Micro-finance clients want flexible facility
Wednesday, 8 August 2007
S. M. Rahman in the second of a three-part article
CLIENTS want liberty from the current insurance practices. Micro insurance appears in various names. Premiums are collected in different modes. There are mainly two kinds of insurance that include loan insurance and health insurance. The aim of insurance is chiefly to cover the risk of life due to death of the clients. Mostly premium is related with loan amount in the loan period. Some MFIs charge a fee at flat rate for all clients. The benefits generally cover the waiver of the outstanding loans and savings is also returned to the nominee. Health insurance is offered by some MFIs. The MFIs providing this facility charge a percentage point against loan or a specified fee. The benefits include free medical prescription by qualified doctors or paramedics, discounted medicine cost and pathological tests, etc. Those who take higher loans (say microenterprise loan) have to pay increased amount of premium compared to others regardless of availing the facility.
Who will call this commonsensical? Clients of many MFIs cannot take this facility for distance problem and transport costs but they keep on paying premiums though. To many MFI clients the concept and practice of this type of insurance is sheer expletive and they think that MFIs siphon off their hard cash to ramp up MFI's capital base. Some argue that insurance should be for long term ranging 8-10 years instead of one year for which they will pay an agreed premium or it could be optional as many are not inclined to avail it. Unhappily, it is totally enforced. The clients feel that after stipulated period, they should get back all the money with interest what they had deposited. They are of the view that in case the client dies, the nominee will get the claims as per insurance policy. It has nothing to do with loan amount, they say. Generally clients are found resentful of the current insurance practices. The findings of a study" Client Satisfaction in Microfinance Programme' commissioned by CARE Bangladesh (2006) shows that the clients overwhelmingly do not like current insurance practices. Their point is that in current practices, they lose a good amount of money.
Clients' need more freedom of choice. It is by now evident that the clients have hardly any leeway to exercise their choices openly as their freedom of choice is not much cared for. Many clients take loans from multiple MFIs surreptitiously for which they remain in tension. They argue that the MFIs need to take a more liberal policy on this count recognising the reality on the ground. Some clients say; "We will do savings where we get more interest and where we can get the facility to withdraw money as and when necessary". Some also say: "We will take loans only from those MFIs where the loan amount is adequate, interest rate is low and where loan can be obtained quickly". Side by side current financial services, they aspire various social development services. They opine: "We will transact with those MFIs where there is no loan cut or no extra charges levied on us". They feel that in order to have client satisfaction, they need intrepid mobility and need to do transactions with more than one MFI. The MFIs are, however, yet to cotton on to these realities. Most MFIs have similar terms and conditions. Customers prefer flexible savings with withdrawal facility. They want more interest on savings. Many clients want both short-term long-term savings products. They want larger loans with low interest so that they won't have to move to other MFIs for money. They do not want to be exploited in the name of insurance any more. The premiums paid once are gone for good. Insurance is preferred in savings mode.
Those who are engaged in enterprise, they want additional loan or refinancing to replenish the depletion of loan capital following quick repayments. They want rolling over of loans in case of hardship. The microfinance clients want to take loan for any purposes. They do not like to be accountable and penalised for others' loan defaults. The MFIs envision development in one way while the clients think their betterment in another way. Sometimes the clients cannot use loans as per policy of the MFIs as the MFIs prefer poverty-focused activities. But the clients need loans urgently for meeting their problems, say for healthcare, education, land purchase, house construction or sending someone abroad.
There are MFIs that sell various production inputs to the clients directly. The clients accept the inputs without any murmur. There is no denying that sometimes this helps the clients as procurement is difficult at times. The clients indeed want freedom to buy these things to ensure quality and some financial gains over the price. There are numerous microfinance clients scattered in the far-flung areas of the country. Many are involved in small scale production that serves both rural and urban markets. They have no knowledge of markets where to sell at good prices. These tiny clients have no marketing linkage and are left with modicum options to sell their products at low prices. Generally the intermediaries gobble up the profits. Except a handful of MFIs, none is effectively engaged in facilitating the marketing aspect. Most MFIs remain with their hands off, just lending the money. That's all.
