Microlending presents massive challenges
While microlending is a very effective way to fight poverty, it's also labor-intensive and therefore expensive. In fact, the high cost of making small loans is one of the major obstacles to bringing microcredit to all who need it.

Like traditional banks, micro finance institutions evaluate potential clients using measurements like business assets, amount of goods sold, and product costs. But unlike traditional banks, micro finance institutions don't make loans based upon revenue or collateral alone. Because of the poverty of their clients, most live far from city financial districts, and often they can't be reached by phone. They also lack credit histories, so loan processing is personalized, time-consuming, and costly.

Microlenders must send loan officers to meet potential borrowers in their places of work, where they weigh intangibles like references from customers and neighbors and the loan officer's own gut feeling about the applicant's drive to succeed. If loan officers didn't consider these factors, the majority of their clients would never qualify for loans.

Loan officers working in poor urban barrios usually travel by local bus to the potential borrower's home or place of work and take the application with pen and paper. They then re-enter the data into the computer when they get back to the office. Some loan officers have used laptops in the field, but they are expensive and their high value and conspicuousness pose safety concerns.

The CrediPalm application
For years, ACCION has been working to cut the time it takes to make a microloan. This is crucial for both microlenders and their clients. For clients, closing their doors to make the trip to a central lending office means lost sales--an expense they cannot afford. And loan officers lose hours traveling to client businesses, often located in outlying neighborhoods poorly served by public transportation.

In early 1999, an ACCION team, funded through a grant from USAID (U.S. Agency for International Development, set out to streamline the lending process. After evaluating laptop applications and various handheld computers, ACCION staff began developing software for the Palm handheld computer capable of managing the information needs unique to microlending. The resulting pilot application, called CrediPalm, was tailored for the loan officers working in Mexico City with ACCION's affiliate Compartamos. Testing of the software using Palm handhelds began in Mexico City in June 1999, and shortly thereafter the company deployed CrediPalm for use by all its loan officers in the field, as shown in Figure A.

FIGURE A

Compartamos loan officer Miguel Ordoñez Zavela collects client information with his Palm handheld using ACCION's CrediPalm software. Click picture for a larger image.

CrediPalm software allows the loan officers to do the following:

• Take loan applications;
• Make loan calculations on the spot;
• Assess specific expenses of each microbusiness like the cost of electricity, water, transportation, and rent;
• Assess specific conditions of a microentrepreneur's family expenses such as education and health care;
• Approve loan applications in the field;
• Quickly upload data to a centralized database at the office;
• Track loan officers' own schedules;
• Track client payment records.