The Decade of the Client


Every time I learn a new word, suddenly it is everywhere. On billboards, coming out of the TV anchor’s mouth, and sometimes even on the back of the box of my favorite cereal. This is exactly what is happening to me now with “clients.” Of course, I’ve known what the word means for a long time. But all of a sudden, everyone is talking about putting clients first, making sure we have client focus, and being client-centric.

This is true not only in my professional world—financial inclusion. I am also seeing this client focus appear in articles about shoes at Geox and in TV ads from Charles Schwab promising that if you signed up to them, they would start with your specific needs and aspirations, not a pre-determined menu of products. Social psychologists would say I suffer from frequency illusion or the Baader-Meinhof phenomenon.

So, “clients at the center” is clearly en vogue. That’s good news for access to finance for poor and low income people, right? Well, yes, though I’d say that for an industry that makes an implicit connection between putting clients at the center and good value for clients, the waters are actually a bit muddy. Let me explain.

I want to bet that Geox is quite clear about why it is intent on understanding clients’ needs – it wants to sell more shoes. In my world, getting to one clear answer about why it is important to hone in sharply on clients—their needs, preferences, and behaviors—is far more difficult. It’s easy to get agreement on the big picture. But try to get two or three sentences beyond that, and the views of people working on financial inclusion are likely to differ. These differences might be slight and some would say inconsequential, just a question of emphasis. But these differences might also unmask more divergent views about the role of mainstream financial institutions in serving the bottom of the pyramid, the appropriate place for regulation, and even the role of finance in people’s lives.

Simply put, I think that it will not be easy to reach agreement among those who work on financial inclusion on two seemingly simple questions:

1) What do we mean by client-centric financial inclusion? – Can we visualize what success looks like and if we have achieved our goal?

2) Why is it important to achieve client-centric financial inclusion? What will be the benefits to clients, the institutions that serve them, and the broader industry? And without razor sharp answers to these two questions, it will likely be even harder to answer a third question:

3) What does it take to concretely achieve client-centric financial inclusion? Do we understand the pathways to getting there…what is needed from all the different stakeholders?

Difficult does not mean impossible. Especially if we – all those of us who work on financial inclusion and care to join the collective “we” – agree that precision is important. We should not assume we all know what we are talking about. We cannot simply assert our new vocabulary word with more and more conviction, and hope that this will be sufficient. We need to get more precise.

In the journey for more precision, I still have more questions than answers. Below are the top six issues currently on my mind with regard to client-centric financial inclusion.

  • Is it good to be all things to all people? There are so many impact expectations of access to finance, it’s dizzying. It is not just that microcredit was overhyped—people expected it to deliver on everything from women’s empowerment, to jobs, to better nutrition and schooling for kids. The plus side is that it was easy to rally supporters, energy, and resources to access to finance. The down side is that it is harder to actually define what success look like, and to then work backwards with relentless focus to increase the chances of achieving success. (see my question 1 above.)
  • Political economy matters. It’s not just governments that operate within a political economy that needs to be understood, offers some opportunities, and also imposes constraints. All actors involved in financial inclusion have their own political economy. Even if we all agree on what it means to be client-centric and the roles of each actor (provider, government, funder), then reality will kick in. The donor whose main instrument is foreign currency debt will have a hard time not prioritizing providers that can deliver on a growing loan portfolio. Providers that manage to gain deep insights’ about their clients may face pressure from a Board to generate short-term profits to the detriment of developing and testing new products. Governments may be swept up in election fever and expedient solutions rather than laying the long-term foundation for a vibrant, inclusive financial sector. Understanding the political economies within which we all operate and the extent to which they shape our respective incentives seems critical.
  • The multiple roles of academic research. I’d say that providers are in the front seat when it comes to putting clients at the center. Their front-line staff interacts with clients everyday and often has a deep understanding of clients and their needs. Yet, the research community also has an important role to play. There is lots of pressure to make academic research on financial inclusion as practical and actionable as possible. I often sympathize with that view, but think we need to be a bit careful. There are at least four different roles for academic research. There is need for research at the “front end” to help develop the understanding of clients that is a public good and provides an important context for the more granular and market-specific insights providers can then layer in. There is also a need for research at the “back end” to help us understand the impacts of our interventions, whether a new policy, product or simply a tweak to a product feature. While academic research needs to be relevant, there should be space for knowledge exploration that is not readily applicable and may only become relevant to industry years later. This leads us to the two additional roles – foundational research and research that explores the unknowns beyond the imagination of current practices, thus pushing the frontiers.
  • Financial services and refrigerators, two peas in a pod? We can learn a lot from industrial design and should not reinvent the wheel. Major industries have figured out processes for sourcing insights “getting to the aha moment” to translating them into a viable service with the appropriate delivery channel and all the parts of the organization that need to come together for the “so what moment.” Yet, is all the learning truly translatable? To what extent can innovation techniques for mass retail products be applied to financial services? As an intangible service, where relationships and trust are at premium, selling financial services and fridges might not be exactly the same thing. In addition to industrial design, perhaps we should also look closer to home – to mainstream financial institutions.
  • Working on demand in isolation of supply and the policy environment is futile. In my opinion, one of the successes of microfinance has been its focus on building institutional capacity—the supply side. There is now welcome focus on finding a more just equilibrium between demand and supply. The swing of the pendulum is quite hypnotic; yet, speaking about the demand side without understanding and forging the links with the supply side and the policy environment would be counterproductive at best. Without a robust supply, the most effective and well-understood demand will remain, well, understood but not served. Ultimately we need the demand and supply market forces to be in equilibrium within the context of a sound policy environment.
  • The client knows best…? Yes, but how exactly can we best bring clients’ voices directly into the conversations, into the decisions that ultimately will affect them? There are romantic notions that clients, given a chance, will best be able to define their needs. Yet, major forces who changed the world as we know it, like Steve Jobs, caution us that the customer will always mislead. Behavioral economists warn that humans are irrational, and that we do not always make the best decisions or act in our self-interest. There is a school of thought that argues not for directly asking clients what they need, but rather for upfront and close observation of their lives, habits, and preferences. This is often a controversial and loaded discussion.