But now time has come to give attention to building marketing infrastructure and product promotion. In every district and sub-district there should be separate markets for their products. Organising an exhibition in the capital city once in a blue moon will not help much. It is time the MFIs rose to the occasion to cope up with these challenges.
Way forward: Clients want faster, safer and convenient service. They are not aware of how this will be done. It is the duty of the MFIs to think, carry out research and scout around ideas. It seems a rapid improvement in the microfinance sector is crucial that can be done coalescing local best practices and innovations. Many best practices are available in the country. Practitioners can give sober attention on the experience of those MFIs including Grameen -II for providing quality service to the clients matching their choices and aspirations.
In positioning themselves in the market, the MFIs have to focus on price, quality/range and customers service. The MFIs can mull introducing new product like overdraft loan facility for the microenterprises, which will stem depletion of capital and promote the growth of the business.
Delivery systems need to be more efficient, effective, responsive and reliable. In modern times, technology is coming to the forefront as integral to product - for example ATMs, handheld computers or card based savings accounts. We will have to be aware of the new ideas and trends. MFIs truly committed to customer service will have to monitor and understand the customers' growing needs, perceptions and satisfaction. In the outside world, MFIs are galloping ahead in product development, technology and customer service. We cannot lag behind and must catch up with the going trend to bring in more benefits to our clients. We are to show that we have not only developed in terms of quantity but quality as well.
Millions of clients in Bangladesh with multiple financial accounts (viz. savings, micro loans, enterprise loans, etc.) have become a formidable challenge to manage with traditional paper ledger or MS spread sheet. The larger MFIs in the country are using computerised MIS or FIS/AIS. Generally these are done mostly at head office level. A good number of MFIs have computerised system at their branch level, though. The MFIs that have even 1000 clients do handle three to four accounts for each client. To simplify their operations with efficiency and brining in transparency, use of information and communication technology (ICT) is imperative. If MFIs do not have an integrated system of information gathering, processing and output generation, they will never exactly know what is happening in their operations. Truly, it will not be possible for all MFIs to undertake such venture, yet raft of them are in a position to embark on this system.
One of the impending challenges of MFIs is, however, to increase the scope of financial products for low income clients as their needs and choices are changing fast. Clients want quicker, safer and convenient transactions. How long they will wait to ensure this? With traditional system in place, it is increasingly difficult to meet their evolving choices, while the number of accounts in the MFIs is going up every day. Asset and liability management of the clients is also immensely difficult with MFIs remaining outside the ICT environment.
SafeSave - a cooperative doing microfinance in urban slums of Dhaka city has introduced Personal Digital Assistants (PDAs) in all of its eight branches covering 13,000 clients. The handholds are hot-synced to the branch office database (MS Access) by USB connection, which takes no more than a few seconds. SafeSave having door-to-door collections use palm pilots for the transactions recording that provides benefits both to the clients and the organisation. Better time is ensured for the staff. Eliminating three to four hours per day of data processing gives branches more time in the field to spot check accounts and promote other services.
PKSF's 218 partners are using MIS and FIS/AIS at head office level. BRAC and ASA are in the process of doing it at the branches level. Outside its partners there are some MFIs who have also access to computerised MIS/AIS. PKSF is meanwhile piloting on domestic remittance transfer from Dhaka through mobile phones with three to four MFIs for its hardcore poor programme in the Northern Zone of the country which is a highly poverty stricken area. Besides, PKSF is piloting in four branches of its two partner MFIs to access all information. This is being done through a central server based application (MIS and AIS) software. One can get hooked with this system through a cell phone or normal PC. Eventually it has plans to bringing all client information through a centrally managed credit bureau. The use of paper works in the MFIs needs to be reduced and systems workflow management software has to be adopted instead. It will cut down costs substantially. Groups of 20-40 people are supposed to sit for a meeting. Due to lack of space, many clients keep standing and waste time. These meetings eat up millions of hours every day of the working women and man. If calculated, it will be a horrendous figure. We need to save these hours.
