What do microfinance clients think about client protection? Do client protection principles really matter to them? In particular, how important are the seven client protection principles (CPPs) that the Smart Campaign has developed and are now adopted or endorsed by many microfinance stakeholders?
To answer these questions, MicroSave launched a study with 357 clients with seven financial institutions across three Asian countries- India, Bangladesh and the Philippines between February 2012 and April 2012.
This study uses 2-6 questions to guide the discussion of each principle and rates the performance of the participating organisation on its adherence to the principles; and then facilitates the ranking of the client protection principles in the order of importance to clients. This post discusses the results from these three country studies and the way forward for client research on client protection. 1. ‘Fair and Respectful Treatment’ matters the most to clients, followed by ‘Transparency’. All the seven CPPs are considered important by clients in all three countries. However, when asked to rank them on their relative importance, the following were the top two ranked principles:
- Fair and respectful treatment of clients is one of the most important principles. Clients value being treated with dignity. A respectful attitude from MFI staff encourages them to form a relationship with the organisation, and this increases their satisfaction with the MFI. In some places in India, clients categorically mentioned that if staff behaviour is disrespectful, it is reason enough to move to another organisation. In the Philippines, some groups mentioned qualities such as kindness, understanding, perseverance, patience, punctuality and respect makes them believe that they (clients) are being treated in a fair manner. This makes the case for stronger CPP implementation to stay ahead in competitive microfinance markets such as India and the Philippines.
- Transparency is the second most important principle. Clients appreciate having clear information to help them take decisions. In the Philippines, clients considered this important because it helps them to plan better, develop trust in the MFI, and avoid over-indebtedness. Clients want to have clear understanding of terms and conditions of the products – especially the loan – to be able to decide if they can meet the repayment obligations. In India, many respondents expressed the need to explain the terms and conditions to their husbands to get their approval. In addition, clients also value regular and accurate update of passbooks / loan cards / savings records. Finally, they really appreciate the time provided to help them make a big decision.
- Clients have a high regard for organisations they are associated with. In all three countries, they rated the performance of participating organisations very highly. The chart below summarises the performance rating of MFIs in three countries:
For further details on the results and analysis, click here to see the full report.
3. The results from the tool can help organisations such as Smart Campaign, financial service providers and support organisations promote client protection. Information gathered can help to refine these principles and increase their effectiveness. It can help understand the product and knowledge gaps and build effective programmes to enhance customers’ financial awareness. Once made part of the core operations, it can provide inputs to improve customer service. For instance, where clients give a low rating on complaint resolution mechanism (as in most cases the clients do not know whom to contact for registering a complaint), this feedback can be used by organisations to strengthen their processes and training to build capacities of the staff. Thus, improving their customer service.
Using the ServQual-based tool developed by MicroSave has also encouraged clients to freely talk about client protection. The discussion with clients improved their awareness on CPPs and provide inputs for MFIs to improve social performance practices.
As a next step, MicroSave has started to research, test and customise the tool for e-/m-banking clients. We would like to see financial service providers and support organisations use this tool to gather insights from clients directly and use those insights for decision-making. To help other organisations understand the tool and methodology, a series of publications on the tool and results are published. For more details, you could refer to the following publications:
Why does MicroSave ask itself, and CGAP publishes the conclusion, that Client Protection Matters to Clients, i.e. Poor sofar unbanked people who are often unregistered, surviving in the informal sector, who are thus still unprotected?
Foreign donors, experts and charities claim to help the weakest in this world. And how do they do that in Microfinance?
Since the huge rise in their popularity, the world’s MF Champions talk about “Don’t Rush to Regulate” and since a few years they unequivocally promote “Mobile, Electronic Banking”. Their research (as on Branchless Banking, Agent Banking) also reveals large cases of fraud and theft, yes indeed, of money of the poor. Please also read http://www.newswise.com/articles/cell-phone-financial-identity-theft. WHAT reason for the strategic choice by these donors, researchers? Is their interest of growing their MF Business, growing their employment more important than promoting enforceable rights of the poor?
