Microfinance Core MIS Systems - The Business Case for Outsourcing

Outsourcing solutions for building MIS and IT capacity in MFIs

41 pages

This document presents research to identify whether outsourced management information system (MIS) solutions can resolve the MIS, information technology (IT) capacity and infrastructure challenges of MFIs, and enable them to perform more effectively by focusing on their business goals. Key research questions included:

What will MFIs gain from outsourcing?
What would be the trade-offs?
Will they be able to provide additional services by using an outsourced core MIS?

MFIs are severely constrained in the implementation of information and communication technology (ICT) solutions to improve outreach due to poor MIS and IT capacity development. To counter this, a few MFI technology providers have developed outsourced core banking solutions. However, MFIs are reticent about adopting outsourcing, citing reasons like:

Outsourced models are different;
Outsourcing implies loss of control over sensitive and strategic client information;
Security risks are too great to ignore;
Cost savings are non-existent.

The study researched the widely prevalent outsourcing model among U.S. small banks and applied it to MFIs in developing countries. The findings provide MFIs guidance on factors to consider when deciding to outsource or host a solution in-house.