Research and Seminars

Do Clients Still Matter?

Written by Rodolfo Quirós, Claudio González-Vega and Pedro Fardella

 

A very important contribution of the microfinance revolution has been the creation of long-term client relationships.  The value of such relationships has constituted the foundation of the structures of incentives that govern the interactions between microfinance institutions (MFIs) and their clients. From this perspective, genuine microfinance has been a kind of relational banking for the poor.

Traditional microfinance is a proven model, yet it faces persistent challenges from new competitors and disruptive technologies. While facing such challenges, some MFIs have drifted away from their core values and mission.  Some blame the legal structure of an MFI, mainly of a regulated financial institution, for the distancing effect. Some, afraid of mission drift, refuse to convert into a commercial institution.  Yet, by doing that, they are giving up the possibility of scaling and providing other financial products to their clients.

The white paper “Do clients still matter?”, conducted by Rodolfo Quirós, Claudio González-Vega and Pedro Fardella, analyzes the experience of 40 MFIs in nine countries (Bolivia, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Perú and The Dominican Republic), and assess if the corporate structure does have on the relationship of the MFI and their clients.  Based on the findings of the paper, prejudices about mission drift and the performance of regulated MFIs were not been confirmed.  On the contrary, the data set offers many examples of regulated MFIs adhering to their mission, sustaining the outreach of their target clienteles, supplying more varied and less costly services, and developing strong relationships with them. We hope this paper can provide a portrait of the industry in Latin America that allows readers to explore their own hypotheses.

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