Case study: Finca – Flexible finc-ing

April 42013
International microfinance organisation, Finca, is well underway with its roll-out of
Oracle FSS’s Flexcube across its 21-country organisation. CIO at Finca, Braulio Oliveira,
talks to IBS about the trials and tribulations of the project so far.
Braulio Oliveira, Finca At the best of times a core banking implementation can be a
long and daunting process, fraught with challenges and obstacles to be overcome.
However, for microfinance provider, Finca International, these challenges are
multiplied due to the scale of its core banking replacement across the organisation.
The project, which is in its fifth year, still has a long way to go before its 2016
completion deadline, and as Braulio Oliveira, CIO of Finca explains, the challenges of
a core banking implementation are forever ongoing.

Tentative discussions about overhauling Finca’s core banking software took place as
early as 2004, says Oliveira. He explains there were several incentives which led Finca
to the conclusion that it needed a change. ‘Providing financial services worldwide
requires a very stable platform from which to operate,’ he says. ‘At the time, we had
21 subsidiaries and 18 core banking systems. That gave us the impetus to realize the
need to standardize.’ Oliveira also explains that whilst Finca’s approach to its mission
remains unchanged, its business model has facilitated the move towards a new core
banking system. ‘Plans have now materialized to migrate our subsidiaries from non-
profit organizations, into regulated financial services organizations,’ he says. ‘In order
to meet our client’s diverse needs in a better, more structured way, we needed to
transform into a regulated institution.’
With 18 different systems in operation within Finca, the selection process was a
lengthy and challenging one. Oliveira explains that it began looking at potential
solutions in 2006, a process which included inviting a wide range of vendors to
respond to RFPs, reference checks and RFIs. As well as the ‘usual suspects’ (some of
the major players in this field include Temenos, Infosys, TCS and Oracle FSS), Finca
evaluated its existing providers, which included Russian developer 1C, Georgia-based
Alta, Armenia-based Armsoft, and London-based Neptune, with its Orbit offering. The
combination of these products was no longer meeting Finca’s requirements,
according to Oliveira.

‘Anybody who has gone through a core banking change would liken it to a root canal;
it’s not something you would seek out, unless the pain is really bad.’
Braulio Oliveira, Finca
Another vendor, Guatemala-based MFSI, was also considered prior to the formal
selection process, and Finca even went as far as acquiring the company back in 2004
in an attempt to develop a solution internally (it had been using MFSI’s offering, SIEM,
in several of its subsidiaries). However, Oliveira explains that, ‘it was probably not
the best decision ever made, because Finca is not in the business of software
development, and running a software company was complex’. He adds, ‘we
abandoned that idea because of the investment that would be required to make it
meet the needs of so many different countries and products. It didn’t make sense for
us’.
Finca opted for Oracle FSS, a decision which was agreed formally in 2007. It favored
the Flexcube offering for several reasons, explains Oliveira, the main one being the
ability to parameterize the product to match Finca’s business needs. ‘Some of the
vendors were able to meet our needs via development efforts; we didn’t want that,
we wanted to meet most of our needs via parameterization,’ he says. It was also keen
to work with a company which had a ‘worldwide presence, long history and invested
heavily in its products’.
The project kicked off at Finca’s subsidiary in Azerbaijan in 2008, and successfully cut
over to Flexcube at this location the following year. Having implemented in
Kyrgyzstan in 2011, Russia in 2012, and Tajikistan earlier this year, with Mexico and
Georgia plus a Greenfield site in Nigeria expected to be completed later in 2013, the
project is now very much in full swing.
To ease the transition to the new platform, Finca has developed its own internal
integration team, who travel from location to location working on the projects. ‘When
we first looked at how we would proceed with our implementations, we intended to
use the vendor for these activities.
However, after implementing in one country, we decided that building our own team
was the way to go.’ It has facilitated a decrease in implementation time from over a
year and a half from the first project, to eight months using its own team, as well as
improvements in cost efficiency.
Oliveira also explains that level one and level two support will be dealt with by Finca,
and the software will run out of its data centers based in Africa and Frankfurt, as well
as its newly opened centre in Virginia (US). He adds that whilst Finca rarely
customizes the package coding, it is ‘experts in the system’ and is able to parameterize
the product according to the needs of the implementation. Whilst Oliveira
acknowledges parameterizing the product takes time, it gives the levels of control it
needs.
Each implementation consists of the same main stages, says Oliveira. These include
infrastructure preparation and support, data migration, parameterizations and
testing, reports development and training. Testing is of particular importance, with
pilot testing carried out before the subsidiary is switched on to the new system,
followed by live support from the information services team, which includes support
mechanisms at subsidiary, regional and global levels. These teams also play an
advisory role to the subsidiary with regard to new business initiatives on an ongoing
basis.
Flexcube will cover a wide range of functions at Finca’s subsidiaries, primarily
management of customer information, management of the loan process, configuring
loan products, loan disbursements and repayment, loan penalties and restructuring,
processes for savings accounts and recurring deposits, loan collection and bank
inventory management. Oliveira adds that at subsidiary level, Finca has a
parameterizations committee, who are responsible for analyzing software
parameters and making changes to the configuration of the software.

