Swayam Krishi Sangam (SKS) Handheld/Smart Card Project

In the developed world, handheld PCs seem to have become no more than fashionable organizers. What about digital "smart" cards? Just a way to tuck everything into your purse.

But in Medak, one of the poorest regions in the Indian state of Andhra Pradesh, these hi-tech devices are being explored as a cost-saving alternative in microfinance—and may thus have a central role to play in raising living standards in the area.

How can you help feed the poor with $300 handhelds?

Hear Swayam Krishi Sangam (SKS) explain. SKS is a Grameen Bank replication project that has been providing emergency and income-generating micro-loans for women in the rural villages of Medak since 1997. Following the Grameen model, five women are grouped together to form a cohesive unit, and up to eight groups form a larger cohesive called sangam (women's banking cooperative). During sangam meetings held once a week, a SKS staff member or Sangam Manager disburses new loans, manages savings withdrawals, collects due payments, and hears proposals for new loans.

Every transaction is recorded meticulously by hand. Because this is highly time and labor-intensive—and therefore costly—it inhibits the number of women and the number of sangams that the managers can serve. They have to execute all transactions and proposal-hearings within a small window of time in the early morning before the women must depart to work. Coupled with an exponential increase in membership since 1997, from 0 to 8200 women in just 5 years, the situation has forced SKS to explore new operational strategies.

The Technology and How It Works

Introducing SKS' Handheld/Smart Card pilot project. Smart cards are essentially electronic passbooks—bank-card size pieces of hard plastic that contains integrated memory chips. Each group of women is given a smart card that stores information about their loans and savings transactions with SKS.

Every morning, the sangam manager takes her handheld computer and new loans agreed upon at the previous meeting to the sangams she is responsible for. At the meeting, a representative of each women's group comes forth and inserts her smart card into the card reader of the handheld. Due loan and savings repayments are paid, new loans disbursed, and where previously the transaction was recorded by hand, the sangam manager simply has to type in the amount borrowed or repaid into the handheld and it will instantly write the new data onto both the handheld and smart card.

Once the sangam manager returns to her regional SKS office after making her round, she proceeds to synchronize and update the branch computer with the new data on her handheld. In this way, records of loan transactions can travel back to the top-level central databank automatically.

Understanding that more awareness-building needs to be done to generate total confidence in the benefits of the new system, the sangam manager now uses both the manual as well as the smart card system.

Initial Results

Initial observations are cause for cautious optimism. The new system has resulted in a 10% reduction in sangam meeting times, and eliminates the need for sangam managers to do 20,000 manual passbook entries in sangam meetings and 160,000 entries at the branch office per year. The time savings can be productively used in other activities such as conducting new sangam meetings, hearing more proposals or checking on how the loans are utilized. Automating these transactions also reduces the scope of error.

The Handheld/Smart Card design is aimed at lowering SKS's cost of operation. The financial sustainability of microfinance institutions (MFIs) like SKS has continuously been under strain—not only due to their clients' generally small loan portfolios, but also due to the high transportation cost that MFI staff must bear when traveling to their clients' remote and sparsely-populated villages. Thus the system hopes to increase MFIs' profit margins such that they will continue to serve the most needy in those areas.

The Challenge

Given all the benefits, high hardware and software costs are still prohibiting rapid and full deployment of handhelds and smart cards in SKS' operation. Currently SKS is waiting for cost-analysis results from its 10-month, 10-sangam wide pilot. A critical evaluation of the results will be used to determine whether the technology can indeed dramatically increase the MFI's efficiency and give it significant returns for its investment.

SKS is confident that by thinking creatively and leveraging technology, MFIs and their clients will both benefit.

Bridging a Larger Divide

Another important learning experience from the SKS Handheld/Smart Card project is the remarkable way in which its staff—most of whom share the same socio-economic status with their borrowers as dalats (untouchables)—is able to maneuver the hi-tech devices with ease.

Not only is their ability to quickly master the technology impressive, but their willingness (and that of the women villagers) to replace the century-old method of bookkeeping by the complicated, hi-tech device is giving SKS great confidence in the feasibility of scaling up its Handheld/Smart Card operations in the near future.

The organization has set an ambitious target of reaching 100,000 women in the 100 poorest districts in India, to be fulfilled in 5 years. SKS seeks partnerships with larger banks and businesses, and challenges them to take advantage of emerging technologies to offer a greater range of services to improve the lives of these disadvantaged women.