SAP wants to help microcredit groups manage loans

Targeting ever-smaller businesses, SAP is working with French nonprofit PlaNet Finance to help microfinance institutions

SAP hopes to help lower the cost of managing loan portfolios for organizations offering microcredits as part of a partnership announced Wednesday with French nonprofit group PlaNet Finance.

Microcredits, or very small loans, were pioneered by Grameen Bank founder Muhammad Yunus in Bangladesh as a way of helping the rural poor to start up economic activities with which to earn their way out of poverty.

PlaNet Finance supports a number of microfinance institutions around the world, providing them with consulting services and loan portfolio management software to help them run more efficiently.

SAP will contribute software, expertise and a little bit of cash to PlaNet Finance's work, SAP CEO Léo Apotheker said at a news conference in Paris on Wednesday.

That expertise will first be applied to a field project in Ghana. In the north of the country, a major source of income is the cultivation of shea nuts, which can be transformed into shea butter for use in cosmetics and food.

The growers, predominantly women, see little of the profit from their work because they have little bargaining power and insufficient information about the value of their produce, said PlaNet Finance President Jacques Attali.

SAP and PlaNet Finance hope to help the growers by providing them with mobile phones that will allow them to access information about market prices, preventing middlemen from profiting from their ignorance. The phones will also give growers greater access to the capital necessary to improve production techniques, by making it cheaper for microcredit groups to follow up on loans.

Of course, like the organizations handing out microcredits, SAP hopes for a return on its modest investment: In addition to filling the pages of its corporate social responsibility report next year, SAP hopes to learn from the project how to develop simple user interfaces that will let mobile phone users access information intuitively, Apotheker said.

Such interfaces could also help corporate customers wanting to roll out SAP's ERP (enterprise resource planning) systems to more users, or attract more of the smaller businesses SAP is increasingly targeting with its latest offerings.

The project could bridge the gap between small and large businesses in other ways too. Apotheker said he hopes, one day, to hook up big SAP customers in the cosmetics and food industries directly with the smallholders in developing countries who grow their raw materials, providing both sides with a way to cut costs and boost profits.

PlaNet Finance will benefit from SAP's largesse too, using the company's software to improve its loan portfolio management software. The first version of that software, TMS, was written in Visual Basic, and is already used by 15 microfinance institutions. The second version, MicroFIT, was built with Microsoft's .Net platform and SQL Server, and will soon be used by 16 institutions, the first of which will go live in July, according to the nonprofit's operational manager, Tanguy Romain.

Now, though, PlaNet Finance plans another update, built using SAP's software platform. The client software for the current versions is pretty heavy, said Romain, while the next version will be Web-based, making it better suited to the limited computing resources found in the developing regions where many of its clients operate.

The new version could be hosted on SAP's servers in Walldorf, Germany, or on local infrastructure, said Apotheker.

Microcredits are sometimes criticized for the high rate of interest charged to already-poor clients. The rates are a function of the size of the loans -- a small loan costs just as much to administer as a large one -- and the difficulty of keeping in touch with clients in rural areas where communications are poor.

While the new software version will go some way toward cutting costs by simplifying administration, it won't do much for improving communications with the remotest areas. That's why PlaNet Finance is also looking at developing a mobile banking application, said Romain.