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Authors: Bobbi Gray & Amelia Kuklewicz. Health shocks can lead to failures of businesses, clients leaving their financial service providers, repayment problems and even destitution and poverty. In this fourth in e-MFP’s blog series to complement the European Microfinance Award 2021 on ‘Inclusive Finance and Health Care’, Bobbi Gray and Amelia Kuklewicz from Grameen Foundation’s RICHES Program describe the demand for health financing support, the models for meeting that demand, and lessons learned for FSPs considering getting into health finance. We met Teresa in El Salvador in the winter of 2019. She was a participant in a focus group discussion in which we sought to understand the relationship between women’s involvement in microfinance and the impact of income shocks on their families. She was emotional, sharing her anguish over her husband’s illness and how she took the risk of taking out a loan to manage his medical care. Along with the other women in her group, when they discussed income, they had a well-worn phrase to hand - “Coyol quebrado, coyol comido” – which alludes to a particular fruit with a hard shell, that when broken, is eaten right away and nothing is saved. This is their cash flow and expenses; earned income is always fully accounted for and used immediately, leaving no room for emergencies. In English, this might be called ‘hand-to-mouth’. In 2019, with a grant from the US Department of Labor’s Bureau of International Labor Affairs, Grameen Foundation and the American Bar Association Rule of Law Initiative joined forces for the Reducing Incidence of Child labor and Harmful conditions of work in Economic Strengthening initiatives (RICHES) project, with the goal to develop a toolkit for women’s economic empowerment actors such as financial services providers (FSPs) to integrate child labor and business safety into FSP products, services and programming. RICHES started out with a year-long pre-situational analysis, which consisted of a robust global desk review and field research in the Philippines and El Salvador. The evidence was growing that, as women start or grow a business, they will turn to their children for help—either to work in the business as a trusted and unpaid “employee”, or to offset the caretaking and household chores at home. But what also became clear was the primary reason most households resort to child labor - health shocks. Health shocks are also a key contributor to business failure as well as FSP client drop-out or repayment problems. When Teresa and her group members were asked about what products they needed, microinsurance and other health financing products were mentioned, along with the basic need for more flexibility in existing products. Why? So that when household stresses or shocks occur, they don’t doubly suffer from the consequences of responding to the shock and keeping up with financial obligations such as loan repayment. This is of course compounded by the additional stress, pressure and worry that one missed loan repayment might permanently affect their access to future loans. Demand for health financing support is often higher than any other financial risk management solution, and demand far exceeds supply. Health and accident/disability microinsurance are two of the most needed insurance tools. While hospitalization insurance is the most available, out-patient care can be just as financially catastrophic for a household; day-to-day ailments and chronic illnesses can quickly push a vulnerable household towards destitution. Children are pulled out of school temporarily, or permanently, to help fill the financial gap, especially if it is an income earner who has fallen ill. Microinsurance is one of the only financial tools that has been shown to mitigate the risk of a household turning to child labor when a shock occurs. However, microinsurance, when available, seldom covers all out-of-pocket expenses, such as transportation or medicines. While microfinance clients will often use microenterprise loans to cover health expenses, these are not shown to positively impact health outcomes. And all other financial tools have shown a relationship, under certain circumstances, to an increased prevalence of child labor. Yet, the more financial tools a household has in their financial portfolio and the more flexible those financial tools are, the less likely a household will resort to child labor. This means the role of health financing can protect households in more ways than one: microenterprise loans are not being diverted to cover health expenses, households are able to seek health services without delay, and children are not pulled out of school to financially support the household in times of crisis. Building on a paper we produced a few years ago that reflected on lessons learned from developing health savings, and amplified by the research we’ve conducted to develop the RICHES toolkit, we propose the following recommendations for those considering health financing: If an FSP cannot immediately offer products that assist households in managing health costs, they can start by ensuring that existing products (whether these are savings, loans, etc.) and processes: Allow for restructuring in times of crisis, such as a health shock; Are better designed to respond to common cash-flow constraints that push households in making trade-offs. If there are well-known times of the year when households are low on income but have high expenses, these are common triggers for causing negative coping strategies, such as using child labor to support loan repayment, generating income to cover schooling costs, etc.; Don’t rely on aggressive payment recovery techniques. To avoid shame and ensure continued access to future financing, households may rely on children to assist in short-term income generation for loan payments; and Monitor for negative coping strategies and sacrifices that households may adopt or experience when using a financial tool, in addition to the intended positive impacts. This evaluation should be conducted at the product or program design stage, through program monitoring (such as during client satisfaction surveys), as well as when evaluating program outcomes. If an FSP can offer health financing products, our experience shows an FSP should: Conduct market research to understand the types and amounts of out-of-pocket health expenses, women’s decision-making power related to their ability to decide when, where, and how they will seek treatment, and what health providers are most used; Design health financing products that are superior to borrowing from friends and family and other informal lenders since these are the frontline resources most often used due to being easily accessible and providing more flexibility in repayment; Keep red tape to a minimum, since even well-intentioned paperwork can create barriers to use. Focus on speed as health issues are often perceived as an emergency, even for planned medical events, such as childbirth; Consider how to meet different health costs. Different or integrated products should address preventive care (e.g. annual check-ups) and curative care (e.g. illness or injury) as well as financing that responds to small-impact (e.g. cough or cold) and large-impact (catastrophic illness or accident, disability) health issues; Cover the entire family, not just the client; and Evaluate client satisfaction with these financial tools as well as the care received from the health providers, since satisfaction is interlinked between the two. More research is clearly needed to understand the overall impact health financing products (especially those designed to complement microinsurance such as health savings and loans) have on health behaviour, and even more so on the impact they can have on mitigating the risk of child labor. The 2021 European Microfinance Award highlighting advances in health financing is a welcomed acknowledgement of both the progress made in the field, and its potential to encourage replication of good practice. Many FSPs might question the relevance of child labor to their work, but women female entrepreneurs were asked in the focus groups whether they wished their FSP could know and better understand the tradeoffs they often make, and in doing so to be more involved in their lives. One woman in El Salvador put it clearly: “Al menos que sepan que estamos jodidos” (‘at the least, they should know that we’re screwed’). This reveals how significant the challenge for FSPs is. They must see themselves as part of a larger solution, starting with what they do best, which is making well-designed, evidence-driven financial tools readily available. For more on the RICHES toolkit and how the tools can help your organization mitigate the risk of child labor and harmful working conditions through better designed products, services, and processes, please explore the RICHES toolkit here or contact us at riches@grameenfoundation.org. Please note that the tools are currently in the final editing stage, but we are happy to share them prior to finalization for review. A Financial Services Brief, which is where much of the content used for this blog is derived, and which covers more than health financing, is also available. Funding for the RICHES project is provided by the United States Department of Labor under cooperative agreement number IL-31469. 100% percentage of the total costs of the project or program is financed with federal funds, for a total of $1,872,000 dollars. This material does not necessarily reflect the views or policies of the United States Department of Labor, nor does mention of trade names, commercial products, or organizations imply endorsement by the United States Government. PHOTO 1: Antonio Gallegos for Grameen Foundation PHOTO 2: Jim Cline for Grameen Foundation About the Authors: Bobbi Gray is Research Director and Amelia Kuklewicz is Regional Director, Latin America, and Caribbean & Asia, both of Grameen Foundation. Both support Grameen’s Reducing Incidence of Child Labor and Harmful Conditions of Work in Economic Strengthening Initiatives (RICHES) program which works to integrate child labor and harmful business practices within women’s economic empowerment (WEE) initiatives and the Women and Girls Empowered (WAGE) program which focuses on the integration of gender-based violence, women’s peace and security, and WEE. Both also have had extensive experience working on health financing products and education across the globe.

