Simplicity and Human Touch Ensure Better Customer Outcomes in Microfinance

FMO, the Dutch entrepreneurial development bank that has a deep commitment to consumer protection, decided to find out more about how its investees’ implementation of Cerise+SPTF consumer protection standards affects customers. It commissioned M-CRIL, a microfinance rating and evaluation agency, to assess customer outcomes at two microfinance institutions (MFIs) that were already known to have strong consumer protection performance – one in Bangladesh and one in the Philippines. CGAP also joined this effort, providing independent advice and input throughout the process. The assessment revealed two key takeaways – how much consumers value simplicity and human touch, and how funders and providers can gather insights on customer experiences and outcomes through a combination of quantitative and qualitative tools (e.g. surveys, focus groups, interviews). The full report yields more findings in greater detail.  

Simplicity sets a foundation for consumer protection by design 

Customers clearly stated how much they value simplicity and how much simplicity contributes to positive outcomes for them. When asked an open-ended question such as, “What do you like about this institution?” responses from the Filipino MFI showed an overwhelming appreciation for simple and easy products and processes. Customers were confident in their own ability to handle the decisions that come with using the product. Some customers said they chose their MFI specifically because their products and processes were simple. As the report states, “The simpler the products, the terms and options, the more likely that problems are reduced.” This finding confirms the importance of concepts emphasizing simplicity, like appropriate product design, quality financial products, financial product governance, and suitability, which are integral to consumer protection standards. 

The lesson has a reverse angle too: adding new products often brings complexity and new challenges. In the same Filipino MFI, a voluntary insurance product was introduced and nearly all the customers paid the premium, erroneously believing it was required. With the added complexity of flexible loan prepayments alongside fixed insurance terms, customers could end up paying for double coverage. The introduction of a more complex product, however well-intended, caused negative financial and experiential outcomes, disrupting the predictable, easy-to-navigate relationship between customer and MFI.  A key lesson from this finding is that simplicity protects customers. When providers plan to offer more products to attract more customers or increase their revenue, they also need to plan for customer-centric product design, adequate staff training, and clear customer communication. Otherwise, potential consequences for customer outcomes and relationships may be negative.  

Human touch is more trusted than hotlines 

A disappointing finding at both MFIs was the lack of success in building hotlines that customers would actually use to submit inquiries or complaints. This speaks to the question of trust. Both MFIs offered online or phone-based hotlines; one of them also had a Facebook page and had started its own app. However, surveyed customers overwhelmingly said that they preferred raising complaints directly with their loan officer or, in severe cases, their branch manager.  

This finding was confirmed by the MFIs’ data showing a relatively small number of inquiries and complaints coming in through the hotlines. The positive angle was that customers showed confidence and trust in their local staff. It was beyond the scope of the evaluation to explore the reasons the hotlines were not used – probably some combination of strong familiarity with local branch staff, customers’ hesitation about using impersonal automated channels, and lack of sufficient communication from the MFI about the hotlines. A key message from the assessment is that customers greatly prefer to interact with real people whom they trust. This finding has implications for digital credit providers whose entire relationship with customers is online — as it is important to account for human touchpoints throughout their journey. 

Recommendations for providers and funders to gather customer insights 

Based on the positive experience with this assessment, the report offers a few key methodological recommendations that providers and funders can adopt to gather customer insights and better understand customer outcomes: 

1. Conduct (or commission) several tools to gather insights on customer experiences and outcomes: phone surveys, in-person surveys, focus groups, and in-depth interviews. 
2. Add a few open-ended questions to otherwise quantitatively scored surveys with closed questions– asking not only whether but why certain issues have occurred. Analyzing qualitative data may soon become easier using AI. 
3. Oversample delinquent and defaulting customers in the surveys and focus on them during the qualitative in-depth interviews. Because there are relatively few such clients, their specific problems would be lost in a survey that is representative of all customers. As the report says, “Examining more challenging situations is the ultimate test of strong client protection.”  
4. Utilize all this data to examine root causes and propose solutions. Qualitative data helps move quickly from flagging a problem to diagnosing causes and solutions. 

Throughout the assessment, this methodology uncovered critical operational pain points and helped identify solutions that MFIs can adopt, especially for delinquent and defaulting customers. For example, the MFIs’ existing debt collection rules were not clear or prescriptive enough to prevent some staff from resorting to harsh tactics. Because repayment-based incentives can tempt staff to pressure clients, institutions must gather client feedback to spot harmful tactics and make clear to staff what is unacceptable. Similarly, a look at clients in rural areas and with low education or incomes revealed some problems in disclosure practices – for example, too much information was loaded into the loan distribution session rather than spread out and repeated to ensure thorough customer comprehension. These findings reemphasize the need for providers to ensure that customer-centricity is applied to all stages of the customer journey.  

Customers have clearly spoken – they value simplicity and human touch. Providers should see these attributes as enablers of consumer protection. Therefore, they should integrate customer centricity in every phase of the product life cycle and use several tools to ensure they understand customer experiences and outcomes, taking corrective actions as needed. Fostering customer centricity is paramount to building a finance ecosystem that is both responsible and sustainable.