People who work on financial inclusion often make assumptions about customers and what drives their choice and use of financial services. But do we know how customers feel about their ability to engage and use these services? CGAP is seeking to answer this question and test out some initial ideas as it explores the concept of empowerment and the role it can play in building customer trust and confidence.
Women in Philki village in India’s eastern Bihar state, where I spent some time two years ago and again recently, offer insights. Women in rural Bihar often handle household finances, as many men migrate to cities for work. In Philki, they had their first taste of branchless banking two years ago when a kiosk resembling a brick-and-mortar branch, called a Customer Service Point (CSP), opened with two agents staffing it. Initially, the women in the village were enthusiastic but somewhat skeptical. “Will this bank run away?”was a phrase I heard repeatedly. They talked of withdrawing money from the kiosk, but not of conducting other transactions.
When I visited Philki and a few neighboring villages more recently, however, doubts about the CSP “running away” had disappeared. In addition, almost all of the women I spoke with were not only withdrawing money from the kiosk but making deposits. This new confidence was striking.
"We will never be a leader in client service" a senior AMK manager told me. Indeed in the competitive Cambodian microfinance market many clients might choose another microfinance institution over AMK as its loan disbursement is slower and more time-consuming for clients and its loan sizes are smaller. Coming from an organisation that is proudly client focused, this struck me as strange.
AMK, serving more than 360,000 people, is now the largest MFI in Cambodia in terms of outreach. How can an organisation that invests heavily in understanding and responding to the needs of its clients be less customer friendly than others? Answering this question gets to the heart of the approach of an organisation that has often taken the “road less travelled” in the way it does business. If fast loan disbursement (which clients might prefer, and which other MFIs are prepared to provide) means compromising the detailed loan appraisal process that ensures the success of a client’s investment and ensures they are not over-indebted, AMK is just not interested. AMK recognises the importance of matching loans to client capacity to repay, not just whether they have sufficient collateral to cover them in the event of a default. Central to the appraisal process is a visit to the client’s home which experience has shown is critical to get an accurate understanding of the client’s situation. This takes time, is hard work for staff, and involves some inconvenience for clients. Other MFIs have long abandoned this step, but AMK has made this a mandatory part of their lending process, and implemented a “zero-tolerance” policy, with disciplinary action for client officers who neglect the visit, and checks as part of the internal audit process.
The world is littered with the burnt-out wrecks of well-meaning people who have tried to take a weak organisation to scale. When the foundations aren’t strong enough, problems are magnified, and a huge amount of energy must be wasted in sorting products that are not quite right or systems that fail to deliver. If you’ve ever built and scaled a business, you’d accuse us of stating the obvious here. But when we think about scaling organisations with a social purpose, it’s a lesson that needs to be re-examined within the context of delivering impact. Scaling impact is not simply delivering more products and services through more staff. It’s about understanding precisely what it is that we do to create social value, so that when we start chasing numbers, we don’t lose sight of what matters. The problem is: going to scale can generate its own organisational momentum and gravitational pull on our priorities. Case in point: we’ve seen countless poverty-focused organisations suffer mission drift, when staff start focusing on easier-to-reach (read: less poor) clients in response to cash bonuses that reward rapid growth in client numbers.
Unintended consequences are both ubiquitous and invisible when it comes to the business of doing good. Selia, a woman from Cambodia and intended 'beneficiary' of the Concern Worldwide microcredit programme brings the harsh reality of 'good intentions gone wrong' into view. A new book, The Business of Doing Good, by Anton Simanowitz and Katherine Knotts ventures to explore and solve the problem.
‘Today is the day we feed the ghosts. The monks have been chanting in the temple all night, and by afternoon we’ll meet seven generations of our ancestors as they emerge from the other side. We’ll offer to them prayers and food to ease their suffering, before they disappear again. There are far too many ghosts now, too many gone from our families and villages since my mother’s time. Even those that remain today are somehow half-ghost – a foot or a leg taken – no longer complete humans.’
Impact is now high on the agenda for Third Sector organisations. But how do we ensure that a concern with impact drives real changes in the way that organisations work and the benefits they deliver, rather than just being about measurement and accountability?
Impetus-PEF, in their recent paper Building the Capacity for Impact, argue that Impact Readiness is not just measuring impact but about building organisations that can reliably produce these impacts. This is important, as it means looking at the whole organisation and how it functions, and not just at the products or services they deliver.
The Universal Standards for Social Performance Management Implementation Guide provides financial service providers with practical guidance on how to improve strategies, governance, operations, and employee treatment. It is based on a set of industry standards for social performance management (SPM), called the SPTF Universal Standards for SPM.
"In my work with microfinance organizations around the world, I have noticed that efforts to serve more poor people can stumble on the very first step: seeing them.
One experience in particular stands out from my work with a very well-meaning MFI whose staff claimed that there were not poorer clients or women to whom they could lend. In order to shed some light, I went out and interviewed people whom I thought were potential clients who were poorer than those currently served and took their pictures. I also interviewed and photographed some people at a slightly higher economic level that I thought resembled the people they were currently serving.
B-Corps is a global movement to redefine success in business. It models a new form of capitalism, whereby organisations are judged not just by their profits, but the difference they make to society. In this way, business becomes as a force for good in the world. B-Corps companies structure their legal form so that they are accountable to a broad set of stakeholders, and not just shareholders.
In order to be recognised as B-Corps, businesses must be certified in terms of governance, environment, working conditions, community and business model, which is an excellent start in terms of setting standards for good practice. This is done through self-assessment, followed by an external validation process.
“Customer centricity” is the new buzz in the microfinance industry. More and more financial service providers are recognizing that their success is built on the success of their clients. Customer centricity certainly means recognizing that financial inclusion is not just about more services – it’s about better services. To achieve this, financial service providers need to grapple with the complexity of clients’ financial lives, understand what appropriate design looks like, and empower clients to use those services effectively. But is it always a “win-win”? What if clients express preferences and make choices that are not in their long-term best interests – that is, what happens when what clients need isn’t what they might want or demand? And what if responding to client needs in the most appropriate way appears to be a riskier decision from the point of view of institutional financial performance?
Multiple lending is on the rise in Cambodia. Is this a problem, and if so how can we respond appropriately at an institutional, sector and government level?
For years the world has patted itself on the back about the rapid growth of Cambodia’s microfinance market. Over the past decade, Cambodia’s market has been one of the fastest-growing globally, recording a 127% portfolio increase between 2013 and 2014. Forty-five microfinance institutions (MFIs) now serve some 1.8 million borrowers, out of a total population of 15 million. In a country where the level of formal financial inclusion is negligible, this has looked like a notable success story.
What if your social enterprise provides a great product that helps lots of people, but also has some unintended negative consequences?
“From day one, I was in debt. Two years on – I’m still behind on my payments, and really struggling to find my feet with my finances.”
This is what we heard when recently talking to a tenant of a housing association. Taking up a new tenancy had thrown him into unmanageable levels of debt – a direct and unintended consequence of one social enterprise’s failure to see the big picture.
No one can dispute that the housing association delivers social value in its core product – low-cost homes for vulnerable people. But a housing association is also a business; in these days of austerity there’s financial pressure to keep properties filled, in order to avoid lost income.