Data Standards for Connecting to Commercial Sources of Capital

This paper proposes an overall strategy to meet the emerging need for data standards in the microfinance industry. It argues that:

• As the microfinance industry grows and accesses more commercial capital, there is a need for standardized reporting from multiple MFIs to multiple sources of capital, rather than one-to-one reporting relationships;
• Information technology (IT) professionals and MFI managers need to and push for an agreement on specific standards of data elements, quality and transmission protocols.

The paper states that data standards should cover the following areas:

• Financial reporting;
• Connections to commercial capital markets;
• Information needs of credit bureaus and regulatory players;
• Remittances and external payment systems;
• Remote transactions and third-party transactions.

The paper then discusses:

• The microfinance open source project that focuses on integrating data standards and protocols for financial transactions into an operational system;
• Setting out a high-level data standard.

The paper concludes that:

• Microfinance should be able to promote and use a set of standards for data about asset quality and profitability;
• This data should be meaningful to the commercial sector and in keeping with the mission of microfinance;
• MFIs should be aware of the value of their customer database to the commercial bank;
• Grameen Foundation, USA, and others are promoting innovations in the financing of MFIs;
• Commercial data interface standards have an important role to play in terms of leveraging the existing portfolio quality for funding.