefficiet schedulig, the BPM team regrouped the meetigs so that most loa officers oly wet to oe tow o a give day. Before this exercise, loa officers could oly atted oe or two group meetigs per day. After the loa clusterig, the loa officers were able to atted three meetigs per day, icreasig their efficiecy. Furthermore, trasportatio costs per group meetig became lower sice loa officers were ow travelig shorter distaces betwee group meetigs. Third, the remittace of cash from group meetigs was chaged by makig use of M-PESA. As metioed earlier, group members brig cash to the group meetigs ad the re-use the paymets to disburse the loas to the members. However, there are times whe there is more cash i the pot tha is loaed to the members, ad whe that happes the excess moey is remitted to KEEF. The loa officers would travel from oe group to the other ad fially retur home to the KEEF office carryig this cash for depositig. Durig these travels, ad eve durig the group meetig, there was a risk of losig cash through egligece, fraud, or theft. Furthermore, the KEEF accout clerk ad accoutat would have to wait for all loa officers to remit their reports ad cash before they could start closig the books for the day, which meat leavig the office ope after ormal office hours. It was therefore recommeded that loa officers remit cash to KEEF by usig M-PESA after each group meetig. This reduces the risk of lost cash ad at the same time allows the accout clerk ad the accoutat to record all collectios for the day without waitig for all the loa officers to arrive at the office. Now, with all loa officers required to remit cash via M-PESA, KEEF oly keeps petty cash at its offices. This also saves KEEF from the eed to hire a security guard, which ca cost a office 120,000 KES (1,500 USD) aually. More importatly, the KEEF staff o loger feel that their lives are at risk at the office. The secod set of BPM iitiatives was to itegrate M-PESA ad Mifos ito KEEF s operatios. The BPM tools were used to redesig core busiess processes, such as the group meetig, loa applicatio ad approval, loa disbursemet, ad daily trasactio recociliatio. Each of these processes was redesiged, piloted, ad ehaced throughout the iitiative. Major process chages were made relatig to M-PESA ad Mifos as well (which are discussed i detail uder the M-PESA Itegratio sectio). Upgrade of existig Mifos istallatio ad Mifos Cloud Problems With Existig Istallatio. Although Mifos was already i use whe KEEF joied the Mifos cosortium i February 2010, the Mifos team felt this was a ideal opportuity to test the value of added assistace with IT strategy ad busiess process optimizatio. However, by the time iitial research at KEEF cocluded i late February 2010, the fidigs were somethig of a surprise. We ucovered the followig problems: KEEF was usig a outdated versio of Mifos; it had attempted to upgrade, but the upgrade failed, ad whe it rolled back it harmed the itegrity of data. Mifos was ot stable. It was ruig o a sigle desktop computer that was ifected with viruses ad was also ruig other software. There was o procedure for backig up the database ad o test server was available. Staff had ot received adequate traiig ad were ufamiliar with Mifos, which preveted them from takig advatage of Mifos time-savig features such as data-etry by exceptio (bulk etry). Furthermore, staff were chagig server dates ad were ruig required batch jobs maually ad itermittetly, which caused problems with data itegrity. 4 Keya s public buses, which are the size of miivas. 9

12 No dedicated IT support role or techical assistace had bee arraged with ay local provider. The software was improperly cofigured, prevetig KEEF from takig full advatage of its features. Mifos was ot cofigured to use Ceters, prevetig KEEF from takig advatage of the Mifos Collectio Sheet, a group accout statemet listig members savigs ad loas balaces ad loa, savigs, ad fees due, ad the Chart of Accouts was ot properly set up. usig it as its primary data repository. However, KEEF has cotiued to experiece staff turover ad was especially challeged i fidig ad retaiig strog techical staff talet. Eve with a stable Mifos applicatio, ay MFI ruig Mifos (or ay other MIS) o its premises must ivest ot oly i the server ifrastructure eeded for a test-ad-productio eviromet but also i retaiig staff who are techically competet to maage ogoig upgrades, bug fixes, applicatio support, ad future ehacemets. Reports were largely abset or uusable due to icomplete or utrustworthy data. Some of these issues suggest that the local systems itegrator was ot sufficietly familiar with Mifos. Moreover, the techical support was fuded with a grat from the Humaist Istitute for Cooperatio (Hivos), techical support eded whe the grat term eded, ad KEEF was either uable or uwillig to pay for cotiuig assistace. As a cosequece, KEEF placed little reliace o Mifos ad cotiued to struggle to keep accurate records of its loa portfolio. The situatio at KEEF was a stark remider that qualified techical support ad thorough staff traiig are required for ultimate success, ad that havig both ca be challegig for a istitutio with KEEF s limited size, staff, ad resources. To address these urget issues, Mifos techical staff visited KEEF i March Over the subsequet weeks Mifos was upgraded to a ewer versio ad istalled o dedicated hardware. Cofiguratio issues were resolved. A test server was istalled. Traiig was provided to a KEEF employee who was formally dedicated to play a IT support role. Idetified issues with the Mifos software were logged for immediate attetio by the developmet team. A ew local techical support provider was also idetified. As a result of this visit, KEEF was able to take advatage of Mifos reports ad its bulk etry feature, which reduced the time required for data etry by more tha 80 percet simply because data oly eeds to be etered by exceptio. Eterig paymets for a group the old way, oe by oe, took about oe hour, but with Mifos bulk etry method this could be doe i two to te miutes. With techical support from the Mifos team, KEEF started usig Mifos properly i March 2010 ad has sice bee Mifos Cloud. Because fidig ad retaiig such techical expertise is a challege for may small ad midsized MFIs, the Mifos team recetly itroduced Mifos Cloud to address some of these issues. Mifos Cloud rus cetrally i a hosted, shared data ceter, so a MFI usig it o loger has to ivest i local servers ad techical support. Istead, the orgaizatio has access to its portio of the Mifos Cloud over the Iteret, from ay computer, ad the Mifos team maages security, upgrades, backups, ad database optimizatio. As a result, may small MFIs are able to access a level of techical support (via the Mifos team) that they would otherwise be uable to afford if they had to purchase the services locally. I February 2011, KEEF was migrated to Mifos Cloud. Movig to cloud computig lighteed the IT burde for KEEF, sice it was able to elimiate o-site servers ad did ot eed to add a staff of techical experts to service the applicatio. More importatly, KEEF ca ow add braches or service ceters ad have ready access to Mifos. Additioally, its maagemet team ca look at reports outside the office. KEEF ca also take advatage of the may ew features of Mifos 2.1, icludig 10 ew stadard reports, survey features, social performace maagemet, ad support for agricultural loas, to ame a few. As of this writig, KEEF loa officers still maitai their maual records, called group files. The group file is a folder cotaiig the profile of group members, records of loa applicatio ad disbursemets, ad each member s loas ad savigs trasactios ad balaces. As we described i the history of KEEF s Mifos istallatio ad upgrades, oly sice February 2011 has KEEF had the mostup-to-date versio of Mifos, which icludes the Group Collectio Sheet cotaiig the same iformatio as KEEF s group file. 10 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

