Thesis Proposals for ICT

Thesis Proposal

ICT based Microfinance Services Delivery Model (Action Plan for Pakistan)

Owner: Asif Yaseen [email protected] Examiner: Terrence Brown [email protected]

Master of ICT Entrepreneurship School of Information and Communication Technology

KTH, Royal Institute of Technology Stockholm, Sweden

Timeline: July 23 to December14, 2007

Master Thesis Proposal 2

ICT based Microfinance Delivery Model, Action Plan for Pakistan

Table of Contents

1. INTRODUCTION ...................................................................................................................... 5

2. THESIS MOTIVATION ............................................................................................................. 6

3. RESEARCH QUESTION ........................................................................................................... 7

4. THESIS OBJECTIVES................................................................................................................ 8

5. RESEARCH METHODOLOGY ................................................................................................ 9

5.1 SECONDARY RESEARCH SOURCES ........................................................................................ 9

5.2 FOCUSED GROUP ................................................................................................................... 9

5.3 FIELD SURVEY ....................................................................................................................... 9

6. EXPECTED RESULTS............................................................................................................. 10

7. BENEFICIARIES...................................................................................................................... 10

8. THESIS ORGANIZATION...................................................................................................... 11

9. THESIS METHODOLOGY ..................................................................................................... 12

9.1 PROPOSAL STAGE ................................................................................................................ 12

9.2 LITERATURE REVIEW STAGE............................................................................................... 12

9.3 DESIGN STAGE..................................................................................................................... 12

9.4 DOCUMENTATION STAGE .................................................................................................... 12

9.5 PRESENTATION STAGE ........................................................................................................ 12

10. DELIVERABLES .................................................................................................................... 13

10.1 PROJECT WEBSITE.............................................................................................................. 13

10.2 FINAL VERSION OF PROJECT PLAN.................................................................................... 13

10.3 LITERATURE REVIEW REPORT 1 (MICROFINANCE MODELS & PRODUCTS)...................... 13

10.4 LITERATURE REVIEW REPORT 2 (FINANCIAL REGULATORY FRAMEWORK RELATED TO

MICROFINANCE IN PAKISTAN)................................................................................................... 13

10.5 LITERATURE REVIEW REPORT 3 (ICT INNOVATIONS IN MICROFINANCE)........................ 13

10.6 ICT BASED MICROFINANCE DELIVERY MODEL ................................................................ 13

10.7 PROJECT DRAFT PROTOTYPE ............................................................................................ 13

10.8 FINAL PROJECT REPORT .................................................................................................... 13

10.9 PRESENTATION .................................................................................................................. 14

11. GANTT CHART ..................................................................................................................... 14

11.1 KEY ACTIVITIES FOR PROJECT .......................................................................................... 15

11.2 IMPORTANT DATES AND MILESTONES .............................................................................. 15

12. RISK ANALYSIS ..................................................................................................................... 17

13. CONCLUSION ....................................................................................................................... 19

14. REFERENCES ........................................................................................................................ 19



Document Information

Document Name

Version Number

Start Date Submission Date

Thesis Proposal 1.0 July 23, 2007 July 30, 2007



Domain: Social Entrepreneurship Area: Micro finance outreach & Sustainability, breadth and depth of microfinance services Context: Information & Communication Technologies Result: A new delivery system for providing micro finance services like micro credits, micro insurance and leasing by using information and communication technologies for mitigating poverty in rural territories of Pakistan.



1. Introduction Sustainable development is one of the greatest challenges of today. Microfinance

initiatives are recognized as development tools to empower sustainable development.

Microfinance services can be defined as access of poor to financial services who have

been neglected by main banking industry. These people have no access to commercial

banking services due to poverty, lack of education, living in a far flung area and lack of

collaterals. This was started during 1970s and now many different organizations like non-

profit organizations (both regional and international), financial institutions, some

commercial banks and also state, local governments and independent rating agencies are

in the main stream to provide microfinance services in different parts of Asia, Africa,

Latin America and East Europe.

