Does Client Protection Matter to Clients?
What do microfinance clients think about client protection? Do client protection principles really matter to them? In particular, how important are the seven client protection principles (CPPs) that the Smart Campaign has developed and are now adopted or endorsed by many microfinance stakeholders?
To answer these questions, MicroSave launched a study with 357 clients with seven financial institutions across three Asian countries- India, Bangladesh and the Philippines between February 2012 and April 2012.
This study uses 2-6 questions to guide the discussion of each principle and rates the performance of the participating organisation on its adherence to the principles; and then facilitates the ranking of the client protection principles in the order of importance to clients. This post discusses the results from these three country studies and the way forward for client research on client protection. 1. ‘Fair and Respectful Treatment’ matters the most to clients, followed by ‘Transparency’. All the seven CPPs are considered important by clients in all three countries. However, when asked to rank them on their relative importance, the following were the top two ranked principles:
- Fair and respectful treatment of clients is one of the most important principles. Clients value being treated with dignity. A respectful attitude from MFI staff encourages them to form a relationship with the organisation, and this increases their satisfaction with the MFI. In some places in India, clients categorically mentioned that if staff behaviour is disrespectful, it is reason enough to move to another organisation. In the Philippines, some groups mentioned qualities such as kindness, understanding, perseverance, patience, punctuality and respect makes them believe that they (clients) are being treated in a fair manner. This makes the case for stronger CPP implementation to stay ahead in competitive microfinance markets such as India and the Philippines.
- Transparency is the second most important principle. Clients appreciate having clear information to help them take decisions. In the Philippines, clients considered this important because it helps them to plan better, develop trust in the MFI, and avoid over-indebtedness. Clients want to have clear understanding of terms and conditions of the products – especially the loan – to be able to decide if they can meet the repayment obligations. In India, many respondents expressed the need to explain the terms and conditions to their husbands to get their approval. In addition, clients also value regular and accurate update of passbooks / loan cards / savings records. Finally, they really appreciate the time provided to help them make a big decision.
- Clients have a high regard for organisations they are associated with. In all three countries, they rated the performance of participating organisations very highly. The chart below summarises the performance rating of MFIs in three countries:
For further details on the results and analysis, click here to see the full report.
3. The results from the tool can help organisations such as Smart Campaign, financial service providers and support organisations promote client protection. Information gathered can help to refine these principles and increase their effectiveness. It can help understand the product and knowledge gaps and build effective programmes to enhance customers’ financial awareness. Once made part of the core operations, it can provide inputs to improve customer service. For instance, where clients give a low rating on complaint resolution mechanism (as in most cases the clients do not know whom to contact for registering a complaint), this feedback can be used by organisations to strengthen their processes and training to build capacities of the staff. Thus, improving their customer service.
Using the ServQual-based tool developed by MicroSave has also encouraged clients to freely talk about client protection. The discussion with clients improved their awareness on CPPs and provide inputs for MFIs to improve social performance practices.
As a next step, MicroSave has started to research, test and customise the tool for e-/m-banking clients. We would like to see financial service providers and support organisations use this tool to gather insights from clients directly and use those insights for decision-making. To help other organisations understand the tool and methodology, a series of publications on the tool and results are published. For more details, you could refer to the following publications: