Oracle helps Opportunity International manage loans to the world’s poor.
by Blair Campbell, November 2010
A few years ago, a woman in a Malawi village grieving the death of her husband was doubly grieved when her late spouse’s brother demanded her limited assets. Fortunately, this not-uncommon order was thwarted because her money was safe in the bank—protected by the nonprofit microfinance agency Opportunity International. When the brother-in-law took the woman’s bank card to an Opportunity International bank and demanded her funds, the biometric technology embedded in the card prevented him from gaining access to the account. News of the incident spread quickly, and the next day approximately 200 women from the same village opened Opportunity International accounts.
Today, almost 220,000 people in Malawi and more than 560,000 around the world have savings accounts thanks to Oak Brook, Illinois-based Opportunity International, which provides banking services to the poor in the developing world. The agency operates in more than 20 countries, serving more than 2 million clients per year with a variety of individual and group loan products; savings accounts through a network of scalable, sustainable, and accessible banks; and crop, loan, health, life, and property insurance through its microinsurance broker, MicroEnsure.
“Half of the world, three billion people, live on [US]$2 a day or less. That’s our client,” says Jeff Ross, vice president of corporate relations at Opportunity International. It’s a market that has been well served by the organization since 1971, when the first Opportunity International microenterprise development program launched in Latin America. The original premise was simple: offer small business loans of as little as US$80 per borrower to give poverty-stricken entrepreneurs an opportunity to found businesses such as cooking and sewing services, vegetable stands, and schools.
With unique lending methodologies such as using “trust groups” of 10 to 30 entrepreneurs who act as cosigners for each other’s loans, the ability to accept deposits of as little as US$2, and an ever-broadening range of financial service offerings—not to mention operations scattered all over the world—the data-collecting challenges Opportunity International faces are daunting. In addition, this emerging industry historically lacked a standard way to deploy IT to service customers. “In the early days of microfinance, every microfinance company developed its own portfolio management software,” says Tim Head, management information and performance reporting manager at Opportunity International. “Most of these solutions were homegrown and lacked the features and flexibility to adapt as the industry developed. A lot of resources were being put into multiple systems with the same objective.”
To address that problem, about 10 years ago Opportunity International implemented the Temenos T24 banking platform and standardized that platform across nearly all its banking institutions. But although T24 keeps track of customer data, loan repayments, loan schedules, and deposits and links to ATM networks, mobile phone banking services, and remittance systems, there remained a need for business intelligence (BI) solutions to help guide the agency in its mission.
“T24 provided us with the tools to offer innovative new products and services to our clients, but a business intelligence solution was needed to help us understand and utilize the data we capture—so we can analyze how we’re meeting our clients’ needs and make better decisions,” says Head. It was the 2004 donation of Hyperion’s Essbase multidimensional online analytical processing server (now Oracle Essbase) that brought Opportunity International up to speed, says Head.
As Opportunity International has grown from a network of lending-only institutions to deposit-taking institutions, the reporting requirements facing the agency have grown as well—to central banks and various other stakeholders, including each country’s individual banking authority and additional debt and equity investors. “Up until the early part of this last decade, we were doing all that reporting in Excel, and it became unwieldy,” says Head. In addition, Head notes, Opportunity International grew 35 percent annually for about five years, and Excel couldn’t keep pace with that growth.
Oracle Essbase allowed Head and his team to migrate historical data, load current data, and analyze and report on the financial and operational performance of each bank in the field and different products in different markets. This analysis reveals, for example, which loan products work well in urban versus rural markets, which deposit products have worked best in Malawi and might be piloted in other countries, and whether some products seem to work better for women than for men. In 2005, Opportunity International purchased Oracle Hyperion Financial Data Quality Management and put that solution to work loading data from out in the field—from the Temenos T24 platform as well as from various general ledger systems and some portfolio management systems—into a centralized database. A critical feature of Oracle Hyperion Financial Data Quality Management, from Opportunity International’s perspective, is its ability to pull data from different formats—different types of accounts, different currencies, different languages—into a common system that Head and his team can then use to generate reports and do analysis.
“The biggest benefit of Oracle Financial Data Quality Management has been our ability to get the data more frequently; to get the data more consistently; and I think most importantly, to get greater depth of data,” says Head. “Because we can automate it, we can flow it through from one system to another with as little manual intervention as possible, so that we can do a better job of understanding our clients and our different products.” The solution enables a better understanding of geographic differences, adds Head, allowing Opportunity International to compare the progress of a certain type of client in Malawi, for example, with a similar client in Uganda.
Dynamic analysis that used to take weeks now takes minutes, and the Opportunity International team can feel confident in the quality of data pulled from its partners around the world. “Oracle Hyperion Financial Data Quality Management puts the business user in command of the data capture and data quality activities to ensure an efficient and effective process,” says Matt Bradley, vice president of enterprise performance management development at Oracle.