13 Switchig to mobile moey ca make KEEF brach offices safer ad more efficiet. Mifos is our barometer i regard to quality of the portfolio, ad with the advet of Mifos Cloud the opportuity for a small MFI like KEEF to grow ad compete with well established MFI s for more rural ad ureached cliets is real. Daiel Kimai itegratig M-PESA Why Switch to Mobile Moey? By the time KEEF joied the Mifos cosortium it had already accepted a few paymets through the M-PESA mobile paymets service operated by Safaricom. However, these trasactios were hadled maually ad therefore offered little advatage to KEEF over covetioal cash trasactios. KEEF wated to revamp ad automate its use of mobile moey as a way to avoid the relatively high operatioal costs associated with the usual microfiace outreach approach. Those high costs ad iefficiecies had icluded the followig: High trasactio costs, icludig trasportatio ad loa officer time spet travelig to ad betwee group meetigs Loa officer iefficiecy, due to legthy group meetigs ivolvig cash coutig ad maual recordig of trasactios Security risks for both poor cliets ad loa officers, due to the large sums of moey carried to ad from group meetigs The icoveiece to cliets who were required to sped several hours away from their families ad the market to atted the legthy group meetigs Back-office iefficiecies i acceptig, recordig, ad recocilig cash Back-office iefficiecies ad errors due to maual recordig of trasactios, ad Security risks at the brach ad to brach staff due to keepig ad movig cash betwee the brach ad the head office. 11

14 How Does M-PESA Work for MFI Cliets? I the classic microfiace methodology, the cliets atted a group meetig, repay their loas i cash, ad maually record the trasactio. The loa officer the recycles the cash collectio, adds some moey from the brach if required, ad disburses loas to the group members. With M-PESA, cliets ca deposit their loa repaymets ito their ow M-PESA accouts ad pay the MFI by trasferrig moey from their M-PESA accout to the MFI s accout. The cliet ca do this ay time before the loa is due. Likewise, the MFI ca disburse loas to cliets via M-PESA by trasferrig moey from its M-PESA accout to the cliet s accout. The MFI ca do this via phoe for idividual trasactios or via M-PESA s web iterface for batch trasactios. Just like paymets, disbursemets ca also be made ay time, ad cliets are o loger forced to wait util the ext group meetig. from Safaricom. Iteral busiess processes would the be modified to take advatage of mobile trasactios, ad KEEF staff would be traied i followig them. Fially, a pilot would be coducted to test both disbursemets ad repaymets via M-PESA usig a sample of KEEF cliets. Oce that pilot ad a fial test were successfully completed, KEEF ad the Gramee Foudatio would pla a roll-out of the ew solutio across all loa groups. The mobile paymet platform allows KEEF cliets to sped more time o their busiesses. Foreseeig that mobile paymets could improve its loa officer efficiecy, stregthe its ability to reach ito more rural areas, icrease security, ad allow time savigs that its cliets could ejoy, KEEF partered with the Gramee Foudatio to fud a pilot to expad its mobile paymets capacity. The project was fuded through the Marketplace o Iovative Fiacial Solutios for Developmet cotest sposored by the Agece Fraçaise de Dévelopemet (AFD), the Gates Foudatio, ad the World Bak. Uder the proposed program, KEEF partered with the Gramee Foudatio for techical assistace i deliverig the followig. The program would assist KEEF i obtaiig a Safaricom commercial accout with a favorable egotiated tariff. A plug-i would be developed for Mifos to allow M-PESA trasactios to be uploaded oto Mifos The mobile paymet platform was expected to provide value to both KEEF ad, more importatly, its cliets. Amog the expected beefits, the ew platform was expected to shorte group meetig time ad decrease meetig frequecy, allowig cliets more time to ru their ow busiesses ad allowig loa officers to icrease their daily efficiecy. The time eeded to verify paymets was expected to be shorteed to close to real time, that is, to become ear-istat verificatio. With automated trasactio processig, data errors at the head office were expected to be reduced ad data quality icreased. The overall trasparecy of fiacial trasactios was expected to icrease as well sice the system would allow real-time isight ito busiess operatios. Ad fially, it was expected that security for both cliets ad loa officers would be greatly improved due to the virtualizatio of paymets. What Cliets Needed ad Expected. Early i the project, a series of focus group iterviews were coducted to measure cliets attitudes toward mobile paymets. Roughly 15 percet of KEEF s total cliets were iterviewed from April to July 2010, icludig a mixture of cliets from rural ad urba areas ad represetig both mature 5 For example, MFI cliets would be required to pay a 45 KES trasactio fee to cash out of a advace loa of 3000 KES. 45 KES is equivalet to the wholesale purchase price of 1.5 kilograms of wheat. 12 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