Pakistan is also one of those countries where microfinance outreach has increased at

unprecedented rate and innovative techniques have been used to tap the rural and urban

market as well. Albeit 65% area in Pakistan is rural but still microfinance institutions in

Pakistan have more access to urban areas as compared to rural areas. Moreover, in urban

areas this growth is concentrated in Karachi, Faisalabad and Lahore district as compared

to other one (16% growth is only in Lahore district). In Pakistan, researchers and

practitioners are of the view that micro finance expansion is still in its infancy stage like

in Lahore where the rate of penetration is highest but still passed only16% of total urban

market. Not only in Pakistan, round the globe this is a proven fact that it is challenging to

build village banking model for microfinance services in remote areas due to following

issues faced by microfinance institutions.

1- Building information networks in far flung areas.

2- Management and processing of information at the transaction level.

3- Payment and receipt of money in remote areas.

Everyone of above mentioned reason poses challenge for outreach and sustainability.

Different delivery models and mechanisms have been used to increase outreach and

financial sustainability but a little explored one is use of ICT for developing delivery

architecture. Information and Communication Technologies (ICT) has a great potential to

support microfinance initiatives. Though many steps has been taken to ensure that ICT is

instrumental in lowering the cost of loan administration and also helps in offering many

affordable and flexible loan products to poor yet practically in Pakistan, only MIS system

and handheld calculators are used to support micro finance operations. In addition, ICT

can also help MFIs to expand their services coverage by providing logistical, strategic

and analytical support. So, ICT has an immense potential to support not only two crucial

issues of microfinance sector, (increasing outreach and increasing financial sustainability)

but also it will bring several benefits like breadth of market coverage as ICT based

delivery model will facilitate expansion in untapped rural territories and also depth of

market coverage by identifying new products and services. ICT innovations will be a key

strategy in efforts to take microfinance to the next level in terms of outreach and

sustainability.



Moreover, in Pakistan, majority of these microfinance organizations are donor funded,

which is an obstacle to their scalability and sustainability. ICT based initiatives (for

example smart cards, handhelds, modified ATMs) are instrumental in lowering down

transaction and overhead cost and expanding the availability of microfinance. As the

world of micro finance is discerning a paradigm shift towards profit oriented commercial

model from donor led model, it is pertinent to develop ICT based sustenance to change

delivery model for microfinance. This new ICT based delivery model will propose a

definite framework for outreach and sustainability whose social benefits will be measured

in terms of quality and usefulness of microfinance services, cost of operations, depth and

breadth of micro finance products, length and scope of microfinance activities.

2. Thesis Motivation According to statistics, about three billion people in this world are living on less than two

dollar per day. Moreover, The United Nations' Millennium Development Goals (MDGs)

have stimulated the world with a challenge to improve the welfare of the poorest of the

poor. Since last three decades, microfinance is positioned as a development tool to reduce

poverty on global level and many multilateral lending agencies, bilateral donor agencies,

developing and developed country governments, and non-government organizations

(NGOs) are supporting the development of microfinance. Despite this growth, outreach

and financial sustainability of microfinance is a great matter to be discussed. It is

estimated that about 95 percent of some 180 million poor households in the Asian and

Pacific Region still have little access to institutional financial services. Access to services

and offering banking operations at the very door step of poor are those two big questions

that call reengineering of delivery mechanism and also range of microfinance products

customized according to the need of a particular society.

In Pakistan, there are certain gaps on supply side of microfinance services that is evident

from outreach statistics. I intend to look for the best practices for these gaps and then

examining the role of ICT for recuperating these gaps. In this context, I will explore

electronic banking for remote areas and what kind of results have been obtained so far

and what is the potential ramifications of this for Pakistan for quite long term growth and

sustainability of this sector.

In Pakistan like many other many areas of the world, only MIS system and handheld

computers are being used in microfinance sector. In some other parts like in India and

Latin American countries, other ICT applications are used on limited scale and a

differentiation edge is taken. No one can deny that ICT innovations would be a key

strategy for development of E-banking services for microfinance sector. This will change

business models, range of services and methodologies that are the central to microfinance

sector. Furthermore, ICT innovations will help commercial banks to do microfinance

more profitably. Thus, it is a dire need to rethink delivery model for microfinance

services and particularly a delivery model for commercial banks that have already big

setups in different countries. Realizing this challenge many research work is going to

induce ICT in microfinance but this is a need of time to consider a holistic approach for

rethinking delivery model for financial services.