An exciting dialogue is underway that is leading to a collective agreement that putting clients at the center of all decisions is key. Importantly, we are starting to add texture and detail to what this means. The stakes are high. If we get it right in financial inclusion, perhaps, 10 years from now, the 2010s will be described as The Decade of the Client.


24 August 2012 Submitted by Charlotte Connors (not verified)

Alexia, I couldn’t agree more that this is at once a popular and tricky topic. We’re thinking (at the Smart Campaign) that success is when clients can choose financial institutions based on their level of adherence (certified??) to the Client Protection Principles. But there is oh so much more…..thanks for the great blog series and glad that this is a hot topic!

24 August 2012 Submitted by Dr S Santhanam (not verified)

Mahatma Gandhi in a speech in South Africa in 1890 said: “A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption of our work. He is the purpose of it. He is not an outsider of our business. He is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us the opportunity to do so.” As an ex-employee of a leading bank in India, I know that in 1970′s, this message of Gandhi with his photo used to be on display at a visible position in a number of bank branches. But, over the years, this message has gone out of fashion and hence the photo and the message. When the neoteric micro-Finance began its journey in the beginning of the last decade of the last century, thanks to the SHG Bank Linkage Programme and the regulator’s support, MFIs really provided a good workable meaning to the term ‘customer’ or ‘client’. But, some where in the beginning of this century, they have also drifted and forgotton the message of Mahatma Gandhi. Now, we are searching for a definition for the term ‘client’. I am happy that you have mentioned about how Steve Jobs looked at a customer. The Apple was successful because of closeness of Steve Jobs to the customer particularly when new products were developed and again when each of the new products was launched. He used to present himself in all the stages of product development to ensure cost reduction at every level and again at product launches taking the centre stage. In fact, recently, I have written an article ‘Steve Jobs, CEO,iPeople microfinance Co (India) Ltd’ based on how ‘Steve Jobs would run an MFI in India’.  So, it is true that there is a lot of learning for MFIs from the style of conducting the Apple by Steve Jobs.

24 August 2012 Submitted by Dr V.Rengarajan (not verified)

I agree with Alexia on the need to have exploratory research on ‘client centric financial inclusion’ for further pushing the frontier in the battle against poverty. In this regard I like to focus on three factors viz., ‘the client’, ‘the product’, ‘inclusion’ for further probe.
Client or beneficiary in MF industry ?
1. In Microfinance arena, the target group hailing from poverty segment , need to be considered more as client beneficiary rather than typical client of other institutions. By and large behaviorally, they don’t act what they say due to multiple demands with competing goods and services. They always look for charity keen to avail credit products irrespective of the cost, type of institution, conditions etc., Access matters more than the cost. These socially excluded ultra poor at the bottom pyramid need multiple inputs arranged sequentially for their graduation in a coordinated manner. It is therefore better to use the term KYBC (Know Your Beneficiary Customer ) than KYC. With the given social profile these clients need to be distinguishably protected with integrated inputs along with financial products. Otherwise, mere financial inclusion will not serve the purpose in this context.
Financial products vs. Non financial products
2. Regarding product outreach to the beneficiary customer, one need not have sophisticated ‘tech’ based marketing and advertisement for microcredit product as promoted by Steave Job . The client knows the best.The movement they come to know about credit availability usually through friends and relatives , they are ready to avail the credit product irrespective of the color and flavor of the credit products.. The presence of multiple lending and borrowing and formation of SHG mostly for purpose of availing loan consequently over indebtedness, lends credence to the above fact. Unlike ‘Apple’ products or KFC products, being directly consumable ones to the customers, the micro credit , being a fungible financial product, provides too many options to the poor beneficiary clients for utilizing it for meeting the varied end uses(harmful & beneficial). This unique distinguishable feature of MC product demands for supervision during post sanction of credit at poor client house hold level also for ensuring the proper end use of the product. With the given profile of beneficiary client and their behavior , is it necessary to strike demand and supply equilibrium?
The irony of exclusion of the included ?
3. When micro credit has become a ‘forbidden apple’ for tempting the poor,’inclusion’ is not difficult . But what is more concerned is the ‘sustainable inclusion without subsequent exclusion’. This inherent phenomenon causing ‘ exclusion of included’ in this MF industry involving some cost also is being witnessed with different manifestation in the form of ‘drop outs, push outs, dormant and inactive /inoperative account, mortality and defunct groups. Aren’t they so called client who were ceremoniously included ? Where have the ex client gone without being cared under client protection Principle (CPP) ? or are they not deserving to get protected under CPP? Is ‘inclusion’ one time affaire only for the sake of inclusion? If this exclusion of included (unsustainable inclusion ) phenomenon remains neglected or allowed to continue, will it not result in sustaining the poverty level instead of reduction (ultimate goal) ? Is it justifiable to make these ‘decade of drop out clients’ also in the client-centric philosophy?
Thank you for sharing my views

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