15 groups (older tha oe year, payig the full-service fee) ad youger groups (youger tha oe year). These iterviews revealed that cliets mai cocer with mobile paymets was the tariffs 5 ivolved. Safaricom charges a tariff, or trasactio fee, o all mobile moey trasfers. Cliets have to pay a fee each time they cash out a loa disbursemet received over the phoe or make a paymet via M-PESA. At the focus discussios, participats ackowledged that for loas that require them to travel to KEEF s offices to collect disbursemets or make paymets, usig mobile paymets would save the time ad cost of travel. But for loas ormally disbursed at mothly group meetigs, the mobile fee appeared to them to be o more tha a tax with o apparet moetary beefit. However, they felt that i either case the use of M-PESA would resolve security issues, which were a major cocer of may focus group participats. I additio, it would also allow cliets to use the moey from loas oly whe eeded. May participats oted that upo receivig cash from a loa, fuds were sometimes spet iadvertetly. If fuds were stored o the phoe, they could be paid out as eeded with the moies kept safe i the meatime. Also, the ormal practice was for groups to make cash cotributios to the revolvig loa fud ad immediately take loas from the fud at the same meetig. KEEF did ot actually assume custody of ay of this moey or was it a direct participat i the trasactios. It merely kept the accouts. But if loas were to be disbursed or repaid through M-PESA, KEEF would have to recocile the separate records of those trasactios completed at each meetig i cash as well as other trasactios completed separately through M-PESA. Durig the focus group discussios, cliets stated that they would be iterested i switchig to mobile paymets if they could see a immediate moetary beefit. It was decided that iterest rates for the advace loa product would be decreased by 50 percet if the etire group participated. It was soo clear that the overall impact of itegratig mobile paymets was goig to require careful review of product features ad busiess processes. How the Systems Were Merged, Tested, ad Ehaced. The project took place i two phases. Work o M-PESA itegratio bega i March 2010 i tadem with the cosortium program. A commercial accout was established with Safaricom the same moth, which allowed KEEF to access trasactio data via a Safaricom portal ad secured for KEEF cliets a 33 percet discout o ormal trasactio fees. Iitial work o the Mifos plug-i was delayed, however, util uresolved problems with the existig Mifos istallatio could be solved. The Gramee Foudatio project maager worked with KEEF staff through the sprig ad summer to develop ad documet ew procedures for moitorig ad trackig M-PESA trasactios. Traiig materials for loa officers were created ad traiig bega to prepare them to itroduce mobile paymets to their groups. Market research ad focus group discussios were coducted ad processes were redesiged, tested, ad ehaced throughout the pilot period. Amog the redesiged processes, the major oes were these: Cliets would have to use M-PESA istead of cash for payig loas, receivig loa disbursemets ad depositig savigs trasactios. Cliets would have to pay loas oe day before the group meetig so that KEEF would have the record of paymet durig the group meetig. Loa paymets were to be dowloaded from M-PESA ad the uploaded to Mifos every day, istead of loa officers or data etry clerks maually recordig trasactios ito Mifos. Loa disbursemets would be made to cliets via M-PESA. Loa fees would be automatically deducted from loa disbursemets. (M-PESA Loa disbursemets ca be uploaded ito Mifos but KEEF has yet to implemet this process ad techology.) A daily recociliatio process was desiged to esure that Mifos, M-PESA, ad the accoutig system data were all recociled. The aim was to have cashless trasactios. Fee collectios were therefore desiged so that cliets oly siged a form idetifyig the moey to be withdraw from their savigs ad applied to the fees i Mifos. After several cycles of process redesig, KEEF ad the Gramee Foudatio were eve able to desig a process to accommodate the cliets expectatio of immediate loa disbursal durig ay give group meetig. Sice cliets are required to repay their 13

16 loas oe day before the group meetig, at 4 pm those paymets are recorded ad the used to evaluate what size loa a member is qualified to receive for the ext moth. The followig day, durig the group meetig, the loa officer reviews the repaymets ad the asks which of the members eed a loa that day. The loa officer has to update the collectio sheet with the requested loa amout, asks the member to sig the request, ad the s the form to the head office through a web-eabled phoe. The loa officer the hadles the usual busiess at the group ceter. Meawhile, at the head office, KEEF staff receives the , validates the loa amout ad sigatures, ad the disburses the advace loa via M-PESA. This process has bee tested ad refied to esure that the cliets receive their advace loas durig the group meetig just as they were used to. (See Appedix B for the processes before ad after Mifos ad M-PESA itegratio.) It was oly after solid processes were i place that a automated bridge betwee Mifos ad M-PESA was desiged ad implemeted. It was importat to kow the etire life-cycle of the loa, icludig the exceptio processes, to be able to defie the ehacemets eeded for Mifos. A uique ID would be eeded by each user to lik Mifos ad M-PESA, as well. There were pros ad cos to each choice. With the govermet ID, a cliet could pay usig ay phoe but would be required to key a additioal accout umber each time he or she paid o a loa or made a deposit to savigs. Usig the phoe umber as the uique ID would elimiate data etry error (sice Safaricom uses the phoe umber o the SIM card to idetify the trasactio) but would require cliets to purchase a SIM card ad operate their ow phoe. It was later decided to use the phoe umber, sice the Gramee Foudatio requires disbursig oly to the phoe umber registered to the cliet for security reasos. (We do ot wat to disburse the cliet s loa to just ay phoe.) What would happe if oe did ot fid a match o the phoe umber, that is, how would oe fid out who had made a paymet? How could a disbursemet bridge be created, cosiderig that KEEF requires that advace loas be disbursed durig the group meetigs? What kid of reports would we eed to esure so that trasactios were properly recorded ad recocilable with M-PESA ad the accoutig system? These were amog the process exceptio questios the Gramee Foudatio team had to map ad desig for. Durig the cliet pilot, most of the back-office operatios related to processig M-PESA trasactios from the field were carried out maually. Upo completio of the pilot i February 2011, the team itroduced the fial automatio, icludig a Mifos-M-PESA bridge that streamlies ad automates KEEF s back- office processig of M-PESA trasactios. Itroducig the bridge ad related techology eabled the followig process ehacemets: M-PESA paymets are ow auto-accepted, matched with a cliet i Mifos, ad broke dow ad applied to the cliet s loas ad savigs, accordig to the paymet priority order i Mifos, as defied by the MFI. Approved M-PESA loas are extracted from Mifos ad upload ito the M-PESA system for systematic disbursemet. The extract automatically deducts applicable loa fees. M-PESA disbursemet trasactios are accepted ito Mifos ad the disbursemets ad loa fees are recorded. Search fuctioality has bee improved to allow the user to search for the right cliet whe the bridge is ot able to match the trasactio by phoe umber. Two ew reports were also created to support the overall process. The group collectio sheet was created ad desiged to show mobile paymets completed prior to the group meetig; it also shows the allowable ad actual advace loa amouts by cliet. A daily trasactio report desiged for daily recociliatio was also itroduced. At the time of this writig, KEEF has bee usig the Mifos- M-PESA bridge for loa repaymets but is still testig the disbursemet fuctio. Whe fully implemeted, the Mifos-M-PESA bridge should elimiate the eed to record paymets ad disbursemet trasactios ad reduce data etry errors. operatioal beefits to cliets ad to keef By the ed of February 2011, 7 percet of KEEF s cliets (471 cliets) were usig mobile moey. Iitial results are quite promisig, as KEEF has witessed the followig beefits amog its early adopters. 6 Stadard MFI efficiecy ratio. Number of cliets/loa officer. 14 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

