Cash Management DSS based on System Dynamics for MFIs
All the institutions which share a commitment to serving clients with low-incomes that have been excluded from the formal banking sector are part of the microfinance industry. The Consultative Group to Assist the Poorest (the apex association of international donors who support microfinance) regards microfinance as “a powerful tool to fight poverty” that can help poor people to “raise income, build their assets, and cushion themselves against external shocks”. Microfinance institutions (MFIs) have reached well over 100 million clients and achieved impressive repayment rates on loans. Because of the increase in the scale of operations, the concept and practice of microfinance have changed dramatically over the last decade and the microfinance is increasingly adopting a financial systems approach, either by operating on commercial lines or by systematically reducing reliance on interest rate subsidies and/or aid agency financial support. The objective of this paper is to identify the need of a support system for MFIs, select a domain for developing one such system and suggest an approach to develop the system. The paper introduces the reader to three terms ‘Microfinance’, ‘Cash Management’ and ‘Decision Support System’. This introduction is necessary as Microfinance is the chosen sector where the need for such a system is identified. Cash management is the chosen domain for which this system will be used. Decision support system is a technology which is used in different industries to develop such a system. The paper further defines the methodology for developing such a system. This methodology describes the tools and techniques which will be used to achieve the goal.