3. Research Question

Currently, this is a zenith stage for technological revolution showing technological and

economic success for advanced countries while the rest of world finds themselves trapped

in the vicious cycle of poverty. Microfinance is considered a major tool to cope with

poverty issues. This is a high time to use ICT platform for increasing outreach and

financial sustainability of microfinance in Pakistan.

This thesis will explore the answers of the following questions.

1- In Pakistan, how ICT can be instrumental to the future direction of Microfinance

initiatives by changing its delivery model. The cost of microfinance services in

rural and far flung areas is high due to lack of infrastructure, high operating cost

and management of operations. Is ICT based delivery model a promising solution

for breadth and depth of microfinance services to this problem?

2- What is the current microfinance services delivery model prevalent in Pakistan

what are the challenges and barriers in getting financial services by poor and what

kind of ICT best suits the underlying environment in Pakistan.

3- What opportunities does exist in Pakistan for offering other microfinance products

(except micro credit) to fill the microfinance gap through ICT based delivery

model.

4- How Government of Pakistan can support E- banking model for microfinance

operations in rural and far flung areas of Pakistan.



4. Thesis Objectives

This thesis project aims at achieving following objectives/ milestones.

1. Study and analyze microfinance market in Pakistan. What kinds of services are

currently offered in Pakistan? What is the condition of demand and supply side in

Pakistan? What is a true picture of growth and trends for microfinance products in

Pakistan?

2. What kind of financial services are offered for the poor in Pakistan. What is the

supply leading and poverty lending approaches prevalent in Pakistan? What is the

demand driven and financial system approaches are currently used in Pakistan.

3. What are the challenges for rural finance in Pakistan? What are the barriers to

access financial services in Pakistan by poor?

4. What kind of ICT innovations are being used in microfinance in different parts of

the world and how ICT is a strategic tool for making microfinance institutions

more efficient and effective.

5. What are the reasons for facing difficulties for getting right ICT based solutions in

Pakistan.

6. What will be complete architecture for ICT based delivery system. What are

important issues for its development and commercialization in Pakistan?

7. What kind of different microfinance products can be offered by ICT based

delivery model and what will be new methodology to offer new microfinance

services in Pakistan.

8. What are Pakistani government policy issues regarding financial system stability

for building institutional capacity and regulation and supervision issues regarding

E-Banking model for microfinance.

9. What are social and political motivations for developing this new model so

Government of Pakistan supports building this model?



5. Research Methodology To answer the above mentioned questions, following research methodology will be used.

5.1 Secondary Research Sources

Extensive secondary research will be conducted about working of microfinance

institutions in Pakistan, current outreach, comparison of different major delivery

models prevailing in the world and the use of ICT in microfinance operations in

different countries.

5.2 Focused Group

Discussions with a sample of experts from banks, NGOs, government officials to get

the meaningful insights about reality picture in Pakistan. Structured Interview

technique will be used for this.

5.3 Field Survey

Field surveys by using snowball sampling techniques in different areas of Pakistan to

have a clear understanding for building the architecture for ICT based delivery model.

A valid and reliable research instrument (Questionnaire) would be developed to get

information from field. The samples would be selected in following ways.

Respondents would be divided into 2 categories.

Group 1: This group will consist of those persons who are directly availing formal

and informal microfinance services.

Group 2: This group will consist of different family members who are using financial

services.



6. Expected Results

1. To provide a clear understanding of challenges and barriers faced by poor in

Pakistan to access microfinance services.

2. To furnish demand & supply analysis of microfinance market in Pakistan. This

will be instrumental for developing new microfinance products.

3. To provide a complete architecture for ICT based microfinance delivery model

focusing on Pakistani market needs but also can be used in rural parts of the

developing world.

4. To open new opportunities for ICT entrepreneurs in Pakistan to develop

customized products being used for ICT based delivery model.

5. To reduce existing loan administration cost and overhead cost. In addition to this,

Microfinance companies will get logistic, strategic and analytical support by

using this new delivery model.

