The Role and Impact of Information and Communication Technologies (ICT) in Microfinance

Microfinance services available to the poorest people, especially investment loans for micro-business development, are recognized as an important part of poverty reduction strategies. As the industry matures, MFIs face a competitive environment, forcing them to balance the goals of outreach and sustainability. However, in spite of its successes, microfinance has not been able to reach to the poorest of the poor particularly in the low density population areas of Madhya Pradesh, Orissa, Bihar, Uttar Pradesh etc. in India. The main reason behind this gap is the cost of credit delivery. Information and communication technology (ICT) is an important driver and the great hope, although it brings with it fundamental changes to the microfinance delivery mechanisms that have become almost sacred for the microfinance sector. This research is at the intersection of inquiry on ICT for development and the digital divide, the impact of microfinance, and the use of ICT in the financial services industry. We discuss the role and impact of ICT on outreach and sustainability at the industry levels.