Providers and policymakers are increasingly realizing that a deeper understanding of the needs, behaviors, and preferences of low income people will help ensure more relevant and responsible delivery of services to clients. Today there are growing efforts to make analyzing client (or potential client) needs the starting point for product development.
Recent developments in delivery mechanisms, regulations, business models, and increased insights into people’s complex financial lives have all expanded the range of financial services available to low-income consumers.
Problems with consumer finance and overindebtedness in several countries have called into question supply-centric approaches that push growth at the expense of client suitability, product quality, and long-term sustainability of the sector.
Recognizing these opportunities and risks, providers, researchers, investors, donors, and policymakers have been increasing their support for empirical research on clients in recent years.
Client insights can be sourced in many ways, through listening to target clients, using a range of techniques (interviews, focus groups, consumer surveys, and quantitative research), and observing their actions (through observation and shadowing, design thinking, and behavioral research). Provider front-line staff and management can also share insights on clients through interviews and focus groups. Finally, mining existing client-level data from management information systems (MIS) and customer management systems (CMS) can also provide a wealth of useful information on clients.
This more recent surge in interest and progress in understanding clients’ needs builds on important earlier work going back several decades. In the mid-1990s, the USAID-sponsored AIMS Project developed and promoted client assessment tools that ranged from large scale longitudinal studies to practitioner-friendly market research and evaluation tools. Organizations such as MicroSave pioneered a range of client research tools, such as their Participatory Rapid Appraisal methodology, that have been used across the globe. In the 2000s, FinMark Trust initiated the Finscope studies to understand consumer demand across transactions, savings, credit, and insurance.
More recent developments include innovative academic and industry research that are helping to provide a deeper and more nuanced appreciation for poor people’s’ lives. The financial diaries approach has advanced our understanding of poor people’s active financial lives, their cash flow management needs, and their agile use of informal and formal financial intermediation. There is also greater, more refined, and empirical use of segmentation analysis to understand clients across numerous dimensions, including income, gender, age, livelihood, and behavior.
Since the mid-2000s, impact evaluations using randomization have become common in financial inclusion. More recent randomized evaluations have focused not only on impact, but also on product innovation and design, thus helping to clarify how, and under what conditions financial services benefit poor people.
Perhaps one of the most important recent developments in understanding clients is coming out of behavioral economics, which provides insights into the psychological underpinnings of everyday money management decisions. The premise behind this growing body of work is that a better understanding of social, cognitive, and emotional factors can help reveal why people—poor and rich—behave the way they do.
A systematic and continuous investment in client research is crucial for responsible expansion of financial access and market development. While individual client research efforts will always be somewhat context-specific, there is also a growing body of global client research on financial inclusion. The challenge that lies ahead is not just to understand, but also act upon insights into the financial lives of the poor.
- Portfolios of the Poor (Princeton University Press)