It’s Not About Savings, Credit or Insurance. It’s About Clients


After extensive external and internal consultations, the CGAP Board (ExCom) approved the next five-year strategic direction for CGAP at its annual meeting in Amsterdam. The strategic direction lays out five priority themes, desired outcomes, and activities against each priority. We're highlighting these themes in a special blog series. The fourth post of the series below describes CGAP's approach to understanding demand to effectively deliver for the poor.

At CGAP’s Annual meeting earlier this month we invited two guests to explore what it means to put clients at the center of financial inclusion. Ramesh Ramanathan, Chairman and Founder of Janalakshmi Financial Services, an urban non-bank financial institution serving over 2.5 million customers in 10 Indian states and Charlotte Vangsgaard, Managing Partner of ReD Associates, an innovation and strategy consultancy that uses anthropological methods to understand behavior, had a lively discussion that underscored one of the signature pillars of the CGAP strategy, understanding demand to effectively deliver for the poor.

"When you say need, and when I say need, we are not talking about the same thing"


Woman taking care of her geese Woman taking care of her geese

Photo Credit: Sadia Rahman

These words are Charlotte’s, while making the poignant point that few people explicitly articulate a felt need for insurance or savings or even credit. Rather, they express concern about dealing with health shocks, aspirations for their children’s education, and goals for growing their businesses. Understanding these underlying needs and aspirations is the key to putting oneself in the shoes of customers. Developing solutions that are responsive is the next step. Approaching actual and potential customers more holistically will enable institutions to move from a transactional approach (narrow focus on selling a product to a customer) to a relationship approach (broad focus on understanding customers’ dynamic needs over their lifetime and offering solutions that meet their needs).

And learning from customers is not a one-off thing, but rather a continuous process. People evolve, markets evolve, and institutions can easily fall into rote delivery. Indeed, Charlotte underscored that the longer a business is in a market, the higher the risk of myopia. It is perhaps for this reason that corporate market leaders like Samsung, Lego, and Adidas come to ReD to revitalize their businesses.

Ramesh confirmed that businesses can sometimes get lost in the world of building institutions –worthwhile, complicated and indeed critical work—but not all that is needed. He spoke about starting the journey to look “outside-in” which entails more closely examining and understanding the demand before building the supply. In this process, Janalakshmi learned that the group loan is just scaffolding for something deeper and that customers needed much more. Ramesh cautioned that demand for one’s products and services should not be taken as a sign of an institution doing well, “Customers are so bereft of choice, they take on anything we offer with gusto.”

"It is bloody difficult"

These words are Ramesh’s. Uncovering deep insights about people has little value if this new knowledge cannot be translated into a better service offering. Indeed, there is a sense that many institutions are actually sitting on a lot of information on clients, for example in their management information systems. The challenge is recognizing the specific value of these insights and knowing what to do with the data or insights.

Acting on insights can be very difficult, but can also be a competitive source of real differentiation for a provider. Charlotte reminded us that companies tend to be married to the systems they build. So if an insight requires an innovation that will change business as usual, change is hard to implement. Ramesh illustrated this point with a savings- linked monthly loan product that Janalakshmi offered.

As Janalakshmi started looking from the outside-in, the institution quickly learned that the monthly offer to collect deposits did not match customers’ cash flow and that monthly transactions would simply not work. Yet, the operational implications of offering more flexibility to customers seemed overwhelming to the institution.

And all of this is about more than product development and tweaking product features. Pricing, delivery channel, service standards, as well as the actual product all can contribute or detract from the customer experience. Thus, orienting the entire organization to be centered on clients necessarily touches on all parts of the institution, including governance, human resources, delivery channels, processes, incentives, and core systems.

Squeezing deep client analytics into existing operating systems will not always work. So both Ramesh and Charlotte stressed the importance of creating space for testing new innovations outside the core business but warned against marginalizing new ideas to the spheres of research and development or pilot projects. They also encouraged management to develop metrics to help calibrate new ideas and innovations quickly, kill ideas that do not work, and move to operationalize good ones. Unfortunately, everyone has experienced a graveyard of dead pilots.

"For any disruptive innovation, the business case is likely to be sketchy at first"

Charlotte works with large corporates. Ramesh is a former investment banker. Both want to put people back at the center of business decision-making and both understand the importance of making the numbers work. After all, over time, without sustainable institutions, impact will be eroded. Yet, both also understand that when it comes to disruptive innovations and doing things differently to meet client needs, the business case is not a black or white issue.

Indeed, many new ideas would be abandoned immediately if evaluated in the short-term using existing risk analysis tools. Sometimes, innovation is needed to find new ways to think about and calculate the business case and create deep, long-term relationships with clients and market segments. Donors and investors can play an important role in sharing some of the risks of innovation and providing patient capital that enables institutions to prioritize longer-term gains.

In the next five years, our engagement to understand demand will hopefully unpack what it takes for financial service providers to be more client-centric. This will include demonstration work with providers on three priorities– understanding current/potential clients, designing effective organizational delivery, and making the business case work. It will also include undertaking foundational research on clients and a focus on systematically underserved client segments. Finally, considerable energy will be spent on financial inclusion data and garnering evidence on impact – these are important feedback loops to gauge whether we are making progress on advancing financial inclusion and whether access to finance is generating social welfare benefits for the poor.

----The author is CGAP’s Deputy CEO and leads CGAP’s work on clients and products.

Topic: Customers


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