The writer is a Microfinance Specialist. More next
CLIENTS want liberty from the current insurance practices. Micro insurance appears in various names. Premiums are collected in different modes. There are mainly two kinds of insurance that include loan insurance and health insurance. The aim of insurance is chiefly to cover the risk of life due to death of the clients. Mostly premium is related with loan amount in the loan period. Some MFIs charge a fee at flat rate for all clients. The benefits generally cover the waiver of the outstanding loans and savings is also returned to the nominee. Health insurance is offered by some MFIs. The MFIs providing this facility charge a percentage point against loan or a specified fee. The benefits include free medical prescription by qualified doctors or paramedics, discounted medicine cost and pathological tests, etc. Those who take higher loans (say microenterprise loan) have to pay increased amount of premium compared to others regardless of availing the facility.
Who will call this commonsensical? Clients of many MFIs cannot take this facility for distance problem and transport costs but they keep on paying premiums though. To many MFI clients the concept and practice of this type of insurance is sheer expletive and they think that MFIs siphon off their hard cash to ramp up MFI's capital base. Some argue that insurance should be for long term ranging 8-10 years instead of one year for which they will pay an agreed premium or it could be optional as many are not inclined to avail it. Unhappily, it is totally enforced. The clients feel that after stipulated period, they should get back all the money with interest what they had deposited. They are of the view that in case the client dies, the nominee will get the claims as per insurance policy. It has nothing to do with loan amount, they say. Generally clients are found resentful of the current insurance practices. The findings of a study" Client Satisfaction in Microfinance Programme' commissioned by CARE Bangladesh (2006) shows that the clients overwhelmingly do not like current insurance practices. Their point is that in current practices, they lose a good amount of money.
Clients' need more freedom of choice. It is by now evident that the clients have hardly any leeway to exercise their choices openly as their freedom of choice is not much cared for. Many clients take loans from multiple MFIs surreptitiously for which they remain in tension. They argue that the MFIs need to take a more liberal policy on this count recognising the reality on the ground. Some clients say; "We will do savings where we get more interest and where we can get the facility to withdraw money as and when necessary". Some also say: "We will take loans only from those MFIs where the loan amount is adequate, interest rate is low and where loan can be obtained quickly". Side by side current financial services, they aspire various social development services. They opine: "We will transact with those MFIs where there is no loan cut or no extra charges levied on us". They feel that in order to have client satisfaction, they need intrepid mobility and need to do transactions with more than one MFI. The MFIs are, however, yet to cotton on to these realities. Most MFIs have similar terms and conditions. Customers prefer flexible savings with withdrawal facility. They want more interest on savings. Many clients want both short-term long-term savings products. They want larger loans with low interest so that they won't have to move to other MFIs for money. They do not want to be exploited in the name of insurance any more. The premiums paid once are gone for good. Insurance is preferred in savings mode.
Those who are engaged in enterprise, they want additional loan or refinancing to replenish the depletion of loan capital following quick repayments. They want rolling over of loans in case of hardship. The microfinance clients want to take loan for any purposes. They do not like to be accountable and penalised for others' loan defaults. The MFIs envision development in one way while the clients think their betterment in another way. Sometimes the clients cannot use loans as per policy of the MFIs as the MFIs prefer poverty-focused activities. But the clients need loans urgently for meeting their problems, say for healthcare, education, land purchase, house construction or sending someone abroad.
There are MFIs that sell various production inputs to the clients directly. The clients accept the inputs without any murmur. There is no denying that sometimes this helps the clients as procurement is difficult at times. The clients indeed want freedom to buy these things to ensure quality and some financial gains over the price. There are numerous microfinance clients scattered in the far-flung areas of the country. Many are involved in small scale production that serves both rural and urban markets. They have no knowledge of markets where to sell at good prices. These tiny clients have no marketing linkage and are left with modicum options to sell their products at low prices. Generally the intermediaries gobble up the profits. Except a handful of MFIs, none is effectively engaged in facilitating the marketing aspect. Most MFIs remain with their hands off, just lending the money. That's all.
