The maturation of the microfinance industry can be seen in the increasing competition between microfinance organisations (MFOs) and in their greater discernment with regard to clients.
Clients with alternative options leave microfinance programmes when they find that products and services do not work for them. In this kind of environment, MFOs find it important to understand and respond to client preferences.
Increased competition within geographical markets has led MFOs to create innovative products and services and to believe that listening to clients and understanding their financial services preferences will ensure delivery of products and services that clients will value. Another factor leading to MFOs becoming more market-driven is a concern about high levels of client exit, which can damage their financial sustainability. This in turn has prompted MFOs to recognise the importance of evaluating client satisfaction with available products and services and to make changes as suggested by the findings. The goal is to raise both client retention and attraction rates and thereby improve levels of financial sustainability.
This article is concerned with documenting the processes that take place within organisations when they become more client-responsive. In particular, it uses the framework of the feedback loop approach (McCord 2002; Imp-Act 2003) to describe and inform this process and draws on case studies from CAME (Mexico) and ODEF/COVELO (Honduras).
This article comes from the IDS Bulletin 34.4 (2003) How do Microfinance Organisations Become More Client-led? Lessons from Latin America