7. Beneficiaries

Primarily, this thesis report is for academic usage but secondly, it can be a valuable

guideline for different stakeholders not only in Pakistan but also across the globe where

the issue of increasing microfinance outreach and sustainability is a matter of discussion

and that is a certain global agenda pertaining to microfinance sector.

Following stakeholders in Pakistan can find this thesis a valuable resource.

1. Government financial policy makers who have a vision to get poor class of

Pakistan in the main financial stream.

2. Microfinance Institutions who intend to develop a village banking model to tap

the big untapped market.

3. Pakistan Microfinance network, which is a network of different leading

microfinance institutions that are dedicated to improving the outreach and

sustainability of microfinance services in Pakistan.

4. Internet service providers

5. Telecom Network Operators

6. Other ICT entrepreneurs

7. Household users of microfinance products in urban and rural areas.

8. Ministry of local government and rural development in Pakistan.



8. Thesis organization This thesis project will be completed according to the rules of master thesis work at KTH,

School of information and communication technology. The thesis will be completed in

Pakistan by student researcher in collaboration with Pakistan Microfinance Network, a

network of 19 member micro finance organizations (retail microfinance organizations,

NGOs, donor agencies).

Researcher

Asif Yaseen.

Master Student in ICT Entrepreneurship

E-mail: [email protected]

Supervisor-1

Dr. Terrence Brown

Telecommunication System Lab

School of Information and communication technology, KTH


Supervisor-2

Lena Ramfelt




Examiner

Dr. Terrence Brown






9. Thesis Methodology Here is a sequence for the execution of project activities. It is important to note that

execution process for different stages may be iterative as uncertainty prevails when we

solve real world problems.

Different stages of this thesis project are as follows,

9.1 Proposal Stage

Following activities will be carried out,

1. Finalize the draft for detailed project plan after a number of meetings with

supervisor and examiner.

2. Discussing and concluding the project objectives and milestones.

3. Making project website, uploading final project specification and a detailed plan

with GANTT chart.

9.2 Literature Review Stage

This stage covers extensive readings on

1. Existing microfinance delivery models

2. Use of ICT in microfinance

3. Exploring ICT technology that may be used

4. Statistics related to outreach of microfinance operations in Pakistan

5. Financial regulatory framework prevalent in Pakistan

6. Different types of microfinance products offered in Pakistan at current time.

9.3 Design Stage

This stage encompasses extensive field survey, focused group studies from different

organizations like commercial microfinance banks (First Microfinance Bank Ltd, Tameer

Bank), NGOs, personnel’s from telecom operators and financial regulatory body of

Pakistan. In addition to this, this phase also includes building architecture for ICT based

microfinance model.

9.4 Documentation Stage

This stage focuses on putting all the secondary data and primary data collected during

focused groups discussions and field survey in a report form to present to examiner and

also used by any interested microfinance platform.

9.5 Presentation Stage

This project would be presented to examiner and other interested participants for

academic usage.



10. Deliverables This thesis will furnish following important deliverables as progress goes on according to

different stages.

10.1 Project website

This is a space for all kind of documentation pertaining to this thesis. This will exhibit the

complete process of furnishing different types of deliverables. Any concerned and

interested person can access

1. What has been delivered?

2. What is in the pipeline?

3. Time frame for past and upcoming events.

10.2 Final Version of Project Plan

After detailed meetings with supervisor and examiner, a project plan with table of

contents for different areas to be covered during research will be uploaded on thesis

website. Again it is important to note that real world problem solving requires some

changes according to time frame that would be adjusted accordingly.

10.3 Literature Review Report 1 (Microfinance Models & Products)

This report will include secondary research related different microfinance delivery

models and microfinance products prevalent in the world and especially in Pakistan. This

also entails challenges and gaps related to rural finance issues in Pakistan.

10.4 Literature Review Report 2 (Financial Regulatory framework related to

microfinance in Pakistan)

This report will describe Pakistani government financial regulation policy related to

microfinance. It will be analyzed what kind of challenges and opportunities posed by

regulatory framework.

