Customer-centricity in Microfinance: How to make it work

Microfinance clients are sometimes wrongly perceived as people who need financial help and are not likely to bring any value to the table. This is the wrong view of people who are working hard and economically engaged with efforts to put food on their tables. They see microfinance clients as mere survival-seeker; poor people who have nothing to offer anyone and whose only concern is how to make it through one month and into the next. Obviously, this is a warped or at best, wrong view of a group of people who belong to the class considered to hold the fortune at the bottom of the pyramid. This kind of view of the active poor clients of microfinance institutions seems to guarantee one thing: disdain that ensures that clients are not given due consideration and regard in the scheme of things the operators do.

This picture seems to fit the one painted by Peter Fader in his book: “Customer Centricity: Focus on the Right Customer for Strategic Advantage”.  According to him, not all customers of a company impact its bottom line in a positive way. In other words, not all customers contribute to the profit. Some are not profitable because not all customers and their transactions lead to profit. No matter how much one tries, it is all motions and little movement on the profit side. For this reason, Peter was straight with his readers: go for the customers that sustain the business. Clearly, he recommends that companies should seek out the best customers and focus on them and avoid wasting time with those that have nothing to offer.

To be customer centric is to focus on the provision of good customer experience. Every success-driven organisation manages its interaction with its customers. Such interaction management, though involving substantial expenditure of time and other resources, is a key way to foster loyalty of customers. It is therefore little wonder that companies do not strive to provide this premium experience to all manner of customers. Customer centricity involves intensely listening to the customer and taking their views and needs into consideration when designing products and services. This is where the problem lies. Microfinance institutions often do not place much value on their clients. They do not consider these clients deserving of the time and energy required to affect a proper customer experience. The result is that many operators provide services that are either unsuitable or irrelevant to the needs of their clients.

There is need to return to the core values of customer centric micro financing. This begins with demand-side insight, which forms the basic ingredients for the design of innovative products. And there is no progress without innovation. Informal sector operators, including individuals that are poor but economically active, do not have access to financial services, whether credit or savings. They resort to informal credit and savings institutions that often compound their bad situations. These sources include the money lenders that set out with a mind-set of usury and cheating, and the itinerant bankers (Esusu operators) who charge them a fee for helping them save their money.

I always say that microfinance begins as an innovation and only innovation can lift it beyond the past time of charity minded individuals and organizations. The first innovation occurs at inception of the microfinance institution, when individuals lacking in any form of credit worthiness are granted unsecured facilities based on some esoteric ideas about the sincerity of the economically active poor. That is innovative indeed. The second innovation should happen in the area of product design and implementation that improve substantially the risk of loan loss and hence promote sustainability and outreach.

There is no better time for operators to consider investing massively in client centred service delivery. The country is hopefully getting fully out of recession. With some luck, the economy will fully turn around soon. Many small businesses died during the recession.

Emeka Osuji