New Microfinance Technology to Aid Poor in Central America

Business Wire, Nov 29, 2006

Lehigh University students, Honduras banking officials hoping to expedite loan transactions

BETHLEHEM, Pa. -- Lehigh University business students have developed a pair of technologies designed to make microfinance loans more accessible to small business owners and the working poor in Honduras. The Web-based tools have been developed in consultation with REDMICROH, a network of microfinance institutions (MFIs) headquartered in Tegucigalpa, Honduras.

The technologies include a synchronized data collection system for mobile (handheld) devices as well as a database management system. They were specifically customized for Honduras MFIs, with the intent of eliminating redundant, labor-intensive activities.

"We wanted to work with Honduran technology specialists to design an automated system, one that doesn't rely so heavily on paperwork and which consolidates the loan approval process from three days to about 15 or 20 minutes," said Lehigh student Scott Menzer '07, a computer science and business major.

Microfinance has been heralded as an innovative approach in tackling global poverty. Today, more than 10,000 organizations offer microfinance programs to nearly 100 million working poor. REDMICROH is a network of 25 MFIs that serve nearly 160,000 clients in Honduras alone, 80 percent of whom are women.

"As rapidly as it is growing, the microfinance industry is already at a crossroads," says Todd Watkins, associate professor of economics at Lehigh's College of Business and Economics. "Technology will play a critical role in helping commercial MFIs meet the growing global demand for microfinance. New, adaptive technology is especially important for the industry's long-term growth and sustainability."

Microfinance loans are relatively small, usually ranging from US$50 to US$500. Typically, Honduran loan recipients are working poor (either small-business owners or household entrepreneurs) who live on less than one dollar a day and are looking to start or expand their businesses.

In HondurasColike most other underdeveloped countriesComost of the loan processing and transactions are still done by hand. This results in high per-loan transaction costs and challenges in reaching sparsely populated areas where microfinancing is often needed the most.

Lehigh University started collaborating with Honduras MFIs when students made a week-long trip to the Central American country last summer. While there, the studentsCoa combination of economics majors and computer science and business (CSB) majorsComet with entrepreneurs and microfinance officials at venues throughout the country, including Tegucigalpa and the small rural communities of La Entrada de Copan and Pueblo Nuevo.

Lehigh, a member of the Microcredit Summit Campaign, participated in its Global Microcredit Summit 2006, which took place this month in Halifax, Nova Scotia, Canada.

For nearly 140 years, Lehigh University has combined outstanding academic and learning opportunities with leadership in fostering innovative research. The institution is among the nation's most selective, highly ranked private research universities. For more information about Lehigh, visit www.lehigh.edu.