The microfinance movement has been a force for good in a world full of experiments in poverty alleviation. Many a people the world over, have come out of poverty via microfinance. The impressive growth of the sector globally during the last two decades and its current momentum is evidence of a sector whose potential is unprecedented. Currently the sector is on its march to commercialization and seeking greater penetration in the country. The process has further been entrenched in Kenya by the enactment of the microfinance bill.
Granted that Microfinance Institutions (MFIs) have done more good than harm, there are few dynamics that the industry ought to shed off. While groups should ideally select their membership, the capacity of microfinance institutions to provide suitable training to the groups is more important than eventual loan delivery. Microfinance institutions should not be “loan pushers” but rather form part of a core community empowerment resource that helps groups make informed rational decisions on loans, while making them aware of their critical responsibility - guaranteeing each other in case of default.
For the microfinance concept to have a human face, the practitioners should go beyond loan disbursement. Financial services provision that will impact requires professionalism, sound product design and effective community preparation. While some microfinance institutions have realized success in lending is a function of investment in staff, others continue to push targets too much beyond the capacity of frontline staff. All this is happening in an industry with a notable rate of lending staff turnover and hiring fresh graduates. The young officers require more of leadership and adult training skills due to the nature of people they interact with on daily basis, who most of the times could be smarter than them. At the same time the institutions are spread thin on the ground and with no or very small training budgets. This phenomena develops some disconnect with the clients they interact with on a daily basis, compromising the future of the customer and the institution.
Microfinance institutions should ensure that the communities they interact with get better with time. The key to attracting and retaining economically active clients in both urban and rural areas of Kenya is, first and foremost, the people who provide the service. The messenger is more important in the microfinance industry than the message. Staff must be recruited and trained to exercise self-discipline, adhere to institutional policies and procedures and enforce client discipline. It is tough love that must work, not charity.
Lending staff should realize that successful micro financing is about putting all the cards on the table: not just enticing words that don’t inform the repercussions on the decisions customers are about to make. An informed clientele is a good risk. Lending institutions should understand the intricacies that go with entrepreneurship. Not everyone will be an entrepreneur, but many shall masquerade. Many will talk of big business and years of experience. The MFI lending staff have a duty to assess and appraise loan applicants to separate the wheat from the chaff. That’s essentially their core responsibility.
Microfinance customers have many needs. They lead complicated lives within families, communities, and cultures. MFI staff should consequently listen to their clients and know how to facilitate problem solving that goes well beyond ensuring loan repayment. The lending staffs are, first and foremost, responsible for the microfinance institution. The client is responsible for herself and her family. Yet each requires the other, it’s a mutual relationship. The MFI must have a commitment that permeates all aspects of hiring, training and supporting lending staff. If the institutional staffs are not effective on the ground and “truthful” in their relationships with the clients and the larger community, the MFI will struggle. While boardroom decisions and donors could nurture microfinance institutions, the ultimate test for success is out in the field. Only when there is effective client management by lending staff will a “human face” in microfinance provision be realized.
By Charles – Microfinance Practitioner
Granted that Microfinance Institutions (MFIs) have done more good than harm, there are few dynamics that the industry ought to shed off. While groups should ideally select their membership, the capacity of microfinance institutions to provide suitable training to the groups is more important than eventual loan delivery. Microfinance institutions should not be “loan pushers” but rather form part of a core community empowerment resource that helps groups make informed rational decisions on loans, while making them aware of their critical responsibility - guaranteeing each other in case of default.
For the microfinance concept to have a human face, the practitioners should go beyond loan disbursement. Financial services provision that will impact requires professionalism, sound product design and effective community preparation. While some microfinance institutions have realized success in lending is a function of investment in staff, others continue to push targets too much beyond the capacity of frontline staff. All this is happening in an industry with a notable rate of lending staff turnover and hiring fresh graduates. The young officers require more of leadership and adult training skills due to the nature of people they interact with on daily basis, who most of the times could be smarter than them. At the same time the institutions are spread thin on the ground and with no or very small training budgets. This phenomena develops some disconnect with the clients they interact with on a daily basis, compromising the future of the customer and the institution.
Microfinance institutions should ensure that the communities they interact with get better with time. The key to attracting and retaining economically active clients in both urban and rural areas of Kenya is, first and foremost, the people who provide the service. The messenger is more important in the microfinance industry than the message. Staff must be recruited and trained to exercise self-discipline, adhere to institutional policies and procedures and enforce client discipline. It is tough love that must work, not charity.
Lending staff should realize that successful micro financing is about putting all the cards on the table: not just enticing words that don’t inform the repercussions on the decisions customers are about to make. An informed clientele is a good risk. Lending institutions should understand the intricacies that go with entrepreneurship. Not everyone will be an entrepreneur, but many shall masquerade. Many will talk of big business and years of experience. The MFI lending staff have a duty to assess and appraise loan applicants to separate the wheat from the chaff. That’s essentially their core responsibility.
Microfinance customers have many needs. They lead complicated lives within families, communities, and cultures. MFI staff should consequently listen to their clients and know how to facilitate problem solving that goes well beyond ensuring loan repayment. The lending staffs are, first and foremost, responsible for the microfinance institution. The client is responsible for herself and her family. Yet each requires the other, it’s a mutual relationship. The MFI must have a commitment that permeates all aspects of hiring, training and supporting lending staff. If the institutional staffs are not effective on the ground and “truthful” in their relationships with the clients and the larger community, the MFI will struggle. While boardroom decisions and donors could nurture microfinance institutions, the ultimate test for success is out in the field. Only when there is effective client management by lending staff will a “human face” in microfinance provision be realized.
By Charles – Microfinance Practitioner
2 comments:
Thanks for the blog. The blog would be helpful to our nascent microfinance industry in Kenya. Asante
This is exciting. Microfinance is good but if poorly implemented it can make the poorer poorer.
Mzee
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