This note documents the lessons learned in 2005 under the Action Research Programme of MicroSave. Focusing on strategy, the note discusses strategic alignment between an institution, its staff, management and stakeholders, shared vision, strategic marketing, improving governance and risk management process for its success. It also stresses the role played by branding which is not merely designing a logo, but it requires linkages with organisational strategy. The note also emphasises various processes in savings and lending operations including staff incentive scheme for savings, loan portfolio audit and pilot testing. It further discusses importance of communication, institutional culture for customer oriented service and feedback loop to improve efficiency. This note concludes with a focus on e-banking and performance management of the staff to deliver effective and efficient services.
Blog
Uses and users of MFI loans in Bangladesh
The author’s study of the ‘financial diaries’ methodology provided unusual and valuable insights into how MFI loans are actually used and why. This is because they tracked the day-to-day activities of 53 village households over two or three years in great detail, helping them to construct ‘diaries’ of their financial lives. Unlike questionnaire-based surveys, and unlike rival ways of using case-studies, which depend on recall by the interviewees, this method allowed observation in real-time as people struggled to decide what to use their loans for, and then dealt with the consequences of their choices. This Grameen II note covers the methodology used in collecting ‘financial diary’ information from clients and provides the results of the study as well, focusing on how clients used the funds and for what purpose.
The Art and Science of Pricing Financial Services
This note discusses the pricing concerns from customers’ perspective and the difficulty in understanding the costs associated with the financial services. It highlights three main factors for pricing a product—costs, competition and value. It also underlines the importance of transparency in developing a business and the ways to improve it by ensuring that staff members know the products and services well. The note also points out the role played by regulators in reporting the price of a product and voluntary disclosure of actual pricing to customers by the MFIs. It further considers the factors in pricing loans, savings and e-banking products by the MFIs. Conclusively, it recommends building and developing capacities to perform pricing.
Staff Incentive Schemes for Deposit Mobilisation
This note discusses in details about designing the staff incentive schemes for deposit taking microfinance institutions. It highlights the importance of being friendly and having good interpersonal skills in mobilising deposits. It suggests designing group based staff incentive scheme for deposit mobilisation as it is often difficult to discern exactly what (and who) caused the customer to entrust the institution with his or her funds and provides a simple formula for it. It also stresses to factor in more weights, if there are different schemes, and/or management thinks of refining the existing schemes. It further recommends distributing the branch bonus pool according to the base salaries.
Membership in Bangladeshi MFIs: growing, volatile, and multiple
Estimating the number of Bangladesh’s microfinance clients (known almost always as ‘members’) has never been easy in an industry that lacks a credit bureau or other reliable way of tracking users of financial services. Simply adding up the member numbers reported by the MFIs themselves leads to gross over-reporting, because MFIs may exaggerate their numbers, because they rarely distinguish accurately between active, inactive and lapsed members, and because such a method takes no account of multiple membership in two or more MFIs. This note cannot dissolve this uncertainty, but it attempts to use data from the ‘financial diaries’ element of the Grameen II study to examine the growth, volatility and multiplicity of MFI membership among a small number of villagers whose financial activities were tracked carefully for up to three full years (end of 2002 to end of 2005).
Mobile Phone-Based E-Banking: The Customer Value Proposition
The need for a branch infrastructure and managing high volumes of low value transactions are the barriers related to serving the low-income market. While outlining the features of mobile banking, the note warns that the failure of such initiatives is often due to its inappropriateness to address the customers’ needs rather than because of technological problems. The note also highlights the reasons as to why should low income segment prefer technology—if it is secure, convenient, low cost, accessible/liquid and easy to transfer. It also compiles the barriers and challenges in using technology like availability of machine, lack of training, lack of sufficient funds with agents, illiteracy among clients, lack of willingness from suppliers and other resource constraints. It also highlights the significant role played by cash and its functionality.