Maybe that for many Microfinance is like Corporate Social Responsibility is for many commercial companies, “for people who aren’t principled enough to behave decently!” (Peter Horvath) If not then I hope that the MF champions will start to think about the coherence and consistency between their claims and actions.
In the context of more focused attention on ‘Customer Protection’ (CP)strategies like Smart campaign , ,ombudsman , grievance redresses cell, etc.,) at policy level both at global and national level as well in MF arena, the first one which matters is recognition of ‘Client ‘ itself in Micro finance realm. To wit, ‘ who is MF client ? or who is client in micro finance ? then comes the question ‘Does client protection matter to the client ? Further, in view of innovative developments in the ‘ means of out reach’ beyond MFI to the so called ‘clients’ and diversification of products and services beyond micro credit in MF fold for them, there appears to be some ambiguity in the status of client under the brand name Micro finance which entitles them for such client protection benefits and identification of the stake holder as well for providing such CP services to them.
With this premise, a few questions matter from research perspectives on client protection.
That is to address – Does the status of following clients indicate that they are full fledged client of Microfinance and does client protection matter to them deservingly?
1. The person having a micro saving in a post office /bank ?
2. The person having micro insurance coverage from micro insurance company?
3. The person having been accommodated with micro (old age )pension/micro insurance under social welfare scheme by Government
4. Under the group financing concept (SHG/JLG/women group –Gramin type) does the group represent collectively as client or the individual members of the particular group enjoy the status of a client to the concerned principal financial provider ? Further, in the latter case, does the member become a client to the particular group where she joined or to the lending institution ( bank/MFI/Govt.) which funded to the group for relending to its members? In such case does the provision of CP matter to whom – SHG or MFI ?
5. In the case of 4, a) does mere membership in the group having only group savings and credit , entitle the person as ‘ a financially included MF client? b) In the case of drop out member or member with defunct account , does the member enjoy the client status continuously deserving CP? or does client protection matter to these clients deservingly?
6. In the case of tech based branchless ‘means’ of financial access as well agency/correspondent model with too many actors in the supply chain, who is the stake holder for CP to the ultimate clients and how accountability is fixed in the absence of direct relationship between the financing institution and the client?
7. Does client protection matter only to MFI and their micro credit borrowers only? Even in such case when micro credit is integrated with micro insurance , what about CP for these clients related to other mf services ?
8. Finally does ‘micro credit’ client alone enjoy the typical MF client status for getting CP benefits ?
Prudent research on client protection need to encompass for removing ambiguity on the status of client in MF arena. This is what matters on client for the development practitioners since diversified MF services which are essentially needed for poverty cure, are provided demanding diversified client protection services besides the one related to micro credit. .This is what really matters at this juncture in MF arena.
Thank you for sharing my views.
We are delighted to see this conversation around the clients’ perspective on consumer protection gaining ground, thanks to the CGAP blog. These results confirm the findings of a study undertaken in Bolivia by Microfinance Opportunities (MFO) and Freedom from Hunger three years ago (http://bit.ly/mfo-cpstudy). MFO used focus group discussions to generate the information and, as with the MicroSave study, fair treatment and respect followed by transparency of information topped the list of consumer protection principles for clients.
The uneven playing field and information asymmetries that often define the provider-client relationship need to be closely addressed in any consumer protection strategy if it is to work for the consumer. Recognition of the need to correct these imbalances led Microfinance Opportunities to develop financial education resource manual. The manual offers a client’s perspective with respect to the topic of consumer protection in terms of balancing the rights and responsibilities of providers and consumers in transacting financial services. (The manual can be viewed and downloaded for free at: http://bit.ly/mfo-cpmanual). A video on the same theme is also available.
For more information, please visit ahttp://www.microfinanceopportunities.org