10.5 Literature Review Report 3 (ICT Innovations in Microfinance)

This report will consist of uses of different ICT innovations in microfinance delivery

models that are being used in different parts of the world. This will also include what

kind of ICT innovations are currently being used in Pakistan. T

10.6 ICT based Microfinance Delivery Model

After field study, this report will provide an open design for ICT based microfinance

delivery model in Pakistan and this also includes factors influencing the design and

choice of system architecture.

10.7 Project Draft Prototype

A detailed report containing precise and analytical information will be submitted to

examiner and supervisor for constructive improvements.

10.8 Final Project Report

After remodeling report, the final version will be uploaded on thesis website; Final copy

will be mailed to examiner, supervisor and opponent.



10.9 Presentation

The researcher is ready for defending his research work and for oral presentation. The

researcher will be open to any kind of questions to his examiner, opponent and other

participants.

11. Gantt chart

Here is a detailed schedule for key activities to be completed during this research thesis.

Moreover, starting time, finish time and time span for each activity is listed. In this Gantt

chart activities are assigned numbers and listed horizontally and time is shown in weeks

and depicted vertically.

Time Schedule for project activities

Time/

Key

Activities

1 2 3 4 5 6 7 8 9 10 11

Week 30 Week 31 Week 32

Week 33 Week 34 Week 35 Week 36 Week 37 Week 38 Week 39

Week 40 Week 41 Week 42 Week 43 Week 44 Week 45

Week 46 Week 47 Week 48 Week 49 Week 50



11.1 Key Activities for Project

1. Thesis Website and detailed Project Plan

2. Familiarize with different microfinance models and financial products offered in

this domain.

3. Developing questionnaire for focused group interview.

4. Analysis of microfinance markets in Pakistan. This analysis includes different

services offered, demand and supply side, growth and trends for microfinance

products in Pakistan.

5. Study ICT innovations in microfinance markets in the world and also in Pakistan.

6. Developing questionnaire for field survey.

7. Study microfinance regulatory and policy framework in Pakistan.

8. Design of ICT based microfinance delivery model.

9. Initial draft of report.

10. Final Draft of report.

11. Presentation.

11.2 Important Dates and Milestones

Pre-planning work:

18 June: Approval from Examiner, Dr. Terrence Brown for domain and area for working

on master thesis work.

22 June: Registration of thesis work in KTH Enrollment system.

25 June-15 July: Initial contacts to Pakistan Microfinance Network, a network of

practitioners of microfinance for initial discussions for developing research questions.

Crude search on internet related to social entrepreneurship domain and microfinance area.

Project Starting Date: July 23, 2007 (Week 30)

30 July: First draft of thesis plan was finalized and mailed to examiner and supervisor for

approval.

07 August: Feedback on first draft of project plan.

14 August: Deadline for producing and uploading the final draft for project plan.

20 August: Submission of questionnaire for focused group discussion for supervisor

feedback.

24 August: Submission of final draft of literature review report 1 about microfinance

models and products.

03 September: Submission of final draft of literature review report 2 about use of ICT

products in microfinance.

14 September: Submission of questionnaire for field survey for supervisor feedback.

20 September: Submission of final draft of literature review report 3 about financial

regulatory framework related to microfinance.

05 October: Submission of report related to focused group discussions.

22 October: Completion of field survey.

12 November: Deadline for architecture of ICT based microfinance model.



26 November: Submission of first draft for thesis work.

05 December: Submission of final draft for thesis work.

14 December: Final presentation of thesis work at KTH.

Project Finished Date: Dec 14, 2007 (Week 50)



12. Risk Analysis

This thesis is related to solving a real world problem so definitely certain risks are

involved due to uncertainty. Here is a detailed analysis of risk events, probability that is

denoted by ‘P’, effects that is denoted by ‘E’ and their mutual risk index is the

multiplication of probability and Effect of any risk.

Expected Risks

No Risk Event Probability (P) Effect (E) Risk index

(PxE)

1 Precise and accurate information

about Microfinance models and

products are not available.

2 4 8

2 NGOs reluctance to provide

information related to use of ICT

products in microfinance outreach

3 4 12

3 Delay in response from Pakistani

Microfinance organization and

companies are not willing to

provide outreach statistics.

3 4 12

4 Communication problem with

stakeholders and delay in getting

appointment time for focused group

interview.

