1. Applying technology into Islamic microfinance
Nabilah Rozzani,
Rashidah Abdul Rahman
Intan Salwani Mohamed
Sharifah Norzehan Syed Yusuf
Paper presented at the International Conference on Islamic Finance, Muamalat & Financial Criminology 2013, Cagayan de Oro.

2. Presentation Outline Introduction
Issues Surrounding Microfinance Operations
Solving Issues with Technology
Types of Technology Used
System Needed to Accomplish Goal
Benefits of Technology for Islamic Microfinance
Issues Restricting the Implementation of Technology
Concluding Remarks

3. Provide loans and open business opportunities
Introduction
Small-scale financial services for credit and deposits
Tailored to meet the needs of the poor in both urban and rural areas
Microfinance
Provide loans and open business opportunities

4. Conventional Microfinance
Introduction
Conventional Microfinance
Secular
Interest-bearing loan
Enforces group/peer pressure for collection of repayment
Islamic Microfinance
Shariah compliant
Prohibits the utilisation of interest
Exercises the spirit of brotherhood, cooperation and mutual help through Kafalah (guarantee)

5. Introduction
At present, the disbursement and repayment of microfinance loans are accelerated through cash and cheque-based economies
Slow
Prone to human error
Require major reconciliation process every year
There is a need to move towards a cashless payment system with technology
Postbank, Kenya
Objective of Study
Identify issues surrounding current microfinance operations that could be related to Islamic microfinance
Explore the usage of technology that improves the operation of microfinance

6. Issues Surrounding Microfinance Operations
Unable to reduce their dependence towards external funds
Held-back from expanding their services
Reduce outreach
Inability to self-sustain
Unable to fully meet the demand of market and different categories of end users
Prone to fraud and robbery
Reduce clients’ confidence
Non-standardisation of data gathering and dissemination
Difficult to centralise the monitoring progress of subsectors in microfinance institutions
Lowers the speed and ability to collect and deliver client information
Limit the effectiveness in keeping track of current records
Inadequate database to support decision-making and planning
Insufficient diversification of credit delivery and management

7. Solving Issues with Technology
Microfin, Indonesia
Information and Technology System Training to Baitulmaal wa Tamwil institutions
Expansion of outreach to Semarang, Yogyakarta, Surabaya, Medan and Makasar
Tanzania Eco-Volunteerism
Enables the community to participate and acquire new technology in their beekeeping activities
Enhance participants’ financial, social and environment sustainability
Alhuda Humanity Development Assistance
Usage of basic web applications to record client data with SMS and transmission
Reduction of labour cost and improvement of efficiency

8. Types of Technology Used
Management Information System (MIS)
Automatic data flow
Easy access, detailed and up-to-date information
Enable staff to keep track on progress
Client-facing technology
Automatically collect client application data
Enables connection to various payment channels (smart cards, mobile banking, etc.)
Better control of transactions
Process automation technology
Automating loan application process
Integrate both MIS and client-faced technology

9. System Needed to Accomplish Goal
Core System
Loan portfolio management, accounting functions, managerial and financial reporting functions
Enables Islamic microfinance institutions to move towards paperless transactions
Increase transparency and improve business quality management
Additional System
Customer relationship management system, mobile solution system
Enables staffs to monitor, change and improve the process flow
Enables further understanding on client base
Enables management to keep track of the population of clients that are currently served
Real-time transaction could be done effectively

10. Benefits of Technology for Islamic Microfinance
Cost Reduction
Improves Efficiency
Increases Outreach
Client Satisfaction
Promotes Security

11. Issues Restricting the Implementation of Technology
Lack of funding
Inability to define adequate requirements
Fear of making poor choices
Insufficient organisational and human capacity
Unavailability of vendors and capacity to implement and support technology solutions

12. Concluding Remarks
Islamic microfinance industry has good prospects, especially in the application of technology advancement.
It has been found that Islamic microfinance are having problems, especially in managing credit delivery to clients.
The emergence of strategic tool can be a strategic tool for Islamic microfinance with proper and consistent implementation.

13. Thank you for your attention 