But now time has come to give attention to building marketing infrastructure and product promotion. In every district and sub-district there should be separate markets for their products. Organising an exhibition in the capital city once in a blue moon will not help much. It is time the MFIs rose to the occasion to cope up with these challenges.
Way forward: Clients want faster, safer and convenient service. They are not aware of how this will be done. It is the duty of the MFIs to think, carry out research and scout around ideas. It seems a rapid improvement in the microfinance sector is crucial that can be done coalescing local best practices and innovations. Many best practices are available in the country. Practitioners can give sober attention on the experience of those MFIs including Grameen -II for providing quality service to the clients matching their choices and aspirations.
In positioning themselves in the market, the MFIs have to focus on price, quality/range and customers service. The MFIs can mull introducing new product like overdraft loan facility for the microenterprises, which will stem depletion of capital and promote the growth of the business.
Delivery systems need to be more efficient, effective, responsive and reliable. In modern times, technology is coming to the forefront as integral to product - for example ATMs, handheld computers or card based savings accounts. We will have to be aware of the new ideas and trends. MFIs truly committed to customer service will have to monitor and understand the customers' growing needs, perceptions and satisfaction. In the outside world, MFIs are galloping ahead in product development, technology and customer service. We cannot lag behind and must catch up with the going trend to bring in more benefits to our clients. We are to show that we have not only developed in terms of quantity but quality as well.
Millions of clients in Bangladesh with multiple financial accounts (viz. savings, micro loans, enterprise loans, etc.) have become a formidable challenge to manage with traditional paper ledger or MS spread sheet. The larger MFIs in the country are using computerised MIS or FIS/AIS. Generally these are done mostly at head office level. A good number of MFIs have computerised system at their branch level, though. The MFIs that have even 1000 clients do handle three to four accounts for each client. To simplify their operations with efficiency and brining in transparency, use of information and communication technology (ICT) is imperative. If MFIs do not have an integrated system of information gathering, processing and output generation, they will never exactly know what is happening in their operations. Truly, it will not be possible for all MFIs to undertake such venture, yet raft of them are in a position to embark on this system.
One of the impending challenges of MFIs is, however, to increase the scope of financial products for low income clients as their needs and choices are changing fast. Clients want quicker, safer and convenient transactions. How long they will wait to ensure this? With traditional system in place, it is increasingly difficult to meet their evolving choices, while the number of accounts in the MFIs is going up every day. Asset and liability management of the clients is also immensely difficult with MFIs remaining outside the ICT environment.
SafeSave - a cooperative doing microfinance in urban slums of Dhaka city has introduced Personal Digital Assistants (PDAs) in all of its eight branches covering 13,000 clients. The handholds are hot-synced to the branch office database (MS Access) by USB connection, which takes no more than a few seconds. SafeSave having door-to-door collections use palm pilots for the transactions recording that provides benefits both to the clients and the organisation. Better time is ensured for the staff. Eliminating three to four hours per day of data processing gives branches more time in the field to spot check accounts and promote other services.
PKSF's 218 partners are using MIS and FIS/AIS at head office level. BRAC and ASA are in the process of doing it at the branches level. Outside its partners there are some MFIs who have also access to computerised MIS/AIS. PKSF is meanwhile piloting on domestic remittance transfer from Dhaka through mobile phones with three to four MFIs for its hardcore poor programme in the Northern Zone of the country which is a highly poverty stricken area. Besides, PKSF is piloting in four branches of its two partner MFIs to access all information. This is being done through a central server based application (MIS and AIS) software. One can get hooked with this system through a cell phone or normal PC. Eventually it has plans to bringing all client information through a centrally managed credit bureau. The use of paper works in the MFIs needs to be reduced and systems workflow management software has to be adopted instead. It will cut down costs substantially. Groups of 20-40 people are supposed to sit for a meeting. Due to lack of space, many clients keep standing and waste time. These meetings eat up millions of hours every day of the working women and man. If calculated, it will be a horrendous figure. We need to save these hours.
The writer is a Microfinance Specialist. More next