Last week, I was in the Philippines for the Unitus Leadership Summit, an annual gathering of some of the globe’s top social entrepreneurs running many of the most innovative and fastest-growing microfinance institutions in some of the poorest areas of the world. It was a privilege to listen in on sessions where they shared what was working, what wasn’t, their challenges and their aspirations. While some of them are considered competitors, they shared very openly about the experiments they were doing in areas such as mobile banking, product development, increasing operational efficiency, raising capital, high-capacity staff recruiting and training and more.
One of the most fascinating topics was their focus on innovating to increase the productivity of their largest group of staff, loan officers. Loan officers are the front-line staff who directly provide financial services (including microcredit) to their bottom of the pyramid customers and make up 70%+ of their staff count. If they can increase loan officer productivity, their whole cost structure goes down and ultimately they can pass the savings on to the customer in the form of lower interest rates. So, this is a very important metric!
Many MFI’s are happy if a single loan officer can serve 300 clients at a time. [Remember the loan officer goes to the client and often they meet once per week with every client, so the number of touchpoints and travel time is significant.] The conversation started off with how they were not satisfied that 750 (!) clients per loan officer was the maximum productivity. Many of them are now reaching this level of productivity. They get to the 750 number as center groups of 50, 3 center meetings per day and 5 days per week. Of course, there’s the recruitment of new members, new member training, follow-up on members, data entry, various paperwork, etc. which also needs to be done.
So, we had a brainstorming session on ways to further increase productivity without overloading a loan officer. Here are some of the ideas that came up:
- Reduce the maximum radius to client location to 10km (usually now further)
- Collections every 2 weeks (half the # of trips/meetings)
- Deploy handheld/wireless devices to loan officers to reduce paperwork and cash-handling time and cost of float (and reduce group meeting time)
- Create pre-printed stickers to put in client passbooks (rather than having to handwrite each entry in each passbook…loan officer has to do this as most women are illiterate)
But then the discussion went in a different direction … rather than focusing on the # of clients per loan officer as the productivity metric, why not focus on margin generated per loan officer? This has a number of implications and issues including:
- This would encourage innovation around offering additional products to clients so that meeting times have a lower relative transaction cost. e.g. if you also provided insurance products or health products in the same client meeting, there is a much smaller incremental cost as the meeting is already scheduled.
- Would loan officers be able to handle a broader range of products well?
- Would this type of focus increase or decrease client retention long-term?
- Will loan officers then seek to focus on less poor clients who have capacity for say larger loans with more margin?
So, there wasn’t any silver bullet and with every attempt to innovate there is going to need to be experimentation and refinement. But, I really liked the continuous improvement attitude that they demonstrated and the willingness to challenge the current status quo thinking.