In May 2020, amidst the COVID-19 pandemic, we were happy to participate in a CGAP virtual thought forum on developing a shared learning agenda for financial inclusion. At the center of the conversation was the question, “Financial inclusion for what?” We think this is an important question because financial inclusion is a means to improve well-being, not an end in itself. Access to financial services can improve well-being by helping people to cope with shocks and seize new opportunities, as demonstrated by The Poor and their Money and the Impact Pathway tools developed by BFA and UNCDF.
But access to expensive, inflexible financial services may have the opposite effect, particularly for poorer and more vulnerable people. COVID-19 will test at scale whether financial inclusion is indeed helping or hindering different users’ capability to adapt to new threats and opportunities. To better understand these dynamics, financial services providers (FSPs) will need to invest in deeper customer research with the help of the broader financial inclusion community.
Investing in deeper customer research
As the financial inclusion community’s focus has shifted from financial access to financial capability and health, FSPs are faced with multiple challenges of monitoring social performance. For example, client contentment, financial capability and financial health cannot be captured by monitoring indicators of access, use or knowledge of financial services alone, since this data only records changes, not the causes behind the changes. Another challenge is identifying how clients are actually using services to protect and promote their livelihoods and well-being.
FSPs often eschew this kind of practical research because they do not see themselves as academic or development organizations. However, research that can lead to better customer outcomes should be of interest to FSPs because improved outcomes can enhance customers’ loyalty, expand usage and prompt users to recommend services to their friends and family. The FSPs of the future will not only need to “know their customer” and “do no harm” but aspire beyond customer acquisition to customer delight.
Additionally, work with the nine FSP partners of the Savings at the Frontier (SatF) program, in three African countries, confirms that even with limited support there is a lot that FSPs can discover on their own. Even a few hours of phone calls with select frontline staff and customers can generate valuable insights. Some initiatives that FSPs can take to better understand usage and customer outcomes include:
- Leveraging internal and market-wide data to build a useful typology of customers being served well, badly or not at all
- Unpacking operational data to identify usage trends (e.g., percentage of savers active in the last 30 or 90 days) along with how and why they vary across location, gender and age
- Understanding why customers are dropping out or not using accounts after registration
- Distilling internal understanding of why a particular product or branch is growing faster than other products and branches
- Holding discussions with frontline operational staff and groups of actual and potential customers to explore possible explanations for differing use patterns and opportunities to improve products and delivery systems
How can the wider financial inclusion community help?
Building the capability of FSPs to undertake such efforts credibly and cost-effectively will require the financial inclusion community to rebalance methods and ways of thinking about impact evaluation -- placing less emphasis on large, survey-based studies, and instead enhancing capacity for more agile and responsive mixing of approaches.
Quantitative data is important for establishing patterns and trends of use over time. But it needs to be supplemented with qualitative research that sheds light on the causal drivers and processes behind observed changes and identifies new lines of inquiry about how to improve products and services. The bigger the challenges to existing thinking about clients’ use of services, the stronger the case for seeking the help of specialists to help conduct such “deeper dives” into clients’ financial understanding, attitudes and actions.
There are several examples of these studies. In Zambia, SatF was asked to gather deeper insights into clients’ informal savings mechanisms, how clients perceived the pros and cons of belonging to informal vs. regulated FSPs, and what was driving their decisions to use one service over another. The study achieved deeper insights into client thinking by not focusing on specific products in isolation. Instead, it worked with a range of FSPs to pool resources, consult with FSPs about priority questions and the possible implications of findings before collecting and analyzing data, and discuss the implications of emerging findings.
A second example is the use of QuIP studies by SatF in Tanzania, Ghana and Zambia to investigate how customers were using different savings products and why this changed as new products entered the market. These studies elicited explanations from clients about how they used financial services without reference to specific FSPs, thereby reducing the risk of biased responses. A study in Ghana among deposit-collecting (susu) agents looked at how and why withdrawal patterns increased during COVID-19 lockdowns and explained changes in savings behavior after economic activities resumed. A study of savings groups in Zambia highlighted the financial difficulties that members experienced when loan disbursal meetings were suspended, forcing them to draw down their savings in personal bank accounts.
Even before COVID-19, Kenya — a country feted as a global leader for financial inclusion — demonstrated that headline inclusion figures rarely provide the full story. Despite having achieved a high financial inclusion rate (up from 75 percent in 2016 to 83 percent in 2019), indicators of financial health were going the other way (from 39 to 22 percent during the same period).
The onset of COVID-19 and prolonged disruption to the world economy presents new challenges and opportunities both to FSPs and their customers. Having access to appropriate financial services and knowing how to use them can be the lifeline that makes the difference between failing, surviving and thriving. It is the FSPs that can respond quickly and positively to their customers’ changing circumstances, needs and aspirations, and who can grow with them, that are likely to do best in the future.
James Copestake is professor of international development at the University of Bath and a trustee of Opportunity International UK. Sukhwinder Arora is advisor for the Savings at the Frontier Programme, a $17.6 million partnership between Oxford Policy Management and Mastercard Foundation. Thanks also for inputs from Aurélie Larquemin, who is with Bath SDR and is a doctoral student at the University of Bath.