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, sign up for campaign updates.

Image credit: Heather Thorne/Grameen Foundation

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On February 5, the Microcredit Summit Campaign released Vulnerability: The State of the Microcredit Summit Campaign Report, 2013 by announcing that in 2011, 13 million fewer of the world’s poorest families received access to microcredit and other financial services than in 2010. This is the first time since 1998, when the Campaign began tracking this data, that the total number of clients and the number of poorest families reached have declined. We found in our data that the total number of clients fell from 205 million to 195 million and the sub-set of families living in extreme poverty, defined as less than $1.25 a day, fell from 137 million to 124 million. (Visit the report website to learn more.)

I presented the report at a launch event at Busboys and Poets in Washington, D.C., and Susy Cheston (Senior Advisor at the Center for Financial Inclusion at Accion) moderated a lively discussion with my co-panelists Wendy Abt (Deputy Assistant Administrator, USAID), David Roodman (Senior Fellow, Center for Global Development), and Alexia Latortue (Deputy CEO, CGAP). Not surprisingly, the most salient exchange of the panel arose with David in the role of provocateur.

Challenging the Campaign, he contrasted simple but powerful messages that communicate well to the mass public—“microcredit can help people lift themselves out of poverty”—to more nuanced messages that better communicate reality but are harder to condense into a soundbite. Many of us are trying to figure out how to convey the nuanced message that “a range of financial services, when combined with other important development services, may provide tools that people can use to move away from poverty.” David asked whether, after seeing the results of unchecked growth in Andhra Pradesh, the Campaign wanted to rethink its goal-setting role.

Wendy spoke up in favor of facing difficult realities—even when this caused problems in communicating to the public. In her experience, asking the hard questions has led to a much richer set of answers, and then to real progress on the problems we seek to address. She said that this is the approach that USAID is now taking as it examines the results its programs achieve over time.

My own response to David’s question was that the Campaign has been shifting priorities from an emphasis on total numbers (our first goal of reaching 175 million clients) to outcomes (our second goal of helping 100 million clients and their families lift themselves out of severe poverty). We find that those microfinance providers that track their clients’ poverty levels over time soon develop a robust set of products and services that help clients address the vulnerabilities they face, and we highlight some of these in the report.

David prodded one more time. He noted our report’s discussion of the promise of mobile technology to reduce the costs of financial transactions for the poor, as well as our coverage of Fonkoze in Haiti and Bandhan in India, two of the programs in the CGAP-Ford Graduation Program research on working with the ultra poor. He posed these two examples as alternative ways of reaching the goals of the Campaign and thought he detected a subtle bias in the report in favor of the graduation programs. He argued in favor of mobile technology being the true heir to microfinance and the means by which we realize the vision of microfinance’s founders. (David recently wrote a blog post on the report, here.)

Alexia quickly jumped in to challenge what she saw as a completely false dichotomy. Graduation programs and mobile technology are simply two very different things that cannot be usefully compared. She thought that if governments were to take and scale up graduation programs, spending more up front than they are presently with social protection programs, maybe some of the most difficult to reach 5-8 percent of the population would actually graduate from extreme poverty and no longer need permanent government transfer payments. At the same time, mobile phones could help lower the costs of these programs if people could, for example, save using the mobile phone. There is no reason that we cannot not use both methods together to accomplish our goals.

The conversation served as a reminder of where we stand now as an industry: acknowledging the limits and dangers of growing too far and too fast with traditional products but anticipating breakthroughs with new technologies and targeted products that help those in poverty to build resilience against the vulnerabilities they face.

The Microcredit Summit Campaign will continue this dialogue about resiliency with a webinar February 27, 2013 on vulnerability and social capital, organized with the Sustainable Microenterprise and Development Program, a professional training program at the University of New Hampshire. Click here to learn more about the webinar, or contact Sabina Rogers (rogers@microcreditsummit.org).

Larry Reed is the director of the Microcredit Summit Campaign. He has worked for more than 25 years in designing, supporting and leading activities and organizations that empower poor people to transform their lives and their communities. For most of that time Reed worked with Opportunity International, including five years as their Africa Regional Director and eight years as the first CEO of the Opportunity International Network. Reed has taught at the Boulder Institute of Microfinance for 15 years, served as the chair of the SEEP Network, and consulted with industry-wide initiatives like the Smart Campaign for Client Protection and MicroFinance Transparency.

Image credit: Microcredit Summit Campaign

Have you read?

Indian Microfinance Leaders Talk About Poverty

Measuring Success: Microcredit in Perspective

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