Author: e-MFP. e-MFP is a member-led platform, and we always want to hear what our members are doing in different fields, to increase linkages and knowledge sharing both across the platform and with other stakeholders. Over 2021, e-MFP reached out to its members to see who was doing what in the area of this year’s European Microfinance Award theme – 'Inclusive Finance and Health Care'. We asked them five questions, and we’re very grateful to the following members for their contributions, which are reproduced (and edited for clarity and length) here: 1. How is your organisation working to increase access to affordable, quality health care for low-income populations? Microsave Consulting (MSC) MSC works with governments, think tanks, academic institutions, development agencies and others to address policy and last-mile healthcare delivery challenges. Our recent work on healthcare includes: assessment of the impact of COVID-19 on routine healthcare services and frontline health care workers (ASHAs); assessment of the health service delivery challenges and enhance the efficiency of the largest publicly funded health insurance program for the poor; and working with the state government of Uttar Pradesh to create a model block for healthcare service delivery to low-income segments. VisionFund International (VFI) We survey clients to understand the risks they face, how they cope, and how they plan. Additionally, we inquire about their health habits and current gaps in coverage. This year we conducted surveys in eight countries and based on those results we are working with insurance providers to design products that will meet clients’ expectations, coverage needs, and are affordable. We believe that to best serve our clients’ health, services should be incorporated into our financial products. Lastly, for easy access and convenience our disbursements to clients are paperless and cashless, reducing operational risks and expenses allowing us to keep premiums low. Women’s World Banking (WWB) In response to the gaps in health financing experienced by low-income women, Women's World Banking developed Caregiver, a microinsurance solution, providing a per night cash benefit after hospitalization that policyholders can use for a range of related needs (transportation, replacement of lost revenue, etc.) Since its launch in 2009 in partnership with Microfund for Women (MFW) in Jordan, we have worked with financial service providers in Egypt, Morocco, and Uganda to roll-out products. To date, Caregiver has reached more than 2,000,000 beneficiaries, more than half of which are women and girls. 2. What do you see as the most significant health care needs of the low-income populations you or your partners work with? What are some of the most significant barriers to access and affordability that they face? MSC From our view, the key healthcare needs of the poor are: pregnancy care including ante-natal care, postnatal care, and delivery services; preventive and primary healthcare specifically targeting non-communicable diseases; and nutritional care for malnourished children and women. In terms of the key barriers in healthcare access: there are supply-side barriers, including inadequate human resources, capacity and training of the human resources, infrastructure and supply issues, quality of healthcare services, etc.; and demand-side barriers, including awareness regarding the health services, distance of health centers, out-of-pocket expenses on healthcare, previous experiences with the health systems, etc. VFI A significant burden on low-income populations is paying for health care expenses out of their own pocket. Each year, 100 million people are pushed into extreme poverty because of health expenses for themselves, a child or family member, according to the WHO. Universal Health Coverage is improving but in many countries the journey is still long. And even in countries where UHC is more advanced, people are still ranking health expenses as a major financial risk for their families. However, there are multiple barriers for insurance: knowledge about insurance coverage, lack of providers, complexity of products designed, and quality of care and service. WWB Access to insurance that meets the unique needs of low-income women is vital. Many women tend to work in the informal economy, with limited access to health financing from government or employer schemes. As a result, paying for a health emergency is the most common reason women must decapitalize their businesses. Typically, during hospitalization, healthcare costs include indirect out-of-pocket expenses, coupled with loss of income. Many families are then forced to deplete their savings, pledge assets, or rely on informal lending options. Women also face additional risks due to pregnancy and childbirth, with greater difficulty accessing healthcare due to gender-based inequalities. 3. What are some of the most innovative financial or non-financial products, services and solutions available to increase health care access and affordability? MSC Some key innovative financial and non-financial solutions are: Bringing healthcare services near the community. This can involve establishing and strengthening the primary healthcare service delivery through health and wellness centers (HWCs). Building the capacity of community health officers and establishing a robust supply chain for these centers is important – as is the use of teleconsultation at HWCs to improve access; Improving the quality of services, including establishing an effective quality assurance program to assess the quality of services; and Improving beneficiary identification and targeting, including enhancing awareness and outreach regarding government healthcare programs. VFI Our solutions focus on education and access. We have developed health and insurance education modules that are provided to our clients by a facilitator. We also encourage our insurance partners to offer health services such as telemedicine and health check-ups. Microinsurance products are too often designed as a low-cost insurance. We believe that it should be a simpler product, adapted to the population we serve and their education and understanding. That means ensuring clear benefits (instead of several lines of benefits with specific conditions for each), a limited list of exclusions, and easy operational procedures for access. WWB Due to Covid-19, there has been exponential growth in telemedicine and digital health solutions. New analysis indicates telehealth has increased 38 times from the pre-Covid-19 baseline. In Africa, for example, there are over 61 healthcare tech providers offering various, affordable digital services. But to deploy these solutions to the underserved, organizations must invest in customer experience and channels such as mobile, SMS and USSD. These channels are trusted by the target population, which makes adoption easier but requires a gender mainstream approach to avoid excluding women who, for instance, have a 15% phone ownership gap in Sub-Saharan Africa. 4. To what extent has the pandemic changed the health care needs of low-income populations – or the ways those needs can be met? MSC The healthcare needs of the poor have not changed much. The issues around access to healthcare persist because: the human and financial resources were diverted during the COVID-19 pandemic, leading to a lack of services at healthcare delivery centers; the primary health system is overburdened with the COVID-19 vaccination work; and there is fear of contracting Covid-19 from health centers. The health system needs to balance both the COVID-19 and routine work so that the regular services can reach the low-income population. VFI The pandemic is not only a global health crisis but also a financial one, as people’s livelihoods have been impacted making is difficult to pay for additional expense such as health care. A loss of income, in the case of hospitalization, is a realistic concern expressed by more clients and is rarely covered by any health scheme. As a result, microfinance institutions are beginning to provide insurance services to clients, helping them build financial resiliency. Lastly, insurance providers have adapted their way of working and are now providing more products that integrate telemedicine solution to serve beneficiaries better. WWB Covid-19 has deeply affected the healthcare behaviour of low-income populations. Based on our 2020 study, the number of non-Covid hospitalisations - for women in particular - dropped over the previous year. Understandably, women fear going to hospital owing to associated direct and indirect costs - especially as many women work in the informal sector and face significant income loss during the lockdowns. Developing both digitized healthcare and health insurance solutions that cover direct and indirect costs can help meet low-income women’s healthcare needs. 