MICROCAPITAL STORY: IBM and CARE to Streamline Microfinance in Africa through Grid Technology

IBM, a multinational computer technology corporation, recently announced in a press release that it plans to partner with CARE, a leading private international humanitarian organization, to jointly establish the Africa Financial Grid, an integrated data processing infrastructure that will curb costs currently incurred by microfinance institutions (MFIs) in providing financial services in Sub-Saharan Africa.

The idea of the “Grid” was originally conceived and articulated by Ian Foster and Carl Kesselman in 1997, who defined the Grid as “a hardware and software infrastructure that provides dependable, consistent, pervasive, and inexpensive access to high-end computational capabilities”. According to IBM, it is a single, unified data infrastructure in which disparate resources are integrated and virtualized to facilitate asset sharing. Within the financial industry, grid computing enables companies to standardize existing analytic infrastructure, conduct large-scale analyses more efficiently, and achieve near real-time decision-making. Essentially, programs are able to run optimally without limitations imposed by server capacity or access to data.

The Africa Financial Grid is specifically designed to help MFIs reduce operating costs, streamline lending processes, and expand into additional financial services such as micro-insurance, bill pay, credit scoring and history, and international remittances. Its resource-sharing feature will also enable MFIs to collaborate with credit bureaus, international payment networks, and other financial institutions. Eventually, open platform technologies and standards will be adopted wherever possible to offer additional third-party services and capabilities, such as linking mobile payment providers to allow customers to repay loans and conduct money transfers via mobile phones or other devices.

The project will initially target 11 countries with a combined population of more than 400 million people. IBM will design and manage the Grid’s technology platform and provide financial services expertise, while CARE will also contribute substantial resources and local infrastructure. The partnership arose as a result of IBM’s recent Global Innovation Outlook (GIO) program, which highlighted the potential of an open, scalable, low-cost microfinance hub to advance innovation and economic development in Africa. The project is part of IBM’s plan to increase its investment in Sub-Saharan Africa by USD 120 million in the next two years.

IBM is a U.S.-based company incorporated in 1924 and is currently led by Samuel J. Palmisano, Chairman and CEO. It has operations in 170 countries with 65 percent of its employees working overseas. According to its 2006 annual report, it has total revenues of USD 91.4 billion, net income of USD 9.4 billion, and total assets of USD 103.2 billion, with records in profit margin (41.9 percent), earnings per share (USD 6.06), and cash performance (USD 15.3 billion). For more information about IBM’s involvement in microfinance in addition to its GIO program, read about its partnership with the Grameen Foundation to expand Mifos, an open-source microfinance software program.

CARE was originally founded in 1945 to provide relief to World War II survivors. The nonprofit organization now focuses on poverty alleviation through working primarily with poor women. It is currently led by Helene D. Gayle, President and CEO. In fiscal year 2006, CARE contributed USD 590 million to 901 projects in 66 countries that reached 55 million people. With regard to microfinance work in Africa, CARE it adopted a village loan and savings program (VS&L) in 1991 that has become one of its most significant programs in the area of economic development and livelihood security. The program consists of a self-selecting group of 10 to 25 members whose collective savings serve as a source of loan capital; it now reaches over 500,000 people, more 70 percent of whom are women, across southern and western Africa. Over the next decade, CARE plans to provide 30 million households (about 150 million people) with access to basic financial services, including savings, credit, insurance and remittances.

By Mary Fu

Additional Resources:

IBM: “IBM and CARE Partner to Advance Microfinance in Africa”

IBM: Global Innovation Outlook (GIO): Blog

Trivadis: “Is Oracle Database Moving Toward Grid Computing?”

IBM: “Grid Computing Solutions from IBM”

IBM: IBM Grid Computing Solution

IBM: GIO Report on Africa

ITWeb: “IBM Bets R820 Million on Southern Africa”

IBM: About

IBM: 2006 Annual Report

IBM: “IBM Partners with Grameen Foundation to Expand Its Open Source Microfinance Banking Platform and Help Eradicate Poverty”