4 4 16

5 Lack of cooperation from public

sector in Pakistan.

4 2 8

6 Communication problems in field

survey and unwillingness of

common households to provide

accurate information.

3 4 12

7 Due to cost and time for extensive

traveling, may be a homogenous

survey

3 3 9

8 If due to any uncertain reason one

milestone takes longer time than

expected

2 3 6

9 Unanticipated work load

2 3 6



Following are the mitigation strategies and contingency plans for the above mentioned

risks.

Risks Analysis

No Risk Event Mitigations Strategy Contingency Plan

1 Precise and accurate

information about

Microfinance models and

products are not available.

Getting help from Pakistan

Microfinance Network.

Redefining project plan scope.

2 NGOs reluctance to provide

information related to use of

ICT products in microfinance

outreach

Using personal references

to approach microfinance

companies and NGOs.

Exploring the websites of those

organizations whose outreach is

greater or search for alternatives

not those who are originally

included in sample.

3 Delay in response from

Pakistani Microfinance

organization and companies

are not willing to provide

outreach statistics.

Fixing the problem by

negotiation and using

facilitators to get

information.

Redefining project plan to change

the area of working.

4 Communication problem with

stakeholders and delay in

getting appointment time for

focused group interview.

Setup meetings well before

time.

Using references to get time and

plan out telephonic and e-mail

conversation.

5 Lack of cooperation from

public sector in Pakistan.

Attempt to get publicly

available reports for

Pakistani statistics.

Exploring alternatives if possible.

6 Communication problems in

field survey and unwillingness

of common households to

provide accurate information.

Creating awareness among

poor communities by

personal counseling.

Changes in sampling technique

and using accidental and

judgmental sampling techniques.

7 Due to cost and time for

extensive traveling, may be a

homogenous survey is not

possible.

Relying on existing

information collected from

member organizations of

Pakistan Microfinance

Network.

For Focused group discussion only

telephonic interview technique

will be used. And for field survey

a small number of easily

approached areas only in Punjab

and Sindh provinces will be

selected from four provinces of

Pakistan.

8 If due to any uncertain reason

one milestone takes longer

time than expected

Putting extra efforts to keep

delay off.

Make changes and specify project

plan accordingly.

9 Unanticipated work load

Putting extra efforts to

keep delay off.

Make changes and specify project

plan accordingly.



13. Conclusion

The primary focus of thesis project is to deliver an ICT based solution for remodeling

microfinance delivery system in Pakistan that will increase outreach of microfinance

operations not only in urban areas but also in the rural areas of Pakistan. This will be

based on those technologies that are highly suitable for rural areas of Pakistan. This is not

an easy task without realizing challenges faced by field survey, focused group

discussions and regulatory framework view about using ICT innovations in microfinance.

14. References

1- Barton and Marshall Bear. April, 1999, Information and Communications

Technologies: Are They the Key to Viable Business Development Services for

Micro and Small Enterprises?

2- Mathison, S. (2005), Increasing the outreach and sustainability of microfinance

through ICT innovation, draft.

3- Cracknell, D. (2004). Electronic Banking for the Poor: Panacea, Potential and

pitfalls. Website: www.microsave.org

4- Janine Firpo, SEMBA Consulting, Banking the unbanked: Technology, s role in

delivering accessible financial services to the poor.

5- Whelan, S. (2003), CGAP IT Innovation Series: Smart Cards. Retrieved August,

2005.

6- Mark Schreiner, June 1999, “Aspects of Outreach: A framework for the

discussion of the social benefits of Microfinance”, Center for Social

Development, Washington University, St.Louis, USA.

7- Asian Development Bank, 2000, Finance for the Poor: Microfinance development

Strategy.

8- Social Enterprise Associates, Microfinance: Sustainable tool for Urban Poverty

Alleviation, policy working paper no. 06.

9- Claessens, S., Glaessner, T., & Klingebiel,D.(2001). E-Finance in Emerging

Markets: Is Leapfrogging Possible? (Financial Sector Discussion Paper No.07).

Washington, DC, World Bank.

10- “Pakistan Microfinance Network”, website; http://www.pmn.org.pk/.

Documents

Thesis Proposals for ICT