Voice of the Client: Results of the Peru Pilot
To date, about 1,600 MFIs worldwide have endorsed the Smart Campaign’s Client Protection Principles. Nevertheless, there is still no large-scale, reliable and comparable information on how clients perceive the quality of the services of their MFI. Voice of the Client is an initiative of HIVOS and MIX that intends to deliver this information in a cost effective way by directly approaching the end clients of MFIs through local independent market researchers using mobile technologies.
The selected indicators cover five out of seven of the Smart Campaign’s principles: (1) appropriate product design, (2) prevention of over-indebtedness, (3) transparency, (4) fair and respectful treatment of clients, and (5) mechanisms for complaint resolution.
Triple Jump supported the Voice of the Client pilot project in Peru for which four MFIs participated, namely CMAC Arequipa, Fondesurco, Financiera ProEmpresa and Financiera Compartamos. The latter three are investees of funds managed by Triple Jump.
MIX has analyzed the data collected from almost 3,800 clients and can be found back on MIX’s website. This analysis calls attention to the following relevant findings:
1. On the perception of their loan, 28% of clients consider the amount too small and 29% report that the installment size is too big. MFIs can leverage this information to redesign their loan products to better fit client needs.
2. Almost half of clients sampled stated that they had made a late payment at least once, and 15% stated that they borrowed from another source to repay their loan with their MFI. MIX’s forthcoming report investigates the linkages between the number of outstanding loans, multiple borrowing, and late payments.
3. 72% of respondents were aware of their loan’s interest rates before accepting the loan, with the remainder either not knowing (13%) or not remembering it (15%). The full report explores the relation between awareness of cost components and late payments.
4. In spite of an emphasis on strong ethics and compliance within the Peruvian industry, 3% and 1% of the total sample reported having experienced some form of intimidation or mistreatment by their loan officer and/or to have been requested to pay a commission, respectively.
5. Only 40% responded being aware of the availability of a complaint mechanism while the remaining 60% either do not know or do not recall whether a complaint mechanism is available. These figures make a case for MFIs, support organizations and regulatory bodies to review their policies and processes.
The MFIs have received their individual reports in February of this year. Their feedback on the reports was that they find them very useful. The MFIs are looking into ways to improve their operations, especially in their practice on multiple lending. This is where true value is generated – not through generating yet another series of reports – but by inspiring responsible actions.