Role of Technology in Microfinance Sector in India

Technology, innovation, and knowledge have become the key drivers of economic growth today. A broad scan, across many industry verticals, suggests that much of the economic growth of the last decade has been facilitated by the existence of strong technology platforms. The effective absorption and utilization of data and information is extremely important for any sector at various developmental stages. However, the importance of data management becomes more pronounced at the advent of the growth stage when an industry is expanding and diversifying rapidly. This is the state in which the Indian Microfinance industry is in today. As a result, microfinance practitioners‟ motivations to use technology interventions are the same as those for any other similar business model: technology‟s ability to speed up the flow of information and capital, automate transactions, control and analyze data, improve customer experience, reduce transaction costs, and increase efficiency and customer outreach. Technology‟s potential has, therefore, led Microfinance stakeholders to believe that technology can have a profound impact on their operations. As a result, technology‟s promise and potential is being explored by both technology providers and microfinance institutions. INTRODUCTION Technology, innovation, and knowledge have become the key drivers of economic growth today. A broad scan, across many industry verticals, suggests that much of the economic growth of the last decade has been facilitated by the existence of strong technology platforms. The effective absorption and utilization of data and information is extremely important for any sector at various developmental stages. However, the importance of data management becomes more pronounced at the advent of the growth stage when an industry is expanding and diversifying rapidly. This is the state in which the Indian Microfinance industry is in today. As part of this growth stage, microfinance in India is undergoing rapid changes and discovering new challenges. Collecting money from scattered, remote clients, the cost of service delivery transactions in the “last mile”, effective information exchange at the institutional level, and effective growth management are just a few of the many challenges confronting MFIs. As a result, microfinance practitioners‟ motivations to use technology interventions are the same as those for any other similar business model: technology‟s ability to speed up the flow of information and capital, automate transactions, control and analyze data, improve customer experience, reduce transaction costs, and increase efficiency and customer outreach. Technology‟s potential has, therefore, led Microfinance stakeholders to believe that technology International Journal of Social Science & Interdisciplinary Research__________________________________ ISSN 2277 3630 IJSSIR, Vol. 2 (9), SEPTEMBER (2013) Online available at indianresearchjournals.com 108 can have a profound impact on their operations. As a result, technology‟s promise and potential is being explored by both technology providers and microfinance institutions. Though microfinance significantly differs in some ways from the traditional banking industry, traditional banking technologies, when applied innovatively in developing countries, have played a role in reducing costs and increasing outreach and penetration, of the microfinance model. Management Information Systems (MIS), Point of Sale technologies (POS), Automatic Teller Machines (ATMs), Interactive Voice Response (IVR) systems and smart cards are among the major technologies that have entered microfinance over the years from the formal financial sector. Across the four major stakeholder groups, technology can meet the process requirements and increase general information sharing, efficiency, and lower costs. OBJECTIVES OF THE STUDY The objectives of this conceptual study are mainly focusing on the impact of technology utilization in Microfinance Sector in India. The main objectives are as below: a) To signify the role of technology and management information systems in traditional financial services. b) To focus on constraints and hurdles in the technical implementation and adoption. c) To understand the role of ICT in microfinance sector. METHODOLOGY OF THE STUDY The present conceptual study is done on the recent trends in microfinance institution and the technology impact on the MFIs in India. The necessary data is gathered from the secondary sources like text books, magazines, journals, e-journals, published and unpublished articles, websites, etc. ROLE OF TECHNOLOGY IN TRADITIONAL FINANCIAL SERVICESBANKING