> Posted by Alexia Latortue, Deputy CEO, CGAP
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process, and highlights findings from “Mapping the Invisible Market.”
When I was young, the word “camp” was synonymous with freedom and fun. These days are long gone. Today, the word conjures images of debate at best and of self-righteous positioning at worst. There seems to be a tendency in many fields for participants to divide themselves into opposing factions. Even in the field of financial inclusion, where we may share a common vision of full inclusion, there are at least two camps with deeply held beliefs about how to get there.
Some people are in a camp that is all about the economics of supply. They posit that if we can find ways to offer insurance to poor and low-income people profitably, the rest will follow. If we can collect tiny amounts of cash in cost-effective ways, bingo, small balance savings accounts will be available to all. The promise of cost innovations, combined with increasing incomes among base-of-the-pyramid customers may be all that is needed. This is the “If We Build It, They Will Come” camp.
Another camp is all about deepening our understanding of clients. We need to empathize, focus group, observe, and ethnographically study more and more deeply. We need to get into the clients’ shoes, probe their needs, and predict their behaviors. If only we understood clients better, we would serve them better. This is the “If We Understood Better, They Would Be Better Served” camp.
I don’t particularly want to play in or debate on behalf of either camp.
We have seen savings accounts opened that remain dormant, and payment systems that are not leveraged. The “If We Build It, They Will Come” camp just doesn’t do it for me. We have also seen organizations that possess deep insights about their clients and potential market, but have no idea how to translate the knowledge or deliver anything at scale. The “If We Understood Better, They Would Be Better Served” camp also doesn’t do it for me.
Rather than camps, I want to propose a three-part strategy to achieve solutions that work for clients:
- Understanding Current/Potential Clients
- Designing Effective Organizational Delivery
- Making the Business Case Work
Putting all three elements together should help answer major questions that, if answered, might truly advance our objectives. They are:
- What does it take for a financial service provider to move from a transactional approach (narrow focus on selling a product to a customer) to a relationship approach (broad focus on understanding customers’ dynamic needs over their lifecycle and offering solutions to meet their needs)?
- How can a financial service provider design its systems, processes, operations, and human resources to deliver solutions to its customers?
- What is the business case for delivering client-centric solutions?
The answers to all three questions are needed to create value for providers and clients alike. And answering them should be a perennial priority for any serious actor in the financial inclusion space, because people and markets are dynamic and the answers will likely need to evolve.
Sign up here to join the three-part camp and share your ideas and feedback. The Clients and Products Working Group of the Financial Inclusion 2020 Project is examining diverse facets of the challenge of understanding client needs and designing a range of products informed by these needs. Watch this space as the working group begins to roll out elements of its draft action plan.
The author, Alexia Latortue, leads FI2020’s Clients and Products Working Group and is the Deputy CEO and Manager of the Clients and Products team at CGAP.
For more information on Financial Inclusion 2020, and to explore becoming roadmap contributors or reviewers, sign up for campaign updates.
Image credit: Heather Thorne/Grameen Foundation
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March 7, 2013 at 10:46 am
Monique Cohen
Very nice blog Alexia.
I would suggest that until know most of the product development in microfinance has been functionally based – what does one need and then how to determine the attributes of the prodccts e.g. housing loan, education loans. Transaction based products respond to a different set of questions including:
• How do customers manage money?
• Customer behavior – how do people survive with cash?
• How do people spend money?
• When and why do they need lump sums?
This perspective becomes all the more important when we focus on Branchless Banking. Cash flow practices bring to light products that may not make sense for bricks and mortar banking but do for electronic banking e.g. small but frequent intrahousehold cash gifts. Please contact me directly for further information.
March 8, 2013 at 3:41 am
John Gitau
Alexia, I like your thought provoking post. It is an attempt to harmonize strategies for an accelerated financial inclusion vision achievement. However, from where you sit and the role you are playing in this agenda, you can’t afford to anathematize financial inclusion vision achievement diversity in strategy represented by camps. Any antipathy to camps is espousing a zero sum game. Diversity is as good as a balanced diet to the body with so many organs each with different nutrients needs.
It is with this in mind that I want to join your camp that supports a three pronged strategy to faster financial inclusion. The good thing about your camp is that it is borrowing the good from the other camps and jettisoning the molasses. Now, anybody who is against us in the new camp that incorporates beautiful beliefs and strategies from the other camps is anti financial inclusion. I declare myself the Public Relation officer of our camp and my first announcement to all other camps is this: ” We are borrowing all good ideas, beliefs and strategies that can help accelerate financial inclusion. We promise that we shall save them safely, insure them against risk and finally invest them for maximum yield, which is financial inclusion for all by 2020. We shall appreciate if you can send them in digital format for “spot” incorporation into our system. You will get real time confirmation of receipt. Thank you”
Alexia, light touch intended!
March 8, 2013 at 6:47 am
George
All, great to follow this read. I like it. I would, like John, take from all camps or strategies or prongs. Financial inclusion can have many approaches that factor in the core function of getting to the better side of poverty for the beneficiaries. My experience from the ground is that there are a range of areas or gaps that need to be addressed before sustainability is achieved. This is the goal in the long run. Literacy, heath, technical services, knowledge sharing, credit, value chaining, markets, ICT, governance, organizational and institutional structures, awareness creation among others. I am listening……………..