The FrontlineSMS:Credit system combines SMS-aggregating software and mobile commerce offerings to let MFIs deliver and track loans via handsets.

It is based on FrontlineSMS - free, open source software that turns a laptop and mobile phone into a central communications hub. Once installed, the program taps the GSM wireless telephone network to enable users to send and receive text messages with groups of people through mobile phones.

The technology has been used by NGOs around the world, with one of the most successful deployments, FrontlineSMS:Medic, helping to improve healthcare in developing countries by collecting patient data and sharing medical records.

Now it is being used to expand and improve microfinance services. According to its Web site, "FrontlineSMS:Credit aims to make every formal financial service available to the entrepreneurial poor in 160 characters or less".

The new venture is building a series of free and open source financial modules that will allow FrontlineSMS to communicate with mobile payment systems in real time. The founder says this will turn FrontlineSMS in to a microfinance management information system, a payroll centre for SMEs, a collection and distribution centre for micro-insurance premiums and payouts, and a hub for individual credit histories and scores.

The system will allow MFIs to cut operational costs, increase geographic reach, lower interest on credit and automatically maintain detailed accounting records, says the group.

The first finance module, savings and credit, should be available in the next few months, with insurance, payroll, Islamic banking, and mortgage offerings to follow.

You can find out more about FrontlineSMS:Credit here.