A very important contribution of the microfinance revolution that started 40-years ago, has been the creation of long-term client relationships. The value of such relationships has constituted the foundation of the structures of incentives that govern the interactions between microfinance institutions (MFIs) and their clients. From this perspective, genuine microfinance has been a kind of relational banking for the poor.
Facing new challenges
Traditional microfinance is a proven model, yet it faces persistent challenges from new competitors, regulation and disruptive technologies. While facing such challenges, some MFIs have drifted away from their core values and mission. Some blame the legal structure of an MFI, mainly of a regulated financial institution, for the distancing effect. Others, afraid of mission drift, refuse to convert into a commercial institution. Yet, by doing that, they are giving up the possibility of scaling up and providing other financial products that genuinely address the needs of their clients.
Looking for answers
The white paper “Do clients still matter?”, sponsored by Calmeadow (www.calmeadow.com) and conducted by Rodolfo Quirós, Claudio Gonzalez-Vega and Pedro Fardella, analyzes the experience of 40 MFIs in nine countries of Latin America and the Caribbean (Bolivia, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Peru and The Dominican Republic), and evaluates if the corporate structure has influence on the relationship of the MFI and their clients.
Taking prejudices down
Based on the findings of the paper, prejudices about mission drift and the performance of regulated MFIs were not confirmed. On the contrary, the data set offers many examples of regulated MFIs adhering to their mission, sustaining the outreach of their target clienteles, supplying more varied and less costly services, while developing strong relationships with them.
The study aims at providing a portrait of the industry in Latin America and the Caribbean while allowing readers to explore their own hypotheses. To learn more and to access the study we invite you to visit our website at http://calmeadow.com/research/Do%20clients%20still%20matter.html