Financial inclusion: Understand your customer
Why is complete financial inclusion such a big challenge? Why cannot financial products that are designed for one set of people be taken to another? Search for answers and you might come up with reasons like, among others, lack of capability of the financial service provider, unviable commercial exercise or even market failure. But there is another perspective to the issue. How many financial service providers have tried to understand what the financially excluded, especially in the rural areas, really want?
“Conducting surveys to identify needs of the target customer is one thing, but seeing the world through the eyes of a rural person throws up some really interesting perspectives”, says K Preethi of InnerWorlds, a design consultancy within the IFMR ecosystem that is helping to design processes, products, organisation and strategies that connect to the experiencesof the rural people by living with them. “When you go to their homes, live with them and see why they take certain decisions that they do, it all falls into place. Any financial inclusion organisation that tries to provide services to the rural people should first understand what they go through in their daily lilves. We bring the context into picture and so help service providers make informed decisions. What works in one place may not work in another. Simple pushing of products in places where it is not accepted will not make sense” she adds.
What is your customer telling you?
“Its completely true!” says Anu Valli of Rural Energy Network Enterprise (RENE), an enterprise that tries to fill supply chain gaps in the rural energy space. “We were establishing a distribution channel to sell energy efficient products in Thanjavur and we started with household cook stoves. People were buying the stoves in Karnataka. When we met them for feedback, they were positive and said that it was good for making rotis. We later realised that what they were actually telling us was that it was good for rotis but not good enough for making rice!” she explains. “This fact was brought out by InnerWorlds who went to live with our customers in Tamilnadu and understand what our stoves meant to them” she adds. Simple things like these miss the eye, but often make a big difference in the impact.
Work by organisations like InnerWorlds can help create access to finance to small businesses in rural India. Several small businesses in rural India face tremendous volatility in revenues due to an uncertain market. This creates enormous constraints for them to access debt, as lenders dislike volatility and seek predictability of cash flows. Understanding the dynamics of the ‘people’ behind the business can address these constraints.
“The Network Enterprises, incubated by IFMR Ventures, are focused on minimising the root cause of revenue volatility for these enterprises. In RENE’s case, the enterprise we are currently serving is the distributor/dealer of energy efficient products. The uncertainty whether the product will sell or not makes the distributor or dealer not “financeable”. We have taken several initiatives to reduce this uncertainty and our tie-up with InnerWorlds is one such effort”, Anu explains.
InnerWorlds is helping RENE evaluate the distributor’s natural capabilities i.e. what they are good at and what they lack. This helps RENE better leverage the distributor’s strengths and provide support wherever he or she lacks. Collectively they are able to serve the market better.
InnerWorlds, through its comprehensive research in rural India, has spent a lot of time with more than 700 households and understood their way of life over several months. It has documented this experience extensively and this database can go a long way in designing products for these households.
Relevance is the key
It is important to understand if a product is relevant and appropriate to the customers. Prof. C. Vijayalakshmi, Research Director, InnerWorlds shares an example. “Loans is a product introduced by many financial service providers. But this service is already being provided to the villagers by the existing social networks and informal lenders. Agreed, they are inefficient but nevertheless, they continue to exist. To compete with this strong informal network, service providers have to understand the psyche of the villagers. Unless we understand “why” a person takes a decision that he has, we will not be able to impact his decision making”.
Financial inclusion is extremely challenging and creating access to finance in rural areas is no mean task. Every institution that works towards this cause is making a laudable effort. But what separates the successful from the unsuccessul ones is the effort taken to understand the wants and needs of the customer and not just focus on dreams of the promoter. Without this understanding of customer perception, no amount of effort put in product designing is justified.
Should it then be beyond ‘Know Your Customer’ – Understand Your Customer?