With a total of 40 implementing partners around the world, seamless data consolidation is a must for Opportunity International. The majority of those 40 implementing partners in the field report to the agency via Oracle Hyperion Financial Data Quality Management, and plans are in place to migrate those that do not. And because the solution is Web-based, Opportunity International can guide partners through the implementation process remotely.
For the partners currently using the solution, data is pulled from their general ledger, portfolio management, and banking systems. That data comes in on a monthly basis, and then Opportunity International’s Head and his team consolidate it in Oracle Essbase. It’s a process that represents a big change from the days when partner financial data was input by hand, and a quarterly close could take weeks.
“By the time our partners closed and filled out and sent us the spreadsheets, and we added all the spreadsheets together and did all of our number crunching in order to turn our reports around, it was 45 days,” says Head. “We’ve now cut that down to 15 days.”
Oracle’s Hyperion solutions have also offered great benefits in the realm of financial data analysis and modeling, Head says. He adds that microfinance often produces six-month loan periods with payments coming as often as twice a week. That frequency produces an enormous amount of transactional data—data that could be mined to the benefit of the business.
Oracle’s Bradley points to Opportunity International’s use of Oracle Essbase as an ideal way to capitalize on that data-mining potential: “Oracle Essbase’s built-in modeling and forecasting capabilities provide a solid framework on which to build their additional analytics.”
Bradley also notes Opportunity International’s planned implementation of Oracle Hyperion Financial Management, donated this year, which Head hopes will soon be used for monthly financial consolidation and reporting. “Oracle Hyperion Financial Management is specifically designed for organizations of all sizes with demanding and varied regulatory and management reporting requirements,” Bradley says.
According to Head, as the agency’s services expanded, so did the regulatory reporting requirements demanded of the company—including the need to do full financial consolidations at a global level and make International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) adjustments and intercompany eliminations.
“That’s where Oracle Hyperion Financial Management has come in,” says Head. “It will allow us to pull all this data from all of our different entities together at a global level and consolidate it—not just annually but quarterly and monthly as well, so that we can continue to get a better, more accurate picture of our global portfolio and can make better resource allocation decisions.”
Strategic resource allocation decisions are of utmost importance to another group of key Opportunity International stakeholders: its donors. Today’s nonprofits face an increasing demand for quantitative impact metrics, and Opportunity International has aptly met that challenge by choosing to function using the best practices of for-profit entities.
Recently the Caterpillar Foundation, the philanthropic arm of Caterpillar, Inc., pledged funds to Opportunity International that will enable 175,000 entrepreneurs in as many as 33 countries to receive microloans to start or expand businesses. But the foundation has also asked for empirical evidence of an improvement in the lives of Opportunity International’s clients.
“This is where the Oracle Hyperion technology is so crucial,” says Opportunity International’s Ross. “It helps us to better understand our clients and to develop custom solutions to meet their needs—from integrated savings and insurance products, to an agricultural finance program that addresses the whole value chain, helping transform farmers from subsistence growers to cash crop producers. And when we look at further expanding in Asia, Africa, and South America, we know that utilizing a savings-based microfinance model will enable us to serve an even greater number of people more quickly and sustainably.”
That’s the kind of ROI-based thinking that Opportunity International’s big donors—the majority of whom are wealthy entrepreneurs and businesspeople—like to see. “Businesspeople really see a model in our approach that we’ll be able to provide a very long-term investment,” explains Ross. “In fact, if you give $100 to Opportunity International today, it’s leveraged to $150 in the first year and then is recycled over and over again in the years to come.”
That model helped the agency weather a trend that battered many other nonprofits—a decline in corporate philanthropy in 2008 and 2009. “We didn’t have a significant decline in giving from our corporate investors because, I’m told, they strongly believe that they are receiving a high return on their investment,” explains Ross. “Today, because corporate foundations are often tying their contributions to their corporate goals and objectives, they’re also providing the same metrics.” Institutional foundations and big donors have indicated that they focused last year’s contributions on those agencies showing the highest ROI. Many times Opportunity International made the cut—not just because it helped achieve that ROI but because it had a clear way to show it.
“It’s the new wave,” says Ross of such metrics-based philanthropy. “They want a dashboard no different than Larry Ellison’s. They want to see exactly what’s performing well and what’s not, they want to understand why, and they want to see all the facts and metrics.”
As Head sees it, Oracle solutions have extended benefits to both donors and clients. “I think our partnership with Hyperion and now Oracle has enabled us to more effectively manage the resources that we have, so that we can continue serving the clients and continue growing,” he says. “We’re serving more clients with better insight and better products, and we’re providing better accountability to the donors who’ve helped us grow.”