The role of LEAD is undergoing a sea change like many of the NGOs in India. NGOs involved in economic programmes are increasingly playing the role of a financial intermediary, directly lending to groups and individuals. So far LEAD has been predominantly facilitating financial linkage of groups with the banks. Keeping in view the credit requirements of the members and the need to diversify the source funds for the groups, LEAD is slowly turning itself into a MFI.

LEAD is borrowing from Rashtriya Mahila Khosh, Small Industries Development Bank of India (SIDBI), Rabo Bank and other agencies for lending to the groups. The transformation process from a mere developmental organisation to a Micro Financial Institution is full of challenges and dilemmas. The NGO in this phase is neither a development agent nor a full-fledged financial institution.

The characteristics of the organisation right from the goals of the organisation, the staff capacity building and orientation, client population, sources of funding, methodology of lending operations, financial management and management information system need reorientation to face the changing requirements.

The important change requirement in transformation relates to the manner in which information on the NGO's operations is generated, consolidated, analyzed and reviewed. From a mere reporting of activities in terms of programmes and expenses incurred, an aspiring MFI has to generate information on financial quantities, costs, returns, portfolio quality, repayment rates and the like. Unlike pure development work, MFI work leads to financial assets, which need to be accounted for over a period of time, with regular computation of profit and loss arising out of the transactions. Design of an effective MIS is a key issue in a nascent MFI.

a. New challenges

When the organisation turns into a financial intermediary the information required becomes multifarious. This is due to the following factors:

Need to cover costs - The expenses of the developmental organisation are met out of grants and donations. A financial intermediary needs to cover costs and make profits to become sustainable in the long run. Thus MIS is in the process of being modified to generate information on the expenditure incurred and income generated out of lending operations in order to monitor whether the organisation is moving towards self-sufficiency.

Expansion of operations - Many organisations expand their operations to include new areas of work and new clients. The information system needs to give data about how well the organisation is doing in the new areas.

Client population and needs - A financial intermediary needs to address the financial requirements of the clientele and fine tune its methodology and loan terms to satisfy their requirements. A MFI may start with group lending initially with a single loan product. With the passage of time and expansion of operations different loan products need to be developed and introduced. MIS should provide useful information about the success and problems in the expansion of business and the variety in loan products.

Loan portfolio quality - There is a need to measure the health of the loan portfolio. The test of the success of the lending institution is to effect very good repayments. Over and above the data on outstanding loans and repayments collected it is necessary to segregate the amounts prepaid and repayments due and collected to arrive at actual repayment rates. It is necessary to carryout age wise classification of loans in default so that effective monitoring can be undertaken. The organisation can also frame effective policies for loan write off based on the data collected.

Efficiency of staff - The staff is the most productive asset of the MFI. Similarly the salary costs form the major expense of the MFI. The staff efficiency needs to be monitored in terms of number of clients they cater to and the loan portfolio they handle.

Regulatory framework - Unlike a NGO the micro financial institution's activities are likely to be regulated especially if the organisation is mobilising the savings of the public. The MIS should take care of the reporting needs of the organisation.

b. Changes in MIS

LEAD has broadly identified the information requirements and changes are being made in the following categories of information:

Progress reports on savings, loans, and other micro financial services such as insurance and quality of loan portfolio.

Financial statements for the MFI - income and expenditure and balance sheet for the MFI operations.

Customer information - Group performance details, Loan tracking of the clients, customer satisfaction for the financial services and impact assessments.

Progress reports - portfolio information
LEAD's repoting sysytem has undergone changes in the recent past. Field offices till now collected and monitored data on the sanction of loans under various individual loans such as housing, toilet construction and Milch animals loans. However, it plans to collect some more detailed information regarding different type of loans being sanctioned by the organisation. Now such information is collected on a monthly basis and consolidated at the project level. Instead of figures of loans disbursed, collected and outstanding some more refinement is being implemented . The loans prepaid are being segregated to arrive at actual on time repayments. Similarly the loans outstanding and overdue are being categorised into five categories.
Outstanding for more than 30 days.
,, ,, 31 to 60 days.
,, ,, 61 to 90 days.
,, ,, 91 to 180 days.
,, ,, 180 days and above.
Such categorisation has helped the organisation to assess the quality of loans and also to take effective follow up measures to ensure repayment. Though LEAD has not experienced any loan loss due to defaults, this exercise has helped in framing a policy for setting up a reserve for loan loss, as any prudent financial organisation should do.
LEAD has recently introduced the insurance scheme for cattle and goats. It is proposed to centralise data collection on the insurance premia collected and claims settled.

Financial statements - At present the financial operations of the organisation are reflected in the audited annual reports. The information pertains the data all the operations of the organisation and hence separate analysis of the micro credit operations are difficult to be made. Thus it is necessary to segregate the data for financial and non-financial operations separately so that the sustainability of the MFI operations can be tracked.

LEAD is undertaking an exercise to allocate the income and expenses for the financial and non-financial services. Segregating the income is relatively an easy exercise. Similarly the balance sheets are also being segregated for financial and non-financial services. Though the exercise is time taking and difficult LEAD finds that this would benefit the organisation in the long run in monitoring the sustainability of operations and taking necessary decisions to move the financial operations towards sustainability. Moreover, such financial statements are required for further fund raising since any donor or financing agency would like to satisfy them that the organisation is moving towards self-sustainability.

c. The next step - computerisation

Once the scope of work and the type of data to be generated are determined the next issue to be addressed are staff capacity, computerisation requirements and cost considerations. These three issues need to be addressed together. Computerisation is expensive and the capacity of the staff to manage computers is an important ingredient to the successful computer based MIS.

LEAD has computerised major portion of its operation in the Head office level . The field offices are not yet computerised. Given the advances in computer technology, the increasing scale of micro finance intermediation and the importance of developing efficient low cost product delivery LEAD finds that some amount of computerisation is necessary for its information needs. In this regard LEAD has planned to purchase software developed exclusively for monitoring its micro finance activities, appropriate to its facilitation model.