17 Now with M-PESA I ca pay the loa ay time prior to the meetig date ad we do ot have to lock ourselves i these small rooms for fear of beig robbed. Jeifer Wajiru from Weteithie Gateiguru group Group Meetig Efficiecy. The group meetigs for M-PESA pilot groups are ow completed withi oe hour, compared with three hours before. By prepayig before the group meetig, the loa officer comes prepared to the meetig. He or she kows who has paid, who has t, how much is i the pot, who is eligible for advace loas, ad how much each member ca be loaed. This elimiates the eed for discussios to sort out those questios, ad the M-PESA features also elimiate the time formerly spet o receivig ad coutig cash. These time-savig beefits could potetially allow loa officers to triple their caseloads. 6 Fraud ad Theft Reductio. Sice cash is beig paid directly to KEEF s M-PESA accout, fraud ad theft are miimized. I fiscal year 2010 (July 2009 to Jue 2010) aloe, KEEF experieced three cases of fraud. I oe case, a loa officer was ot reportig ad remittig all the service charges collected. I the secod case, a loa officer reported that he was robbed of his collectio for the day, ad ivestigatios later showed that he had spet the cash o persoal use. I the third istace, a loa officer was chargig too much for service fees ad pocketig the extra fees. The total amout lost from these fraud cases was 103,000 KES (1,288 USD). Such cases will largely be avoided with mobile paymets. As metioed earlier, there are two types of group loas: the geeral group loa (GGL) ad the advace loa. The advace loa is the oe-moth term loa that is disbursed durig the group meetig, while the GGL is the regular loa ad comprises 86 percet of KEEF s loa portfolio. Because cliets meet oly oce a moth, uder the previous system a cliet received her GGL loa disbursemet at the followig group meetig oe moth after applyig. With the implemetatio of M-PESA, the process redesig, ad the loa officer s time savigs, the GGL ca ow be disbursed withi two days. Now, the cliet makes a loa request durig the group meetig, the loa officer ispects her home ad busiess right after the group meetig ad files the applicatio the same day at the head office, ad the followig day the GGL loa is disbursed to the cliet via M-PESA. Durig a group meetig, a KEEF loa officer collects paymets from her cliets. More importatly, KEEF s cliets have beefited from mobile moey i the followig ways: There is less risk of losig cash while travellig betwee her home or busiess ad the group meetig. There is less risk of losig the pot durig group meetig. The cliet speds less time at the group meetig ad ca sped more time o her busiess or to atted to her family. Havig a M-PESA accout allows the cliet to safely save moey i two ways. She ca deposit moey wheever she has excess cash. She ca also leave some moey i the accout ad withdraw moey from the loa oly whe she eeds it, avoidig iadvertet spedig o o-essetial items or loss of cash through theft. KEEF offers to give back to the cliets its efficiecy gais from the M-PESA system by cuttig i half (from 10 percet to 5 percet) the iterest rate charged o the advace loa for groups whose members are all o the M-PESA system. 15

