SaaS, the next wave in microfinance technology

By Naagesh Naaraayana

Microfinance Focus, Sept. 14, 2009: Many software providers in the microfinance sector are increasingly turning to the next stage — a new SaaS (Software as a Service) platform. Market intelligence shows that many Indian software providers in microfinance space are now shifting their attention to this model, which has become popular in the mainstream software sector as well.

SaaS is a model whereby a software provider provides an application to customers for use as a service on demand. SaaS software vendor usually hosts the application on his web servers which can be downloaded by the customer on his device or computer terminal, disabling it after use or after the on-demand contract expires.

Under this, users pay either monthly software leasing fees or share a tiny part of their profits rather than incur huge up-front cost to purchase the software.

No more IT infrastructure for MFIs under SaaS model

In microfinance, it requires initial customisation of the software and maximisation of client base to reap benefits. It essentially helps both established and new players to reduce cost and making the business of providing micro-credits profitable.

In addition to the low up-front costs and consistent monthly fees, the SaaS option also offers other benefits of a web hosted environment like 24/7 anytime/anywhere user access to software, elimination of manual update installations, enhanced data security and automatic backup.

“By eliminating the up-front software purchase costs, the SaaS platform makes it easier for firms to establish a solid foundation for their future activities,” said Shabbir Hakim, Executive Director of Craft Silicon, a Bangalore-based software provider for microfinance institutions, which is increasingly into the SaaS model.

“The SaaS not only gives immediate access to the software but also leverages the benefits of a fully integrated suite of software from the beginning without spending huge funds on in-house IT development and maintenance,” said Hakim.  And many software service providers in the microfinance sphere are entering the SaaS model.

But SaaS service providers should pay attention to the customer experience even after sales, according to Gautam Ivatury, Strategic Adviser to CGAP, (Consultative Group to Assist the Poor of the World Bank). “When we talk of SaaS model… software and servicing post-implementation is touted as being completely remote. To ensure that SaaS vendors aren’t painted with the same brush as traditional MFI software suppliers, these vendors must pay particular attention to the customer experience post-sale,” he said on CGAP technology blog.

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