5. What are your organisation’s future plans to seek to improve health outcomes among low-income populations? MSC Moving forward, we plan to undertake: research & analysis to understand the needs, challenges, and behaviors of communities; Knowledge, Attitudes, and Practices (KAP) studies for health and nutrition using the principles of Social and Behaviour Change Communication (SBCC); strategic guidance and technical assistance to implementing agencies, government bodies, and donors; implementation and design innovations through the application of behavioral science and systems thinking to develop beneficiary-centric interventions; and exploration of platform and channel innovations with a focus on beneficiary needs. VFI VisionFund International’s focus is on providing financial solutions to people living in vulnerable, rural communities, most of which are low-income population. We will continue to ensure that our clients are protected and able to recover from shocks they might encounter by designing, negotiating, and implementing health insurance solutions that meet the needs of our borrowers and their families. And as a World Vision partner, we will continue to work closely with them to assess and implement such solutions for their beneficiaries as well. WWB At Women’s World Banking we are planning to further leverage our partnerships with financial service providers in Africa and Southeast Asia to design new versions of our Caregiver solution for local markets. One example is expanding Caregiver to credit customers as well as low-income savers, allowing it to broaden to women micro-entrepreneurs, who face difficulties accessing and repaying credit, but who regularly save. We are also working with a tech company on developing health insurance solutions for low-income women through a global wallet.

Author: Cheryl Frankiewicz. In September of this year, e-MFP published the results of a survey that mapped Human Resource Development (HRD) Practices in the Microfinance Sector and highlighted opportunities for acting on those results. This blog is the first in a series of thematic case studies which explore the actions that some survey participants have taken to address each area. The profiled institutions were selected based on the quality of their HR practices and their willingness to share experiences. We are extremely grateful for their time and effort to contribute to this important research. The first opportunity for action identified in the e-MFP HR Action Group paper was the importance of alignment between human resource development (HRD) and business strategy. What does this mean? That the HR department should not be just thought of as a support and administrative department but an important player in defining and implementing the institution’s business strategy. Aligning HRD and strategy In 88% of the organizations surveyed, the most senior HR representative reports directly to the Board of Directors, CEO, or most senior management executive. Yet, a lack of alignment between HRD and business strategy emerged from the survey as one of the top three factors hindering performance. In the words of Nancy Camey, People and Culture Manager at VisionFund Guatemala, “Having a seat at the decision-making table is important, but it’s not enough. Once you’re there, you have to contribute to the business. You have to make investments in HR worthwhile.” Teshome Dayesso, General Manager of Buusaa Gonofaa in Ethiopia, highlights another aspect of the challenge, “You have to align HR processes for tomorrow’s strength instead of today’s dominant product.” It’s not easy. Buusaa Gonofaa has tried delivering new products through specialized staff and infrastructure as well as through existing staff with a diversified portfolio and it has struggled to achieve scale under both approaches despite strong market demand. This year, Mr. Dayesso is responding with changes in the way people are managed. He’s not alone. HRD is evolving in all of the case study institutions to better align with business strategy. Described below are some of the actions being taken. Minding the gap One of the most common ways to contribute to the business is for the HR team to focus on the key performance indicators (KPIs) or milestones that the organization wants to achieve during a specific period, find the performance gap (what is missing to be able to achieve that target), and then recruit or develop talent to close that gap. According to Salome Kvakhadze, Head of Talent Development and Management at Crystal in Georgia, this approach works even during a crisis like the COVID-19 pandemic. “We shortened our planning cycle from five years to one, and we’re setting KPIs quarterly instead of annually, but the basic process is the same.” Ms. Kvakhadze makes another good point about gaps. Typically, HR is expected to address gaps in knowledge, skills, and attitudes among employees. But if the business strategy is to digitalize, then the HR function (like every other function or department in the organization) must ask itself, “What processes can we digitalize?” It needs to look for gaps between its own performance and the aspirations of the business. Becoming a strategic advisor and a business partner A less common but no less strategic way to contribute to the business is to prepare and support managers throughout the organization to carry out their HR role. In the words of Joy Santos, Vice President of Operations at ASKI in the Philippines, “The HR role is not just the role of the HR department. Line managers have a crucial role to perform…we provided training to our managers especially on crucial decision points in managing Human capital.” VisionFund Guatemala’s Nancy Camey expands on this: “Before, [the People and Culture Department] was just a traditional administrative department, dealing with contracts, disciplinary processes, the dissemination of information, but now we are advisors to the areas – to the CEOs, to the business managers, to the COOs,” she says. “Now we have become a business partner. They take us into account for the important decisions, and that’s where it makes a difference.” Julissa Castillo, HR Manager at FINCA Guatemala puts it yet another way, “Human resources is in the middle. On the one hand, we have to understand the objectives of each of the business areas, and on the other hand, we have to understand employees’ needs and feelings, so that we can help the two mix together in a way that produces results for the areas and also loyalty from our employees.” Developing HR roles from within Having the most senior HR representative at the decision-making table helps keep the HR team well-informed about business priorities but having HR professionals with operational experience helps the HR department to understand the business and employees’ needs. Fermin Sanchez, CEO of FINCA Guatemala, thinks this is critical: “Julissa has been with us for 14 years. She came from being a cashier at the branch and is now our Human Resources Manager, so she has a lot of knowledge. In the microfinance sector, you don’t always have to hire a corporate HR representative. What you need is someone who really understands the requirements in the field.” All but one of the MFIs interviewed has a management development program that aims, in part, to increase awareness of managers’ HR roles and to strengthen their capacity to carry out those functions. Linking rewards and remuneration to business priorities The adage, “What gets measured gets done,” doesn’t always hold true, but tying rewards – be they financial or non-financial – to the achievement of business objectives is a strategy that all case study