18 OUTCOMES Layig the FoudATIo Workig with a small but uique ad dyamic microfiace istitutio brought ew challeges to the Gramee Foudatio team. I the first few weeks at KEEF, it was evidet that we eeded to focus o fudametal operatioal structures before we could optimize their use of Mifos ad before we could start the M-PESA itegratio. Durig our oe-year egagemet, we helped KEEF establish a foudatio that ow allows this istitutio to fially take advatage of the operatioal efficiecies that both Mifos ad the mobile moey chael ca provide. More importatly, the improved foudatio KEEF ow has cosistig of people, processes, ad techology was ecessary for it to achieve its stated goals of beig a well-respected MFI, attractig ivestmets, positioig themselves strategically i the market, ad cotiuig to be iovative i providig fiacial services to the poor. The followig foudatioal goals were achieved at KEEF through its partership with the Gramee Foudatio durig this etire process: Mappig ad stadardizatio of processes that led to the developmet of operatios ad accoutig mauals Use of a disciplied process for chage maagemet for itroducig overall chages with miimal disruptio to ogoig operatios Defiitio of all job roles ad resposibilities, icludig key performace idicators ad the developmet of a huma resource maual, ad Establishmet of a secure ad reliable MIS ifrastructure etwork, hardware, software ad persoel. Eve with these accomplishmets, however, there is still a lot of work that remais to be doe. The ed-of-project recommedatios for KEEF icluded these: Hire a full-time chief fiace officer. This role will be crucial to further defiig ad istitutioalizig record keepig, establishig cotrols, producig ad aalyzig fiacial statemets, ad decidig o fiacial ivestmets ad expeses. Desigate a project maager to istitutioalize the operatioal processes that have bee defied ad to complete the full roll-out of mobile moey. Complete the full audit of maual records ad Mifos records, ad evetually stop the use of Group Files. The audit ad recociliatio process should esure that the migratio of data is completed with high accuracy ad quality. Mifos should the be used as the sole system of recordig to esure ogoig data quality. This will likewise free up loa officers time i maitaiig the Group Files ad allow for the istat creatio of reliable operatioal reports. Loa Officer Efficiecy As oted earlier, KEEF has two pricipal streams of reveue. Oe is the service fees that are paid by each group ad deped o the size of the revolvig loa fud. The other stream is admiistrative fees ad iterest paid o loas made by KEEF itself, so-called Office Debt. To assess the impact of Mifos ad the iovatios itroduced through the cosortium cosultig egagemet, we look at the impact o each reveue stream separately. Because service fees are liked to the size of the revolvig fud, ot the umber of group members or loas outstadig, the key variables that determie reveue are the umber of groups ad the size of their respective revolvig fuds. For KEEF, icreasig the umber of groups supported by each loa officer is a top priority. 7 Two strategies were pursued to accomplish this: Reduce the time required for group meetigs through simplified applicatio forms ad procedures, itroductio of mobile paymets, geographic groupig, ad careful schedulig of groups to reduce travel time betwee meetigs. 7 Because the size of the loa fud is depedet o group size ad the volume of borrowig by group members, icreasig the absolute size of the revolvig fud is a problem ot directly related to Mifos or the busiess process. Therefore, it is ot addressed here. 16 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

19 Reduce the time loa officers sped o admiistrative or accoutig tasks by itroducig a dedicated data etry officer for Mifos ad eablig the Mifos-M-PESA itegratio to evetually elimiate data etry ad maual recociliatio. The followig table shows the hours saved by the loa officers from the differet compoets of the project. hours of daily time savigs possible. The remaiig loa officers at KEEF are curretly oly realizig the 2 hours of savigs geerated by clusterig group meetigs as well as the after-hours time savigs geerated by addig data ecoders. But eve with this partial icrease i overall efficiecy, those loa officers who are ot curretly usig M-PESA are still able to coduct three group meetigs per day. Buildig upo these ew efficiecies, KEEF has Activity Chage Time SAVED per DAY (i hours) IT strategy Decisio to assig a data etry clerk to eter trasactio data i Mifos. 1.5 Busiess process maagemet M-PESA itegratio M-PESA ad Mifos itegratio Group clusterig reduced the travel time of loa officers to ad betwee group meetigs. Sice cash coutig was elimiated ad record keepig was reduced, group meetigs became shorter. Whe KEEF fially coverts all groups ito M-PESA ad switches from usig Group Files to Mifos, loa officers will ot have to do data recordig ad recociliatio at the ed of each day TOTAL 6.5 From the above table, it seems that we have elimiated all of the hours i a loa officer s day. Remember, however, that the first 1.5 hours saved by assigig a data ecoder are hours that had bee spet after office hours by loa officers who had to wait for their tur to use the computer to eter the day s trasactio. So, i this case what we elimiated was really overtime work. Moreover, as explaied earlier, the loa officers still sped the last hour of their work day maitaiig their Group Files. At the time of this writig, oly 8 percet of all groups are usig M-PESA, so the loa officers assiged to these test groups are curretly the oly oes ejoyig the full 6.5 rescheduled its work-weeks so that all the group meetigs are doe withi three weeks out of each moth ad the free week is spet i marketig, recruitig, ad followig up o deliquet loas. With just these chages, KEEF is able to hadle more cliets with fewer loa officers ad thus has the potetial of icreasig its reveue ad lowerig its costs, sice a MFI s reveue is directly proportioal to its umber of cliets ad its biggest expese is loa officer salaries. I the followig computatio below, we compare the loa officer s caseload ad productivity at the ed of KEEF s last fiscal year ad as of February 2011 (latest data available). 80 KES = 1 USD 6/30/2010 2/28/2011 Differece Number of groups % Number of loa officers Groups/loa officer % Total gross icome from loa portfolio (i KES) 18,533,381 14,129,723* -4,403,658 Icome/loa officer (i KES) 855,387 1,009, ,879 * This umber is computed as the projected 8-moth icome with a 14% reveue icrease proportioal to the icrease i umber of cliets. 17

