SPTF Annual Meeting 2015: Day one notes
How Does SPM Help Financial Institutions Address Operational Challenges?
Successful and sustainable SPM practices are those that allow MFIs to confront pressing operational challenges such as client exit, staff turnover, and product decisions. This session was split into two parts, which allowed participants to explore real-life case studies and discuss how MFIs can SPM to improve their operations and benefit clients.
Case study 2: Collecting Client Data Addresses Low Client Satisfaction and Retention
Speakers: Lalaine Joyas; Shahla Rehan, Kashf Foundation, Pakistan; Amina Mendez, ASKI, Philippines—see PowerPoints posted here
This session will examine the operational challenges of increasing client satisfaction and retention. ASKI (Philippines) and Kashf Foundation (Pakistan) discussed their use of client data for making operational decisions that improve satisfaction and retention. Both institutions use client satisfaction and other surveys to make product and delivery decisions that benefit both clients and the institutions. (Find more resources on this topic here and here.)
Amina Mendez (ASKI) mentioned that ASKI had a strong social vision from its origin in 1987. Over the years the organization has seen SPM help them tackle operational challenges. One of their most recent challenges was low client retention rate, specifically with group lending (63% retention).
ASKI used the following SPM tools to help understand the underlying issue:
- Client surveys - since 2011 the organization conducts client surveys on client satisfaction and client protection (now merged into 1 survey)
- Client exit survey - for all drop-out clients
- Komemnto Mo Itext Mo (“send us your comments via text”)- a complaint mechanism via SMS with validation procedure
- External assessments – USSPM beta testing in 2013, Social and financial rating in 2013, SPI4 audit in 2014, Smart Certification process started in 2014
With these mechanisms they learned:
- Clients were dissatisfied with the long processing time for loans
- Group conflicts - issues of abuse of group accountability by some members and issues with center chief
- Room to grow regarding transparency (flyers were not as available as they thought, terms and conditions of add-on services where not well explained, resulting in issues with insurance claims and benefits)
- Delinquency management - unclear policy on collateral processing, registration, and seizure in case of delinquency
With this information in hand, ASKI implemented the following changes:
- Increased resources allocated for individual lending product rather than group lending
- Added additional personnel focusing on the individual loan product
- Transitioned from flat interest rate to declining, to improve transparency
- Developed welcome kits and flyers in local language
- Updated policies on debt thresholds and cash-flow analysis, to prevent client over-indebtedness
As a result of these changes, ASKI saw the following results:
- ASKI’s net promoter score at 82% (global benchmark is 50%—net promoter score is the response to the question, “would you recommend our products and services to your friends/family?”)
- Client satisfaction rating at 89% (institutional target is 85%)
- Increased use of client complaint mechanisms
- Increased client retention rate by 10%
Shahla Rehan (Kashf Foundation) mentioned that Kashf Foundation was also facing client satisfaction issues. In 2007, a client exit survey showed that 42% of respondents were dissatisfied with products features, and a 2008 survey revealed that 34% of respondents had left due to bi-monthly instalments and even more due to bi-monthly meetings and group/center responsibilities.
Kashf conducted client focus groups and hired external consultants to help them better understand and then address this issue. They found the following problems
- Clients did not want to deal with group repayment responsibility
- Weak client/loan officer relationships
- Lack of transparency and confidentiality
- Impact of loan was difficult to gauge
After identifying these issues, Kashf Foundation introduced the following changes:
- Moved to individual lending methodology – started to work with families rather than groups and understanding individual business cash flows and linking loan sized to client needs and repayment capacity
- Started an effort to build client capacity –provide financial literacy, business and technical trainings to equip clients with skills for better business enhancing client knowledge about the institution’s client protection policy
- Started an effort to build staff capacity – the organization provides continuous trainings to staff (induction and refreshers) on customer protection code and SPM, and developed a staff accountability matrix (describing what is acceptable and what is not from employees, what is expected, etc)
- Developed and strengthened customer feedback system – established centralized customer service desk with a toll free number, installed client complaint boxes in all field offices, introduced the Women Entrepreneurs Council (selecting 30-50 women in total, one from every area to come meet the management of the organization both in the field and local office)
- Started post-disbursements client checks
- Developed a social performance dashboard for use by management
As a result of all these changes, the organization saw the following results (among many others):
- Client retention rate is 90%
- Net promoter ratio is at 99%
- 98% of clients expressed being satisfied with products and services (2014 survey)
Q. Why is client retention and satisfaction important?
A. Shahla mentioned that client satisfaction and retention is important for both clients and the institution. The institution cannot achieve its mission if clients are not satisfied and stay with the organization. For this reason, the organization follows best practices in SPM.