institutions pursue. Five out of the seven have created tools to guide managers in the performance evaluation process so that it’s easier to stay focused on business priorities. The process seems straightforward for financial goals, but institutions struggle when it comes to social goals. Survey respondents with a double bottom line (i.e., those pursuing financial and social objectives) incentivize financial goals much more often (82%) than social goals (48%). Even among organizations that are committed to achieving social goals only, financial goals are incentivized twice as often (77%) as social goals (38%). The percentages among case study MFIs follow a similar pattern, suggesting that more can be done to strengthen alignment in this area. Segmentation The MFIs interviewed use segmentation in a variety of ways, one of which is to differentiate between those parts of the organization that are delivering well against business priorities and those that are not. At Buusaa Gonofaa, branches were recently divided into three categories according to their performance against business objectives (above average, average, and below average). The branches in each category were then brought together to discuss what is working, what is not, and what can be done in response. As will be covered in the fourth piece in this series, this way of splitting the discussions by branch category played an important role in enabling branches to take ownership of their situation and to contribute more proactively to plans for the coming period. FINCA Guatemala segments in a similar fashion, but at an individual level. All managers are asked to conduct a quarterly talent review during which they divide the people they supervise into categories by performance (high, middle, low) and how critical their work is to the business. For critical employees, managers are asked to develop a succession plan. The review facilitates a more targeted approach to performance management, and it helped the organization make strategic and timely HR decisions during the COVID-19 crisis. Knowing the cost of turnover Many would argue that employee retention is HR’s most important function, but not all employee turnover is bad. Ms. Kvakhadze notes that Crystal periodically goes through a transformation process and does what it can to prepare employees for inevitable changes. But there are, of course, some who are not happy with the changes and decide to leave. VisionFund Guatemala sets a target retention rate that is above the global average, but slightly below the local market norm. It can do this because it knows that beyond a certain point, spending additional resources to retain employees is counter productive, and valuing employees’ experiences within the organisation at all levels, including development, growth, and benefits, is just as important. The cost of turnover varies, of course, depending on the position being vacated and the amount that has been invested in employees relative to the value they have created. In Benin, Mutuelle pour le Développement à la Base (MDB) adjusted its recruitment and onboarding processes after it measured the cost of turnover and saw that it was investing too much in new recruits early on, before they had decided that the job was a good fit, and before they started generating value for the organization. Its new approach uses internships to screen employee candidates before providing higher compensation and greater development opportunities. Defining alignment Connecting HR functions and business strategy in clear and visible ways can also help strengthen alignment. Crystal did this by creating what it refers to as “regulations” that describe the role, objectives, and job descriptions for each department, including HR. Among other things, these regulations articulate how HR is expected to contribute to the business. At VisionFund Guatemala, HR’s contribution to business strategy is made visible in the organization’s objectives. In its current strategic plan, two objectives speak directly to the role of HR. One of these reads, "To develop, in a phased manner, distinctive capabilities in all areas and collaborators to implement the culture strategy focused on agility and change management.” Providing cultural stewardship At VisionFund Guatemala, the HR department is called “People and Culture,” reflecting the organization’s belief that culture is important and is shaped by its people. Ms. Camey explains, “You have to be incredibly intentional about creating the culture you want. Having the support and buy-in of everyone truly thinking about it, talking about it, and making sure everyone is taking concrete steps to live it is key.” This approach to doing business helps differentiate VisionFund Guatemala in the market and makes it easier to attract and retain people who share its priorities. When people in an organization communicate easily and effectively, plans are easier to implement, and problems are more likely to be identified as they arise. When people trust each other, they’re more likely to collaborate to find solutions. When they don’t, the resulting friction can hinder both the design and implementation of business strategy. Ms. Camey identified communication and trust as being critical to the success of HR’s relationships with other parts of the business, but cultural elements such as these can impact every function in an organization. Perhaps for this reason, more than half of the case study institutions have overtly tasked the HR function with nurturing and protecting their culture. At Bank Arvand in Tajikistan, it all starts with recruiting people who share the organization’s values. Situational questions are asked during the screening process to gauge the values that guide people’s behavior; recruiters don’t just listen to what candidates say they value. Controlling the focus of outsourced initiatives Two-thirds of survey respondents do not outsource HR activities because they believe it is important to carry out all HR functions internally. Several of the case study MFIs do outsource, and they claim the key to success is getting and keeping the external parties focused on the MFI’s goals. The purpose of a training initiative, for example, shouldn’t be simply to transfer knowledge in a particular area. It should enable the people involved to use that knowledge to tackle a particular problem or achieve a target. This year, FINCA Guatemala worked with an external company to develop a new leadership program for middle management. Its first step was to meet with several providers, explain its goals, compare their responses, and then select one company with which to work. After selection, the HR team held a kickoff meeting with the external team to restate the organization’s goals and needs. The external team returned later with recommendations for ten different abilities that could be developed during the program, and FINCA Guatemala chose the four that it thought would yield the results it needed. The program is now being evaluated based on the extent to which those four abilities are actually developed. This relevance of measuring the results of HRD investments will be further explored in the second part of this case study series, Is HRD worth it? How seven MFIs are measuring the cost-effectiveness of their HR investments. Photos: Buusaa Gonofaa About the Author: Cheryl Frankiewicz has more than 20 years of experience building human and organisational capacity for greater financial inclusion, being specialised in diagnostic and design services, training and workshop facilitation, training-of-trainers, and coaching. She holds a master’s degree on Economic and Political Development from the University of Columbia - School of International and Public Affairs, US, and an MBA (Finance) from the University of Ottawa, Canada. Cheryl has been working with the e-MFP Human Resources Action Group (AG) since 2018. She was involved in the design and implementation of the worldwide HR survey among financial services providers conducted by the AG, as well as in the analysis of survey data and preparation of the report “Human Resource Development practices in the microfinance sector”. She is also the lead consultant in the preparation of thematic case studies based on the report recommendations.

