Microcredit in emerging economies: Customer-centricity & organisational change

We’ve been working in Kazakhstan with a microfinance provider whose mission is to deliver economic and social impact, through providing financial opportunities to women in rural communities. Many of these ‘hard to reach’ communities are currently underserved by financial services. Microfinance Initiatives (MFIs) are an established way to deliver impactful interventions to targeted communities in emerging economies, which can help to increase income and improve standard of living.

MFI schemes often leverage the strong sense of collective responsibility found in the rural villages of Africa and India from where MFI concepts emerged, and whilst Kazakhstan culture is quite different to these, Kazakh communities are strong and the social dynamics of collective obligation alive and well.

But MFIs themselves do not run as not-for-profits, the model requires local organisations to be profitable - and it is that profitability that makes setting up these organisations attractive to local entrepreneurs. Throughout the value chain of MFI, ‘local’ is very important: local economics, local people, local knowledge and local business. The aim is to create economic and social impact that leads to change for good at a local level, rather than distributing profits elsewhere or outside of the country.

Being an MFI and staying profitable is tough. Financial businesses in Kazakhstan are tightly regulated -  and needless to say being at position 122/180 on Transparency International's Corruption Perception Index (CPI) means that regulation needs to be strong and far-reaching. Making a buck lending to those considered non-lendable by others and doing so through very small loans (circa $1 - $200) requires a lean operation that builds upon a real understanding of very specific local lending risks and opportunities.

In spite of thin margins and skinned-to-the-bone operations, the Kazakhstan MFI sector is very competitive - and that competition benefits those who do things better and more cheaply. Whilst digital is part of that, so is efficiency and product relevance. But tight constraints and a straightforward product mean differentiation is difficult, and as we have learnt in the West, under these circumstances - success falls to those who win on service and customer experience.

Our client in Kazakhstan knew that they needed to improve their business to remain profitable and competitive in an increasingly competitive market. This shares parallels with the financial service providers we work with in more developed economies. It includes the need to respond to increased competition and digitally disruptive entrants ring-fencing higher-value customers (in emerging economies this can further marginalise the poorest and least digitally and financially literate) and of course, improve service propositions whilst retaining customers and employees. Our Kazakh client was keen to explore how a customer-centred approach might help them to achieve those goals.

We spent time with our clients’ business team in Almaty, but also their front line staff and their customers, gaining rich and meaningful insights into the experiences of their employees and (largely female) customers by travelling the country working with our clients’ front-line employees in rural locations.

Customer journey friction can often be symptomatic of deeper organisational problems. We found that issues for both customers and front line staff derive from the same organisational sources - and this was a command and control structure that centralises decision-making and procedure setting, and can’t respond easily to feedback from customers and employees. Instead we proposed a devolved decision making model designed to flow decision making to those parts of the organisation who knew their customers best.

We developed journey maps and organisation change models for our client, which collectively point towards a transformation for the service from centralised control to devolved decision making that will would deliver a more customer-focused, sustainable and profitable organisation.

Moving focus from a spreadsheet towards customers was refreshing for an organisation committed to delivering economic and social impact. Putting customers at the heart of the business will deliver value throughout the organisation and aligns their mission with the service they actually deliver - something that surprisingly can often be missing.

Our findings provided our client with journey maps and proposals for organisational redesign that are   grounded in the real experiences of their customers and employees - a tool that enables them to think more creatively and effectively about possible organisational structures and service options.