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Can E-Services Help Microcredit Organizations?

Is it possible—or sensible—to use e-service technology to assist microcredit schemes?

Because an important contribution to the success of microcredit schemes is that they operate within a local community, it may not be sensible to set up a microcredit scheme in which the borrowers are geographically dispersed. It is also advisable to keep the feature that the administrators live locally and that there is democratic participation in organizational decisions.

However, two groups of people could be distant without endangering the effectiveness of the scheme. The first is capital providers. The initial capital for microcredit schemes tends to be provided by charities or governmental organizations, or charitable individuals. The Internet could provide an advertising service seeking capital providers and a channel to feed back information to capital providers on how the businesses funded by their capital are doing. Microcredit schemes have a need for transparent management and information systems to make decisions, provide accountability, and inform capital providers of performance. In some cases, e-services might provide an economical tool for this work.

The second group is customers. Provided that there is a suitable infrastructure for delivery of products or services, a microcredit organization could fund businesses with an e-commerce component. Local businesses in poor areas are limited by the financial capacity of local residents to buy what they sell. Opening up their potential market to include Internet customers could help alleviate this problem and inject more capital into the local economy.

According to Fawzi Al-Sultan, past president of the International Fund for Agricultural Development, "It is crucial to combine credit with access to extension and better technologies and ready access to fair markets." It may be that e-services have a useful role to play in this.

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