Author: Cheryl Frankiewicz. In September of this year, the European Microfinance Platform published the results of a survey that mapped Human Resource Development (HRD) Practices in the Microfinance Sector and highlighted opportunities for acting on those results. This blog is the second in a series of thematic case studies which explore the actions that some survey participants have taken to address each area. The profiled institutions were selected based on the quality of their HR practices and their willingness to share experiences. We are extremely grateful for their time and effort to contribute to this important research. Not long ago, when an MFI was asked how it evaluates the cost-effectiveness of its HR investments, there was a pretty good chance that it would reply by describing its process for assessing participant satisfaction with its training courses. Much has changed in the last few years. There is greater awareness of the multiple channels through which capacity can be built. There is increasing desire to compare the costs and benefits of different options. And there’s more understanding of the range of investments that can support effective talent management – from recruitment tools to retention systems. There is so much more measurement that could be done, but what do MFIs find worthwhile? What are they actually measuring – and how are they measuring it? How much does HRD cost? Working out the cost of HRD initiatives used to be the easy part. When HRD meant training, MFIs could easily see and calculate the direct costs of curriculum development or purchase, the salary or consulting fee of the facilitators, logistics like food, transport, and facility rental, etc. Sometimes, the opportunity cost of having employees in the training room instead of at their desk or in the field was also considered. Today, the costs of an HRD initiative are much more likely to be hidden, hard to quantify, or difficult to attribute to a specific event. For example, how much of the cost of a Microsoft Teams license should be included in the budget for a new coaching program? For the most part, the MFIs in these case studies are not trying to calculate the costs of individual HRD initiatives. They’re looking at the gaps in expertise or performance that need to be filled to implement their business strategy and they’re making plans to fill those gaps with existing resources (typically, the labor of existing staff and the digital tools that are being shared across operational and administrative functions). If new investments are needed (in additional tools or people), they are financed by a budget that is designed to produce a level of performance that can support that expenditure. MFIs measure whether their budget achieves its goals, and they measure variances in actual vs. planned expenditure, but they don’t try to measure the contribution of each budget component unless the plan fails to achieve its objectives. Within HRD initiatives, however, two costs are commonly measured. One is the cost of comparative inputs (for example, the licence fee for different brands of software that meet the same need, the salary demands of two candidates for an open IT position, or the time required). The other is the cost of comparative processes (for example, using electronic versus paper contracts, or recruiting new employees through referrals versus educational institutions). Turnover and retention As mentioned in the first blog in this series, case study MFIs are measuring the cost of turnover together with the frequency of turnover to determine appropriate levels of investment in HRD. Typically, the cost savings from a reduction in turnover (or an increase in retention) is compared to the cost of an HRD initiative to determine if it was worthwhile. All but one of the case study MFIs measures the rate of employee turnover at least once per year. Typically, turnover is highest during the initial period of employment, so the interviewed MFIs focused on how they have used these indicators to develop more cost-effective recruitment and onboarding processes. FINCA Guatemala used to invest heavily in new recruits, bringing them to the main office for weeks of training and introduction to the organization’s policies and culture, but over the last two years, it moved most of its onboarding to the branch level, taking advantage of e-learning and virtual meetings to connect new recruits to the organization in the early stages. It also introduced a two-month certification program, at the end of which participants must pass a test before they can be hired permanently. Mutuelle pour le Développement à la Base (MDB) in Benin created a multiple-stage recruitment process that pays candidates a flat rate to cover travel and other expenses during the initial training period. Then, when there’s a need for new employees, it offers the best performing trainees a six-month work placement with remuneration that is somewhat less than that of a full-fledged employee. Interns that meet MBD’s requirements by the end of the placement are offered a fixed-term contract and a full salary. Bank Arvand in Tajikistan recruits new employees from its pool of agents, who are responsible for recruiting new customers and are paid on a commission basis. Crystal in Georgia has introduced an internship process that is focused on rural areas, where unemployment is higher and where the institution can contribute to Sustainable Development Goal #4. Interns that don’t get hired still benefit from the knowledge and skills developed during the period. Engagement Although turnover and retention rates are easy to measure and are commonly used, an increasing number of MFIs prefer to measure the effectiveness of HRD initiatives using employee satisfaction or engagement indicators. There seem to be two main reasons for this. First, turnover and retention rates don’t measure how committed people are, why they are loyal, or what motivates and demotivates them in their relationship with an MFI. Engagement indicators allow MFIs to assess how an HRD investment affects the degree of commitment or motivation, and not just the decision to stay or go. Second, when they’re monitored regularly, engagement indicators can help MFIs identify when commitment or motivation is weakening and respond proactively – before turnover increases. Four of the seven case study MFIs regularly conduct employee surveys. Bank Arvand follows an approach that is similar to the Gallup Q. The MFI used to have a much longer survey but found it difficult to complete and to analyze. VisionFund International (VFI)’s annual employee survey (known internally as OurVoice) evaluates satisfaction across 10 categories, including alignment and understanding of the