20 With M-PESA, we do t have to costatly act like spies ad watch our backs eve if we are already at the head office. Daiel Kimai, CEO, KEEF If the loa officers are each producig 153,879 KES more per year ad there are 14 more loa officers, KEEF ca expect 2,154,308 KES (26,929 USD) of icremetal reveue due to icreased loa officer efficiecy aloe. Take ote that if KEEF had ot reduced the umber of loa officers, it could have recruited more cliets, disbursed more loas, ad geerated icremetal reveue of 4,037,064 KES (50,463 USD) durig the year. Oce KEEF coverts 100 percet of its groups to M-PESA, the group meetig time will be reduced by 67 percet, from three hours to oe hour. KEEF loa officers will actually realize a efficiecy gai of 300 percet, but sice KEEF plas to have group meetigs oly three weeks out of four, we ca reduce this efficiecy gai to 225 percet. If the loa officers are 225 percet more efficiet o top of the iitial 68 percet efficiecy gai (which resulted from the massive process improvemets ad itroductio of Mifos), ad assumig that all efficiecies are put towards cliet recruitmet 9, KEEF could experiece additioal reveues of 31,791,877 KES (397,398 USD) per year. This calculatio is derived from the ew loa officer productivity 1,009,226 KES (12,615 USD) multiplied by the umber of loa officers (14) ad with a efficiecy gai of 225 percet. Improved Security ad Reduced Fraud With KEEF trasitioig to M-PESA, cash security ad fraud risks are miimized. Cliet repaymets ad fees are credited directly to KEEF s M-PESA accout ad loas are also disbursed via M-PESA. Whe all members trasact with KEEF through M-PESA ad cash is completely elimiated, it will be very hard for loa officers to lose cash. Fraud cases ivolvig loa officers overchargig cliets ad ot remittig cash will be elimiated. Furthermore, loa officers ad group members will ot be at risk of beig robbed aymore. Reducig cash risks ad fraud ca result i cost savigs for KEEF. I FY2010, as metioed earlier, KEEF recorded three cases of fraud totalig a loss of 103,000 KES (1,288 USD). 10 Goig cashless, whe combied with ew process cotrols ad the automatic recordig of trasactios from Mifos to M-PESA, should elimiate all kow fraud related to cash hadlig. However, to be coservative, we estimate that this risk will be reduced by oly 90 percet. The total savigs of KEEF related to fraud cases for FY2010 would the have bee 92,700 KES (1,159 USD). This amout is 0.05 percet of KEEF s Gross Icome for Loa Portfolio. KEEF ca assume 0.05 percet savigs year after year with the M-PESA itegratio. Furthermore, with very little cash at the head office, KEEF does ot eed to hire security persoel. This persoel curretly costs KEEF 120,000 KES per perso, ad as KEEF expads ad opes additioal braches or service ceters it ca cotiue reapig this savigs. More importat tha this cost savigs, KEEF brach persoel, loa officers, ad cliet members ejoy peace of mid. Icreased Cliet satisfactio As part of the mobile moey pilot, the Gramee Foudatio moitored the cliet satisfactio of the pilot groups. This survey was coducted mothly with five radom groups that had implemeted mobile moey; the survey questios were asked at the ed of group meetigs by the loa Area for Evaluatio Cliet SATISFACTION As of September 2010 As of February 2011 Group meetig structure 71% 100% Group meetig duratio Mobile moey paymet process Mobile moey trasfer cost Arguably, efficiecies ca be redirected towards other activities such as better customer service, providig more services, ad capacity buildig. However, KEEF s latest busiess pla is still focused o icreasig cliet outreach. 10 This umber is based oly o FY2010 sice the prior years data are ot available. 18 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

21 officers. This method was used to test the efficacy of the traiig, esure cliets receptiveess to the chages, ad reset course as eeded. (The survey ad istructios ca be foud i Appedix C.) The survey shows icreased cliet satisfactio i the followig areas: Much work was doe o the educatio ad traiig regardig mobile moey costs for both loa officers ad cliets. The improvemet from 18 percet to 95 percet i mobile moey trasfer cost is a good example of measurig the efficacy of desigig ad refiig the messagig aroud the fees. This is also key to successfully rollig out M-PESA across the etire cliet base. The overall icrease i cliets satisfactio ca be attributed to the followig cliet beefits brought about by mobile moey: Reduced risk to cliet of losig cash while movig betwee home or busiess ad the group meetig ad durig the group meetig Time savigs i group meetigs Ability to save moey i a M-PESA accout, ad Reduced iterest rate for a advace loa from 10 percet to 5 percet. KEY OBSERVATIONS AND CONCLUSION The mai purpose of this case study was to better uderstad the value that a holistic approach to techology deploymet ca brig to a microfiace istitutio. This approach should combie cosideratios for people, process, ad techology. I particular, we were iterested i documetig the experiece of itroducig a mobile paymet platform at a MFI usig Mifos. By selectig KEEF for our study, we also leared much about our origial hypothesis, amely, that local istitutios could dowload the applicatio ad move forward o their ow, avoidig the expeses usually associated with commercial software deploymets. Techology ca oly yield strategic, fiacial, ad social beefits whe cosidered i cojuctio with the people ad processes. Ufortuately, KEEF s iitial experiece with Mifos as a commuity deploymet, leveragig a local IT specialist, was quite poor. Support from the local provider was icosistet ad suggested that the service provider was ot sufficietly familiar with Mifos. As a cosequece, although KEEF ultimately wet live with Mifos, it was uable to make full use of the fuctioalities ad cotiued to struggle to keep accurate records, hiderig its ability to maage operatios. This situatio at KEEF uderscored the importace of proper ivestmet i qualified techical resources ad iteral staff, ad further reiforced the importace of lookig at IT deploymets from a 360 degree perspective. I both cases Mifos implemetatio ad mobile moey itegratio busiess process ad huma resource optimizatio were critical to esurig that the techology geerated beefits to both KEEF ad its cliets. The mobile moey itegratio also required that all fuctios at KEEF (ot just IT) be reviewed ad appropriately adjusted ad streamlied for Mifos. KEEF idetified a marketig officer ad coducted market research ad focus group discussios to uderstad customers hesitatio to adopt mobile trasactios. As a result of the study, the M-PESA loa product was adjusted by offerig a lower iterest rate, resultig i better cliet service ad satisfactio. Chage maagemet was a importat elemet throughout the process. We evaluated the overall chages required ad tried to maximize value with regard to KEEF s overall busiess eeds. From the iitial mappig of processes through the redesiged processes, chages ad course correctios were evaluated with a KEEF workig group ad tested before they were implemeted, documeted, ad reviewed. 19

