CGAP IT Innovation Series - Automated Teller Machines

This note studies the case of using Automated Teller Machines (ATMs) in microfinance institutions (MFIs). It informs about the various types of ATM transactions - furnishing account information, accepting deposits, drawing down on pre-approved loans and transferring funds.

The note covers the following aspects of ATM usage:

• Suitability of ATMs to MFI operations - more suitable for MFIs that accept savings and service multi-location clients;
• Technology used in ATM operation;
• Requirements for ATMs, for example:
  • Reliable electrical power and communications infrastructure;
  • A central database for storing client data;
  • Reliable after-sales services and support;
  • Sound operational procedures and resources;
  • Secure systems to transfer cash to ATMs.

Further, the paper informs about:

• The benefits and costs of ATMs;
• Increased deposit mobilization;
• Convenience of 24-hour access to funds via a wide network of locations;
• The use of ATMs for microfinance operations:
  • Prodem FFP in Bolivia,
  • Banco Ademi in the Dominican Republic,
  • MEB in Kosovo.

Finally, the paper lists points that should be considered before implementation:

• Identifying a provider familiar and committed to the MFI's market and possessing sufficient level of expertise to implement home-grown systems;
• Leveraging existing resources to avoid the full capital investment and operating burden;
• Testing feasibility with a pilot or phased implementation to measure the management's commitment, ease of client adoption, and adequacy of physical infrastructure.