CGAP’s new focus note, Facilitating the Market for Capacity Building Services, poses interesting challenges and opportunities to adopt a market development approach for all players in the financial inclusion space. The note, complete with case studies and an operational framework, invites us to ask the questions: why are there so few vibrant capacity building service markets for financial services providers (FSPs)? And why are these “Few” so far ahead of the rest?
Photo Credit: Mohammad Moniruzzaman
My top six answers to these questions –both opportunities and challenges -- have to do with perceptions, behavior and established ways of doing business.
Let's start with what the "few" do right:
1. Commitment to ensuring quality capacity building is engrained in FSP culture. Almost everyone agrees that capacity building services for FSPs are important for promoting dynamic growth to serve poor and low income people in their markets. But, many FSPs are exceptionally committed to ensuring that all staff is up to date on the latest research findings in their market. They provide state of the art training, mentoring, peer learning groups, and in-house induction and professional development. They budget regularly for dedicated professional capacity building services, and hold staff accountable for the FSP’s investment. They are future oriented, and look forward to learning about what the next 5-10 years may bring.
2. Keeping up with the times, even when times are lean. Besides basic training for staff, FSPs are dedicated to being leaders in their markets and emphasize management and staff training, even in dire times. Several FSPs took the opportunity presented by slower business growth during the financial crisis to invest in staff capacity. They read market signals and emerged from the crisis much more quickly, while others cut capacity building expenditures and continued a spiral down. The bottom line: FSPs understand the value proposition of capacity building and integrate it into their day to day activities. They realize that capacity building is integral to operations in the best of times, and the worst.
3. Capacity Building Service Providers (CBPs) invest in themselves and in lasting FSP relationships. More vibrant markets for capacity building services have developed a variety of professional services that respond to FSP needs. These CBPs position their services to advance the state of the art; they stay informed about new developments and have developed the expertise to design curricula to respond to FSP client needs. They provide tailor-made services, show the value of capacity building and build lasting relationships with the FSPs. They compete with each other on quality and price, and each of them has a reputation in the marketplace.
Shifting to some of the challenges:
4. Capacity Building Providers often offer services they can deliver, not necessarily what FSPs want and value. This leads to a mis-match between supply and demand. Many capacity building providers can provide high quality delivery of a standard curriculum, but when it comes to keeping up with new demand from FSPs their human resources are stretched. Over time, a capacity building service provider must also invest in its own capacity to adapt to evolving FSP capacity building requirements, as well as innovations in the delivery of capacity building services, such as e-learning or other digital tools.
5. A communications and knowledge gap may exist between FSPs and CBPs. Capacity building providers who focus on the provision of non-traditional micro-finance services (such as insurance, mobile money, and technology based services) often do not have the skills and experience to communicate well with FSPs who serve the poor and low-income market. They also may underestimate the investment required to serve low-income people well.
6. Donors often neglect long-term sustainability; the focus is on the event. Direct donor delivery of capacity building, or high subsidies have created expectations that FSP capacity building is a public good. Many capacity building services designed for FSPs receive generous donor funding for start-up without expectations for the capacity building market to become sustainable, let alone vibrant.
In a best case scenario donors analyze the current local market dynamics and develop a vision and a plan to build local capacity building service markets in the future.
Changing perceptions, behavior and traditional ways of doing business may be difficult, but it is possible, as the “Few” have demonstrated. I invite you to post your own list: Why are dynamic markets for capacity building services “few and far between”? And, why are the “few” so far ahead of the rest?