22 The overall streamliig of busiess processes at KEEF, coupled with the Mifos ad M-PESA systems, resulted i cosiderable improvemet i loa officer efficiecy. Oce all of these improvemets are refied ad implemeted, this efficiecy will icrease eve more dramatically. The loa officer may the use the time saved to reach more cliets, icrease cliet iteractio/servicig, or do market research all of which would serve to improve the cliet experiece. To fully leverage the strategic beefits of techology, a istitutio must walk before it rus. Busiess operatios fudametals must be i place before automatio ad iovatio ca flourish. Techology oly multiplies the existig efficiecy (or lack thereof) of ay operatioal processes. This is why it is so critical for a MFI to walk before it rus to istitute efficiet ad effective maual processes before implemetig systems. Likewise it must establish strog competecy ad processes for basic systems such as a MIS before itroducig ew techology iovatios that build o the foudatioal MIS. While it is possible for iitiatives to be doe i parallel (as we did with BPM, Mifos, ad mobile moey), this approach requires substatially more time ad resource ivestmet tha it would have if the MFI first had a strog, streamlied maual operatioal foudatio i place. Goig forward, as KEEF seeks to stregthe its existig techology base without the support provided by the Gramee Foudatio, it will be critical for it to cotiuously improve its baselie operatios ad oly add ew techology from a positio of operatioal stregth. The real work has just begu. For the Gramee Foudatio to cosider this project a real success, we would like to see KEEF use reliable ad realtime iformatio from Mifos ad to become 100 percet cashless i the field with mobile moey. Doig so should brig cosiderable beefits to both KEEF ad its cliets. This project s scope was oly to create a IT strategy, itroduce busiess process maagemet, advace the Mifos istallatio, ad pilot the use of mobile moey. Workig together with KEEF, we believe that we have put processes ad tools i place for KEEF to cotiue this work. The key ext steps for KEEF to take are these: 1. Ivest i key ad techical staff to cotiue this work. Key persoel such as a chief fiacial officer ad operatios maager should build, ehace, ad implemet defied accoutig ad operatios processes ad mauals. Techical staff ad users should be properly traied ad a cotiuig program for ehacig techical skills should be implemeted. KEEF should esure that the umber ad competecy of maagemet ad staff are adequate ad appropriate for their growig eeds. 2. Istitutioalize ad cotiue to optimize the redesiged processes through regular process compliace audits ad reviews. 3. Esure that the MIS systems (Mifos ad the accoutig system) are curret ad accurate. This should start with a complete full audit of Group File versus Mifos data, as well as M-PESA ad accoutig data, to establish Mifos as the primary database, droppig the maual system altogether. 4. Cotiue marketig, traiig, implemetig, ad refiig the itegratio of Mifos, M-PESA, ad accoutig systems for the full roll-out of the M-PESA project. 5. Update ad implemet the IT strategy pla o a yearly basis to esure that it is still relevat ad aliged with busiess goals. The most poverty focused orgaizatios must be the most efficiecy focused orgaizatios. Bill & Melida Gates Foudatio 20 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

23 APPENDIX A: Products Loas available from KEEF solidarity groups are of several types. The largest proportio of loas cosists of these two types: Geeral Group Loas (GGL). These are geeral purpose loas of 6, ,000 KES (75-6,250 USD), depedig o the borrower s history ad qualificatio. No collateral is required but guarators are required. Repaymet period is from moths depedig o size of the loa. Iterest is charged at 0.7% per moth or 8.4% per aum. Advace Loas. The advace loa is for oe moth at a flat rate of 10%. No collateral or guarator is required. The maximum loa size is 15,000 KES (188 USD). While GGLs are a importat part of KEEFs offerig, it is the mothly advace loas that are most popular ad most importat to KEEF. Mothly advace loas have a relatively low threshold of qualificatio. They meet cliets eeds for smoothig of icome fluctuatios durig the moth, ad the 10% flat iterest rate causes the revolvig fud to grow rapidly, thus icreasig the fees collected by KEEF. This is therefore the product that is curretly most importat to KEEF, ad it is both strogly promoted ad popular. Advace+. This loa is made directly from KEEF to the borrower. It does ot come from the group s revolvig fud. Iterest is 10% per moth o decliig balace. Loa size is from 10,000-50,000 KES ( USD). There is a applicatio fee ad the cliet must have 6 moths group membership ad 10,000 KES (125 USD) miimum savigs. Farm Developmet Loa, Busiess Loa, School Fees Loa. Like Advace+, these loas are directly from KEEF to the borrower. These are special purpose loas of 5, ,000 KES (63-6,250 USD) of varyig legths at 4.5% iterest. There is a applicatio fee ad varyig, but sigificat, requiremets for established savigs. Because of their substatially higher qualificatio requiremets, the Advace+ ad special purpose loas are a much smaller portio of the portfolio. Below is the breakdow of the overall portfolio as of the ed of the latest Fiscal Year, Jue 30, KEEF s Merry-Go-Roud, Divideds, ad Iterest Rates 98.5% of KEEF s loa portfolio is composed of the group loas Geeral Group Loa (GGL) ad the Advace Loa. Usig the stadard formula for Aual Percetage Rate (APR), the APR for GGL is betwee 9.4% to 13.7%, ad the APR for Advace is 61% to 144%. The average effective APR for MFIs i Keya is 40 to 50%. Thus, KEEF s Advace APR is high. Take ote however, that all the loa iterest goes back to the pot ad at the ed of the year a good portio is retured to the cliets i the form of divideds. These divideds ca go up to 50% of the cliets cotributio, so ot all of the iterest stays with KEEF ad ca arguably be discouted from the APR. Nevertheless, the APR calculatio, based o iteratioal stadards, raises criticism i the public eye ad is ot good for KEEF s reputatio. Thus, GF recommeded that KEEF lower the iterest to a market rate ad the lower the divided share just eough to reach KEEF s fiacial goals. KEEF agreed to follow these recommedatios ad will also lower the rates o its idividual loas. This is plaed to go ito effect by July PORTFOLIO BY PRODUCT TYPE 80 KES = 1 USD # of Borrowers OUTSTANDINg Portfolio (KES) % of TOTAL Portfolio Value Geeral Group Loa 4,841 27,683, % Advace 5,832 5,143, % Idividual Loas (Advace +, Farm Loa, Busiess Loa, School Fees) , % 21