Amina mentioned that if clients are not satisfied, they walk away. This presents a risk of clients reversing back further into poverty. On the business side, acquiring new clients is more costly than maintaining existing clients. As competition grew in the sector, client retention started to become an issue, not only for market share, but also to ensure that all actors treat customers with respect.
Q. What issues and challenges have you encountered in collecting client feedback, and how did you face them?
A. One of the first challenges is cost. It’s important to note that the cost can vary depending on what you decide to do. ASKI for example has a research and development team, this requires a cost, but provides the organization with very valuable data that is then used by other areas of the organization. Another challenge can be skeptics inside of the organization and getting their buy-in and trust that the investment in collecting client feedback will pay off.
Q. How often do you do client surveys?
A. At Kashf Foundation, the client research team conducts client exit surveys every year and client satisfaction surveys every 6 months. The organization has a client center that gathers feedback from clients. Every client complaint received is developed into a report. Kashf does not face the challenge of internal skeptics as management is very open and committed to collecting and understanding client feedback.
Q. How did you put together your client complain mechanism?
A. Amina mentioned that complaint boxes were not working for us. However, clients were using Facebook and text messages to express their opinion. The organization acknowledged that the first step was to develop standard and consistent polices to manage client complaints. Second, they realized that staff did not want to share the complaints internally (they realized this by asking clients in surveys whether they were familiar with complaint mechanisms). To change the negative perception that staff had about sharing complaints, the organization incentivized sharing them by adding “number of complaints shared” as an indicator. Amina also mentioned that she would be suspect of a branch that claims to have no complaints.
Q. Can you please explain what the Net Promoter Ratio means?
A. It is the number of clients that respond affirmative to the question of “would you recommend the institution to others?” divided by the number of clients visited.
Q. How is client data used at the management level?
A. Kashf now presents to the board of directors in all meetings the top three suggestions and complains from clients.
In ASKI the research & development team is the main mechanism for collecting data. On the management side, there also is an SPM committee. ASKI has an SPM dashboard that is presented to the board on a quarterly basis. It includes 10 indicators and is not supposed to show all the information the board needs, rather it is intended to start conversation and discussion.
Q. What were the factors that enabled you to implement all these changes and mechanisms?
A. For ASKI, the three enabling factors were: having a strong R&D team, committed and informed board and management (providing them with the right level of information, not too much to overwhelm them and not too little that would not allow for informed decision-making), and a strong MIS.
For Kashf Foundation the enabling factors were: having commitment for SPM at the board level to help build it the organization should provide training, a strong MIS, a strong training department, a formal customer feedback system, and dedicated people to respond to customer complaints or suggestions.
Q. Has Kashf been able to identify the factors for client exit?
A. One of the things the organization found out was that clients would leave after the first cycle, saying they no longer needed a loan. Also, Kashf does rely on Credit Bureau information before making loan decisions, but not all organizations use it. This means that if a client’s repayment capacity changes and the client asks for another loan, Kashf would not give them a further loan, which means the client leaves. Also, if the client does not use the loan for the intended purpose, the organization will not give them a further loan.
Q. Kashf provides business training to clients, including a certification. What happens if a client that is certified has a business that fails? Does the client blame the organization? Also, what happens when you discover that a client has not used the loan for the original purpose, for example what if the person had a health situation and used the money for medical care?
A. Kashf provides basic financial training to all clients before disbursement but certification training (a 3-day training) is only provided to clients in their second or third cycles, which means the organization knows more about those businesses. In terms of clients having emergencies and using the loans to cover that, the organization does not sanction the client but this gets marked in the MIS. This allows us to know that the loan might have become riskier (as it was not used for the business).
ASKI also discovered that some of their loans were being used for different uses than those originally planned for, for example to cover child education fees. They also learned that some clients might keep a loan even if they do not need it just to be able to access insurance. Crop insurance is tricky.
Q. Has Kashf moved completely away from group lending?
A. Yes, we moved completely away from group into individual lending. We made a plan that indicates at which point we will be profitable with this model. We are currently 100% sustainable. This model allows us to know more about what we are doing, we know we have a one-on-one relationship with the client, and we know we are working to achieve our mission. This is important to us as we have a strong social mission and we balance social and financial performance.
Q. By conducting surveys every six months, does Kashf run a risk of data overload? Does the organization really need this frequency?
A. In the last few years the organization has gone through a lot of changes: moved from group to individual lending, introduced new products on education and insurance. This requires frequent feedback from clients so that we can react quickly. At the point when we do not have so many changes, we will probably do a yearly client survey.
Q. Now that the complaint mechanism has been established, what changes have you seen in the types of complaints you receive?
A. I believe that now ASKI receives improved quality of complaints (i.e., with more detail)