strategy and perception of local leadership, staff care and engagement. It is anonymous and confidential and allows for open questions, the responses to which can be organized by keyword and topic for easier analysis and the definition of action plans. Both Bank Arvand and VFI segment their survey results (e.g., by functional area, gender, tenure), which helps them to understand the needs of different employee groups, identify root causes, and respond. Performance and behavior Among case study MFIs, the most common way to measure the effectiveness of an HR investment is to assess whether people achieved the goal or target that the HR initiative was designed to facilitate. MDB provided the quintessential example: it wanted to lower the delinquency of its loan portfolio to a specific level, so it designed a training to achieve that goal and measured whether or not delinquency fell to that level. Typically, there are macro-level goals that HR investments are expected to contribute to, and there are project-specific goals that gauge whether an HR investment accomplishes what it is supposed to influence macro-level performance. For example, the effectiveness of a leadership development project at FINCA Guatemala was measured by the extent to which scores on specific questions of the semi-annual climate survey improved, and by whether the organization met its goals for increasing portfolio size and decreasing turnover. Sometimes it makes more sense to measure the change in an attitude or behavior rather than a key performance indicator because the attitude or behavior is affecting performance in multiple areas. One of the indicators FINCA Guatemala measured, for instance, was employees’ response to the question, “Do you trust your manager?” Influence Sometimes, what drives the cost-effectiveness of an HR initiative is not the content or the cost, but rather, the influence of the person or organization delivering the content. This is something that some MFIs measure before embarking on an HRD initiative – or before contracting someone to implement it – to increase the likelihood that it will be worthwhile. FINCA Guatemala’s CEO, Fermin Sanchez, made this point when discussing how his organization chooses between internal and external service providers. “We first look internally to see if there is someone who not only has the ability but will also have the influence for others to follow. Sometimes there are people who have the knowledge, but they don't connect to the personnel, and that is not good enough.” The role of technology Technology is playing an increasingly important role in helping MFIs measure both costs and effectiveness. It is also helping organizations improve the cost-effectiveness of their HR processes. MFIs gave dozens of examples of digitalization initiatives that have reduced costs and/or made HR functions easier. Employee self-service apps are making it easy for employees to request leave and track their compensation. Electronic signing is reducing the use of paper and express mail services. Less time is spent on reporting. Responses are sent and received more quickly. Fewer mistakes are being made. Online learning platforms make training cheaper and more flexible. As more information is collected electronically, there are more opportunities to use that data to monitor performance in real time, to analyze that performance against business priorities, to identify gaps in individual and team capabilities, to assess strengths and weaknesses in workplace learning tools, to find and reengineer time-consuming HR processes, to understand what is motivating and demotivating engagement – and to make decisions that are informed by that data. Momentum is building among decision-makers in the interviewed MFIs. “We need to take more decisions based on data” says Mr. Sanchez. “It’s not enough to have a feeling that something needs attention,” echoes Salome Kvakhadze, Head of Talent Development and Management at Crystal. “We need to know what it is that needs attention, so we can design a relevant intervention and measure its effectiveness.” She believes digitalization is a critical tool: “Manual data is past data. That’s why we were more reactive rather than proactive. We want to be proactive.” Of course, the gains that technology facilitates come at a cost. Often, but not always, that cost is considerable. Case study MFIs are meeting many of their communication and collaboration needs through platforms and apps that are not fee-based: for example, Zoom, Google Meet, WhatsApp, SurveyMonkey, and Google Forms. Holding companies like ASKI and networks like FINCA and VisionFund are building technology infrastructure for the benefit of all members. There are tremendous economies of scale and expertise in this approach. Organizations that cannot leverage the IT infrastructure or talent of an association may find it more cost-effective to purchase licenses to use existing technology solutions rather than try to develop solutions in-house. Bank Arvand uses a licensed program for its appraisal system. ASKI in the Philippines pays a subscription for their employee mobile app (Elstaff), and also for Google Classroom and Zoom based on how many people need to be trained. Several of the interviewed MFIs pay for a commercial Microsoft Teams license because of the confidentiality it provides. Case study MFIs recognized that major HR investments, such as an internal learning management system (LMS) or the integration of administrative, learning, and performance management systems, only make sense if they’re integral to an organization’s business strategy. They also warn that the return will not be immediate. “It takes time,” says Nancy Camey, People and Culture Manager at VisionFund Guatemala. Photos 2 and 3 above: Bank Arvand, Tajikistan About the Author: Cheryl Frankiewicz has more than 20 years of experience building human and organisational capacity for greater financial inclusion, being specialised in diagnostic and design services, training and workshop facilitation, training-of-trainers, and coaching. She holds a master’s degree on Economic and Political Development from the University of Columbia - School of International and Public Affairs, US, and an MBA (Finance) from the University of Ottawa, Canada. Cheryl has been working with the e-MFP Human Resources Action Group (AG) since 2018. She was involved in the design and implementation of the worldwide HR survey among financial services providers conducted by the AG, as well as in the analysis of survey data and preparation of the report “Human Resource Development practices in the microfinance sector”. She is also the lead consultant in the preparation of thematic case studies based on the report recommendations.

Author: Cheryl Frankiewicz. In September of this year, e-MFP published the results of a survey that mapped Human Resource Development (HRD) Practices in the Microfinance Sector and highlighted opportunities for acting on those results. This is the first part of the third blog in a series of thematic case studies which explore the actions that some survey participants have taken to address each area. The profiled institutions were selected based on the quality of their HR practices and their willingness to share experiences. We are extremely grateful for their time and effort to contribute to this important research. All but one of the case study institutions in this series conduct interviews with employees when they leave the organization. The insights gathered during these interviews have helped the MFIs understand what can be improved, but they haven’t shed much light on what MFIs are doing right. Why do people engage and stay engaged? In the words of Salome Kvakhadze, Head of Talent Development and Management at Crystal in Georgia, “We need to find out what motivates them BEFORE they leave. We want to be more proactive.” The case study MFIs are using a variety of methods to better understand and influence employee engagement. Among these are climate and satisfaction surveys, focus groups, polls, complaint and suggestion systems, Q&A sessions with the CEO, informal conversations, and personal observation. What follows are their reflections on what works and why. A clear career growth path In interviews with the MFIs, a clear and credible career growth path was identified as the most important factor in staff retention. If employees see a way to grow within an organization, they are much more likely to stay than if they don’t. Promotion to a higher level of responsibility and compensation is attractive to most employees, even if it’s a goal that isn’t immediately attainable. What seems to matter is the visibility of the career ladder and the extent to which employees feel it is possible to climb. At Mutuelle pour le Développement à la Base (MDB) in Benin, the career ladder begins with a three-month internship, at the end of which participants are evaluated and the best performers are offered a six-month, renewable work placement. Additional training is provided and those who pass a subsequent evaluation are offered a longer-term contract when a position becomes available. Espérat Tossa, the Executive Director, explains how the promotion chain continues: “A successful savings collector may be promoted to become a loan officer, the loan officer becomes a branch manager, and so on.” Bank Arvand in Tajikistan follows a similar approach, drawing from a pool of agents who are responsible for client recruitment to fill vacancies in loan officer positions. The growth path doesn’t have to be constrained to an advancement in position. VisionFund Guatemala, for example, has categories within the loan officer position. Employees can move from the beginner to junior, senior, and master designations and see their salary and responsibility increase. Only after reaching the last category is a loan officer eligible for promotion to branch manager. In the meantime, all loan officers can grow, and all are eligible for variable remuneration based on the growth and quality of their portfolio. Part of what makes internal promotion effective in the case study institutions is that it’s the norm. Most positions are filled internally, so employees see the career ladder in action and have confidence in its effectiveness. Nancy Camey, People and Culture Manager at VisionFund Guatemala remarked, “They have an example that their boss grows with the organization and the organization grows with him.” Any act of promotion sends a message about what the organization values. If employees see that people with certain competencies are being promoted, that will encourage them to develop the same set of competencies. The more consistently the same competencies are promoted, the more naturally those competencies evolve within the organization. Every employee will have examples to learn from. VisionFund Guatemala has a competency management system that is linked to career paths. It clarifies what competencies are required to excel in a position, so people know what information and skills they need to acquire if they want to advance in a particular direction. Bank Arvand has a similar system of career maps for every position which accomplishes a similar purpose. With this kind of guidance, employees can proactively seek opportunities that help them develop in the direction they desire; they don’t have to wait for the organization to deem them eligible for development. Of course, growth doesn’t just mean promotion. Lateral career moves, stretch assignments, involvement as a coach or mentor, and participation on a task force, problem solving team, or product/market development team are all growth opportunities that could engage employees. Link HRD investments to career growth opportunities The more immediately an employee can use the knowledge or skills acquired in the workplace, the more likely it is that the HRD investment will generate value for the employee and the employer. As time passes, information will be forgotten, skills will get rusty, and motivation often wanes. Fermin Sanchez, CEO of FINCA Guatemala, believes that this is the main reason for which some MFIs see increased turnover when they invest in employee development. Employees don’t want to waste what they’ve gained any more than institutions do. “If you train someone, if you give them more knowledge, it must be hand in hand with growth, with additional responsibility, or the authority to take decisions. If people aren’t challenged, that's when they start thinking about going to the competition.” Help employees see the value they’re creating At Bank Arvand, each position’s job description includes KPIs as well as a definition of its “valuable end product” – the contribution that people in that position are expected to make to the business. This kind of clarity guides employee performance, but also makes it easy for people to see why their work is important. Twice a year, ASKI in the Philippines recognizes top performers on its social media page and profiles an employee-of-the-week in the live feed of its internal portal. The profile typically includes a photo, some information about the results achieved, comments from the employee on what makes them so effective, and at times, customer feedback. Besides this virtual recognition, ASKI also gives cash rewards to their employees. MDB provides its most efficient employees with performance certificates. To make employees’ contribution to the achievement of social goals more easily accessible and visible to all stakeholders, including themselves, was one of the main reasons for Buusaa Gonofaa to digitize its poverty scorecard. These different measures are complementary to the financial incentives provided by all the interviewed MFIs. Most commonly, these incentives reward loan quality, but all except one also reward employees for customer satisfaction and/or the achievement of social goals. Connect to shared values All the case study MFIs look for a set of core values in their new recruits. Many then invest in reinforcing those values during the onboarding process. Some make a continued effort to buttress those values throughout an employee’s relationship with the organization. ASKI, for example, asks all staff to begin their day with a devotion and recitation of the seven client protection principles. Shared values can create a strong bond between employer and employee, one that fuels the relationship and helps the parties overcome challenges along the way. They can also differentiate an MFI from other employers looking for people with similar talent. There is a direct relationship, however, between the strength of an MFI’s value system and its effectiveness as an engagement strategy. If an organization says that it values transparency, but then fails to share information with employees, or if it recruits empathic front-line workers and develops their skills on the job but hires highly skilled managers from the outside who fail to empathize with the frontline, the mismatch between what an organization says and does can become a reason for employee exit rather than retention. Case study MFIs that try to engage employees through values like ‘empathy’ and ‘respect’ have worked hard during the COVID-19 pandemic to act in ways that demonstrate these values. Some asked employees to work in shifts rather than reducing the number of staff. Others managed not to reduce salaries and provided e-learning offerings that gave people access to information about COVID-19 and how to stay safe. Crystal is one of the MFIs that is proud of the way it treated employees during the pandemic, but Ms. Kvakhadze says it’s not something to be advertised. “The actions have to speak for themselves.” Pay a competitive salary Several MFIs commented that the market has become competitive enough that the baseline salary for employees is a hygiene factor. They monitor market norms informally, and sometimes through salary surveys, to prevent non-competitive compensation policies from causing employee exit. Salaries have had to rise significantly for IT professionals who are in high demand worldwide in the wake of the COVID-19 pandemic. Make the job easier MFIs have had to make a lot of changes in the last few years, and it’s been challenging for all interviewed MFIs to manage those changes. One thing they’ve learned is that if change can make something about an employee’s job easier or more enjoyable, it’s more likely to be embraced. Both ASKI and Crystal began their digitalization journeys by streamlining internal processes. This brought quick wins for the organizations, but also saved employees significant time and energy. ASKI got its field staff on board by making the payment of allowances the first transaction conducted through their mobile devices. Next came iStaff, a system through which employees could much more easily access pay slips, record attendance, and request leave. Only after employees had embraced the digital transition did ASKI move forward with the changes to reporting systems and client service. Part two of this blog will continue examining what case study MFIs have learned about keeping employees engaged. Photo 2 above: Bank Arvand, Tajikistan About the Author: Cheryl Frankiewicz has more than 20 years of experience building human and organisational capacity for greater financial inclusion, being specialised in diagnostic and design services, training and workshop facilitation, training-of-trainers, and coaching. She holds a master’s degree on Economic and Political Development from the University of Columbia - School of International and Public Affairs, US, and an MBA (Finance) from the University of Ottawa, Canada. Cheryl has been working with the e-MFP Human Resources Action Group (AG) since 2018. She was involved in the design and implementation of the worldwide HR survey among financial services providers conducted by the AG, as well as in the analysis of survey data and preparation of the report “Human Resource Development practices in the microfinance sector”. She is also the lead consultant in the preparation of thematic case studies based on the report recommendations.