24 APPENDIX B: Group meetig process, before ad after Mifos ad M-PESA Itegratio 22

25 APPENDIX C: Mobile Moey Cliet Survey Form ad Istructios Group 1 Group 2 Group 3 Group 4 Group 5 Group ID 1-Group Meetig Attedace # Cliets 2-Group Meetig Structure positive eutral egative 3-Group Meetig Duratio positive eutral egative 4-Mobile Moey Paymet Process positive eutral egative 5-Mobile Moey Trasactio Fee positive eutral egative 6-Loa Officer Access positive eutral egative 7-Cliets Usig Moey Leders # Cliets 8-Amout Spet o Trasportatio To/From Group Meetig (KSH) Cliet 1 Cliet 2 Cliet 3 Cliet 4 Cliet 5 9-Amout of Time Spet o Group Busiess (Hours) Cliet 1 Cliet 2 Cliet 3 Cliet 4 Cliet 5 23

26 Istructios CLIENT SURVEY FORM This survey is desiged to assess a umber of cliet experiece idicators ad should be admiistered every moth. Five groups are to be selected at radom ad this survey coducted at each of the five group meetigs durig the moth. Step 1: Moth I the space at the top of the form, eter the moth for which the assessmet is beig coducted. The moth correspods to the assessmet moth oted i the efficiecy assessmet excel spreadsheet. Step 2: Group ID Eter the ID umber of the group at which the survey is beig coducted. Step 3: Questio 1 Group Meetig Attedace Cout the umber of group members i attedace at the meetig ad eter that umber uder the appropriate group colum. Step 4: Questio 2 Group Meetig Structure This questio seeks to uderstad cliet s geeral satisfactio with how the group meetig is structured. Ask the cliets to raise their hads if they have a positive opiio of the group meetig structure. Cout the umber of hads ad eter that i the positive box for the appropriate group. Now ask the cliets to raise their hads if they have a egative opiio of the group meetig structure. Cout the umber of hads ad eter this i the egative box. Ask ay cliets who has ot raised their hads to raise them. Cout the umber of hads ad eter this i the eutral box. Step 5: Questio 3 Group Meetig Duratio This questio seeks to uderstad how cliets feel about the duratio of the group meetig. Usig the method described i Step 5, ask cliets to raise their hads if they have a positive, egative, or o opiio of the meetig duratio ad eter the umber of hads i the appropriate box. Step 6: Questio 4 Mobile Moey Paymet Process This questio seeks to uderstad how cliets feel about the mobile moey paymet process, i geeral. Usig the previously defied show of hads method, ask the cliets to idicated if they have a positive, egative or o opiio of the mobile moey paymet process ad eter the umber of hads i the appropriate box. Step 7: Questio 5 Mobile Moey Trasactio Fee This questio seeks to uderstad how cliets feel about the mobile moey trasactio fee. Agai usig the method defied above, ask the cliets to use a show of hads to idicate if they feel the beefits of usig mobile moey is worth the curret trasactio fee, if they believe the beefits are ot worth the fee, or if they have o opiio. Cout the umber of hads ad eter the amout i the appropriate box. Step 8: Questio 6 Loa Officer Access This questio seeks to uderstad if cliets are comfortable with the amout of access they have to the loa officer particularly i the cotext of shorter group meetig duratios. Usig the show of hads method, ask cliets to idicate if they are happy with the amout of access they have to their loa officer, uhappy with the amout of access, or have o opiio. Cout the umber of hads ad eter the amouts i the appropriate box. Step 9: Questio 7 Cliets Usig Moey Leders This questio seeks to uderstad how may cliets cotiue to use moey leders i additio to accessig KEEFs services. Ask the group to raise their had if i the past three moths they have take a loa from a moey leder (ot KEEF or other MFI). Cout the umber of hads ad eter this umber i the appropriate group box. Step 10: Questio 8 Amout Spet o Trasport This questio seeks to uderstad, i geeral, how much cliets are spedig to get to ad from the group meetig. For this questio, select five group members at radom ad ask them how much it cost them to get to ad from the group meetig today. For each respodig cliet, eter the amout i the appropriate box. Step 11: Questio 9 Amout of Time Spet o Group Busiess This questio seeks to uderstad how much time cliets are spedig to coduct busiess associated with the group. This should iclude makig paymets ad collectig disbursemets, travelig to ad from the group meetig, as well as the time spet i the group meetig itself. Usig the same five cliets selected for the previous questio, ask each cliet idividually to calculate the umber of hours they believe they sped o group busiess. The aswer ca be whole or partial hours. Eter the total i the appropriate box for each cliet usig decimals for partial hours (e.g., 3.5 for three ad oe half hours). Step 12: Data Etry Oce the surveys have bee completed, retur this form to the office ad trasfer the data ito the cliet survey tab of the efficiecy assessmet excel for the correspodig period. 24 Adoptio of Mifos Adoptio of Mifos as a platform for mobile moey at Keya Etrepreeurship Empowermet Foudatio (KEEF)

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28 Empowerig people. Chagig lives. Iovatig for the world s poor. Gramee Foudatio th St. NW, 3rd Floor Washigto, DC Phoe: Toll Free (US): Fax: Gramee Foudatio Techology Ceter th Ave, Suite 1030 Seattle, WA Phoe: Fax: