Client Protection Matters… a Lot

Fifteen years ago, in Pocantico, New York, a group of representatives from several microfinance institutions signed an agreement whose weight resonates to this day.

In 2008, the eyes of the world were on microfinance for different reasons. There were those who attributed to microfinance a social impact never seen before. Some even pointed out that it could lift millions of people out of poverty. Others only thought about  the business it could mean.

Meanwhile, the industry was shaped by all kinds of organizations: NGOs, banks, financial institutions of different types, savings banks and governmental institutions, among others.

The idea of the Pocantico Declaration was to embody the industry's commitment to the customer. Beyond visions and business models, all players understood that their responsibility was to take care of the customer.

Like never before, millions of people, mostly from low-income segments, could access a microcredit and, in many cases, this would be their first experience with the formal financial system, in which they saw an answer to the needs they were facing. This democratization of the financial industry was very positive, but it implied some risks.

Thus, The 7 Principles of Customer Protection were developed:

1. Appropriate product design and distribution

2. Prevention of over-indebtedness

3. Transparency

4. Reasonable pricing

5. Fair and respectful treatment of clients

6. Privacy of customer data

7. Mechanisms for the resolution of complaints

Today, the microfinance industry has evolved, consolidated, and offers a much more sophisticated range of financial services. Clients, who are now more mature and educated, demand other types of attention and products that are relevant, cutting-edge and in line with the moment they are living, to make their lives easier. 

The recent pandemic also shook up consumer habits. Added to this was a growing digital offer of financial products and the arrival of fintechs in the market.

Once again, these principles are relevant, and our main challenge is to stick to them in order to continue to take care of hundreds of millions of people.

1. It is no longer a matter of designing a one-fits-all product that can be replicated regardless of the client. Today, information technology has helped us to process large amounts of data, allowing us to offer personalized products, according to the context and moment of people's lives. Let's understand that if we want to be relevant, we have to keep walking with them. It is important to understand that the people, our customers, not only work at one thing, but they can also have their own business, or have several businesses. This is why designing accurate products to make their lives easier is of great relevance.

2. Faced with the increase in supply, this knowledge and closeness to the customer should enable us to focus and help them to use the financial products to their advantage: A healthy industry implies a virtuous circle.

3. Simplicity and transparency must prevail. Let us not confuse products that are easy to acquire with transparent products. Let's banish commissions and hidden costs that benefit no one. The more clarity there is when talking to the client, being explanatory about financial terms and prioritizing financial education will help them to have healthy finances and thus generate well-being for the industry, their families and the community

4. As we have gained scale, we as institutions have been able to offer not only reasonable, but very competitive prices. Yes, we have many challenges, but we must maintain the balance between financial profitability and convenience for those we are privileged to serve.

5. If it used to be a challenge to train thousands of employees to provide a high level service, today, the challenge has new dimensions. On the one hand, we must ensure, first, that our employees understand the service they are selling with the digital tools that accompany it. More importantly, we used to have more face-to-face moments of truth with our customers, but now that we no longer visit them as often, how can we achieve that warmth? How can we ensure quality? And how can we make their loyalty last? The answer: being more empathic, clearer, and closer; not physically, but with a great openness to new ways of communicating.

6. If there is one thing that financial institutions invest in, regardless of their type, it is information security. Our clients' data, regardless of their segment, must be safeguarded to the highest standards. In this way, we honor the trust they place in us.

7. Finally, technology has allowed us to expand the channels of communication with our customers. Each of these has its challenges, but we must be able to resolve our customers’ concerns with the highest standards, in the best way and as quickly as possible. We emphasize that our clients and people in general treasure their time and the investment they make, which is why we emphasize having the highest standards to serve them and solve their needs.

We have made great progress and achieved great things as an industry. However, we are aware that the evolution of microfinance will advance faster and faster. We value that behind every client there is a story, there are dreams, and it is our goal, and also our privilege, to propel the dreams of our clients.