‘Choose your partner well, understand your needs, be very clear in what you’re trying
to gain from the exercise, and do not minimize the work required to go into the project.’

Braulio Oliveira, Finca

Change management is a frequently occurring challenge in core banking

implementations, and in Finca’s case this was no different, observes Oliveira. ‘I don’t
think anybody likes a new system,’ he says. Finca alleviated the problem in several
ways, ‘we did a number of things, we showed people what it looks like, we told them
how much better it is and we explained the benefits that they would gain’. Finca has
found other innovative solutions to this problem, with one such example in Mexico,
where the management team has distributed ‘flex cubes’, similar to a Rubik’s cube
puzzle, in order to generate excitement about the project.
Oliveira says that the majority of Finca employees are embracing the change to
Flexcube. ‘People look forward to the projects, they recognize it is tough to go
through, but once they have completed it they become part of this club of successful
companies that have converted, and become part of the “Flexcube family”.’
He also describes an element of internal competition within various Finca
subsidiaries, which he feels has benefited the project. ‘People tend to be competitive,
if they see Finca Russia, for example, converted in a record time, the next country
wants to do it even faster,’ he says.
The decision to go for big-bang implementations is one, Oliveira admits, which poses
a challenge to those using the system. He notes, ‘there is that time when people leave
the office on Friday, it’s the old legacy system, and when they come back on Monday
its Flexcube’.
Having a large number of international subsidiaries comes with significant regulatory
pressures, especially when applying a one-size-fits-all approach. Oliveira
acknowledges this, ‘regulatory requirements are often evolving, so keeping up with
them and understanding them tends to be a challenge’. Finca tackles this by
partnering closely with its subsidiaries during the projects, keeping a constant eye on
any future regulatory changes which could impact on the implementation.
The logic that core banking projects should only be undertaken as a matter of absolute
necessity is corroborated by Oliveira’s experience. ‘Anybody who has gone through a
core banking change would liken it to a root canal; it’s not something you would seek
out, unless the pain is really bad,’ he says. With such a long project, the fear that the
technology will become outdated is something which has been considered by Finca,
‘five or six years in technology terms is an eternity’, Oliveira says. However, he feels
comfortable that Flexcube is still good enough to support Finca’s operations. ‘It has
aged from a technology perspective, but it is still meeting the majority of our needs,
and that’s a testament to the package we’ve put together.’
Finca is already reaping the benefits at its Flexcube locations, states Oliveira,
including the standardization of operations, improvements in information security
and efficiency of both the internal compliance and audit teams. He also stresses the
benefits for Finca employees, who are now able to move from country to country,
knowing they will be familiar with the system upon arrival.
The 2016 deadline looks a long way away, but to date the project is going according
to plan. Oliveira remains confident of meeting the deadline, albeit with a slight degree
of trepidation, ‘we are expanding, so when we add to the scope, certainly the days are
going to shift’, he says. ‘We are going to have to make decisions at that point.’ With
Oliveira confirming that several acquisitions are in the pipeline, plus the Greenfield
site in Nigeria, due to start implementing Flexcube imminently, these decisions may
have to be made sooner rather than later. Finca will be implementing Flexcube in all
newly acquired locations, so keeping the package free of customizations is something
which could test its resolve in the future.
Oliveira explains how the project has been unique due to the dynamics of the Finca
operation. ‘We have a business model unlike anyone I’ve seen, we own and operate
our subsidiaries, whereas other microfinance networks do not,’ he says. ‘We are
certainly not HSBC or Citibank in our focus, ours is on low-income entrepreneurs.’
However, Oliveira believes Finca’s approach is not necessarily a universal guide in
how to approach a core banking replacement. ‘The way that we went at it from a core
banking synergisation perspective, from building our own teams, to standardizing
our platforms in the data centers, these are important characteristics that pertain to
Finca, but not necessarily to someone else.’
He is clear in what he feels are the fundamental ingredients to a successful
implementation. ‘Choose your partner well, understand your needs, be very clear in
what you’re trying to gain from the exercise, and do not minimize the work required
to go into the project.’ He also stresses, ‘it should be a business driven, needs-based
activity’. Finca is currently in the process of devising a strategy to upgrade its existing
versions of Flexcube, a process which Oliveira describes as ‘complex’. ‘We’ll be
converting from these legacy systems into Flexcube, while upgrading existing
Flexcube installations.’ He hopes that a definitive decision on a timeline and strategy
for the upgrade will be finalized by mid-2013.
Whilst Finca’s plan is ambitious and challenging, to date it has experienced relatively
minor complications during the roll-out. Oliveira is confident that not only can
Flexcube continue to be relevant for Finca’s business needs, but also that it will be
able to implement the software in an increasingly challenging regulatory
environment. Whether it can keep on top of the growing number of implementations
on its plate remains to be seen.