Given that microfinance is rooted in financial inclusion, it would seem evident that since most financial institutions structure their business around the customer, so would microfinance. As Rahil Rangwala says, “Financial organizations are successful because they are client-centric, not in spite of it. This is as true on Wall Street as it is in the slums of India.” That isn’t always the case though due to the stigma associated with microfinance clients.
Here are a few tips for applying a customer-centric approach to microfinance.
Redefine your perception of microfinance clients.
People often misconstrue microfinance clients as consumers without value. Rather than assuming this clientele only focuses on survival from paycheck to paycheck, consider the initiative they have taken to find a microfinancing option that works for them. That initiative exhibits economic engagement and a strong work ethic.
Don’t assume that clients aren’t going to make good on their payment.
As explained by FIRST for Sustainability, the risk associated with microfinance is considerably lower than people realize. “Although at the individual transaction level the environmental and social risks associated with microfinance are low, given the smaller size and shorter tenure of transactions, there are credit or liability risks for the microfinance institution in cases where environmental and social issues, such as an accident, affect a micro-entrepreneur’s ability to repay a loan.” The point is that while this loan makes a considerable impact in a patron’s life, these loans are still relatively small in the grand scheme of things.
Focus on the customer experience.
By considering the needs specific to each customer, you foster loyalty. While not all of your clientele has a ton of monetary value, their continued business keeps your business in business. Yes, it may take a little more time and effort, but by improving their experience, you will have loyal customers for years to come. Customers who display allegiance are more likely to return your investment.
Remember the microfinance mission.
Microfinance intends to offer small loans at relatively low-interest rates to assist impoverished constituents who may not otherwise be able to afford loans or build credit. As Emeka Osuji says when customers cannot find an effective microbank for them they often turn to informal institutions that often only exacerbate their fiscal troubles. “These sources include the money lenders that set out with a mind-set of usury and cheating, and the itinerant bankers who charge them a fee for helping them save their money,” which is the very problems microbanks intend to help their constituents avoid.