Author: Cheryl Frankiewicz. In September of this year, e-MFP published the results of a survey that mapped Human Resource Development (HRD) Practices in the Microfinance Sector and highlighted opportunities for acting on those results. This is the second part of the third blog in a series of thematic case studies which explore the actions that some survey participants have taken to address each area. The profiled institutions were selected based on the quality of their HR practices and their willingness to share experiences. We are extremely grateful for their time and effort to contribute to this important research. The case study MFIs are using a variety of methods to better understand and influence employee engagement. Among these are climate and satisfaction surveys, focus groups, polls, complaint and suggestion systems, Q&A sessions with the CEO, informal conversations, and personal observation. What follows are their reflections on what works and why. Get feedback, and get it often The mechanisms used to gather the feedback don’t seem to matter as much as the flow of communication itself. Most case study institutions are taking advantage of digital solutions to gather information often, at a low cost, and anonymously when that’s desirable. However, Buusaa Gonofaa is among those MFIs that are still in the process of digitizing, so it uses face-to-face methods and has come to the same conclusion. How frequent is frequent? FINCA Guatemala conducts a climate survey every six months, but it holds focus group discussions, and administers mini-surveys using Microsoft Teams, Survey Monkey or Google Forms more frequently. Sometimes it directs the mini-surveys to a limited group of people to probe a specific issue and sometimes to all employees, depending on where it identifies a problem or in which area it wants to grow. Mr. Sanchez explains, “We need a lot of surveys because the situation is always changing. HRD should be a moving part, not something static.” Teshome Dayesso, General Manager at Buusaa Gonofaa, holds ten-minute meetings with his management team on Mondays to discuss what they want to achieve for the week, and then another meeting on Fridays to reflect on what worked and what didn’t. He’s also experimenting with monthly one-on-one meetings with each team member to exchange more structured feedback against targets. If those meetings are effective at facilitating greater ownership and accountability, he plans to encourage his team to adopt a similar approach with the people they supervise. The feedback mechanism that works best for ASKI runs continuously via SMS. “It’s a way of listening,” says Joy Santos Vice President of Operations. “Employees, partners and clients can send recognition to a branch, complain, or just make a comment at any time through ‘Komento Mo I Text’ (send your comments thru text). The feedback mechanism is helping ASKI to continuously review, revise and adopt new initiatives that will really put our clients in the forefront of our services.” Case study MFIs all ask for feedback when a new HR program or tool is introduced. Typically, this is a one-time invitation, but FINCA Guatemala is asking for feedback every month on its transformational leadership program and is using the input to improve the program as it progresses. Do something with the feedback you get Frequent requests for feedback won’t be well-received by employees if they don’t believe anyone is listening to what they have to say. They may not respond at all, or if they respond, they’ll resent the time spent on it and put the least amount of effort into their reply as possible. The reverse is also true. When employees see actions being taken as a result of their feedback, it encourages them to participate more. It demonstrates that the organization is listening and values what they have to say. “I think that if we, as employees, feel that our ideas are being taken into account, that we feel of value for the company,” says Mr. Sanchez from FINCA Guatemala. “We are going to stay.” An easy way for MFIs to show that they’re listening is to share the results of surveys and polls conducted. Three out of the four case study MFIs that conduct employee satisfaction surveys share the results with every employee. All four systematically respond to the survey results and track the resolution of employee grievances. At VisionFund International (VFI), managers prepare action plans in response to their annual employee satisfaction survey and those action plans are followed closely each quarter by the Senior Leadership Team and the Board. Even Audit uses the results and analysis to identify risks and follow-up on corrective actions. “As people see action,” says Solymar Torres, VFI’s People and Culture Manager for Latin America and the Caribbean, “they are increasingly growing more confident and use the survey as a way to provide feedback for improvement.” The way you ask the question matters If you’re asking for feedback and your question is unclear, or you ask it in a way that leads employees to answer in a particular way, the results will be misleading. Case study MFIs have found it useful to get expert advice when designing an engagement or climate survey that they intend to use on an ongoing basis. However, institutions almost always design ad hoc and mini-surveys locally, since these tend to respond to specific, time-sensitive challenges or opportunities and the questions are only used once. MFIs that use these tools often may find it helpful to train the people who design the surveys in simple techniques for effective questioning. Segment the data Three out of seven case study MFIs segment their employees and define HR strategies for each employee segment. This increases the likelihood that their HRD investments will be relevant and attractive to each segment and result in greater engagement. To better understand the needs of its employees, Bank Arvand is among those institutions that segment its engagement survey results. It analyzes the data by branch (to help branch managers understand what is working well and what needs to be improved within their span of control), length of service (to see whether employees’ commitment and motivation is increasing or decreasing with time), and by position (managers versus others). This year, it is planning to analyze the results by gender as well to see if there are any signs of discrimination. Digitalization is affecting engagement in many ways. It’s making it easier to communicate across distance and enables teams to function even during a crisis like the COVID-19 pandemic, but there’s less in-person interaction, fewer spontaneous meetings, and hardly any large and energetic gatherings. Ms. Kvakhadze from Crystal noted, “Most MFIs are now facing a really big problem of corporate culture because without the face-to-face collaboration, communication and involvement, employees are not feeling attached, and when they don’t feel attached, it’s easier for them to leave.” She claims that many of those leaving the sector are going to the technological sector which has grown and became more attractive during the pandemic. Case study MFIs are reacting in varied ways. Crystal and MDB are choosing to recruit new employees with a different profile who are attracted by the work in its new context. Executives at Buusaa Gonofaa and FINCA Guatemala are convinced that finding ways to facilitate in-person interaction is more important now than ever. According to Mr. Sanchez, field visits are “still the only way to know what’s really happening on the ground.” Mr. Dayesso credits a two-day in-person workshop held earlier this year with branch managers taking ownership of their current situation, something he says could never have happened online. Bank Arvand is excited about the potential of its new learning management system (LMS) to optimize employee development. Employees will be able to see different career paths more clearly and monitor their progress towards goals more easily. Learning will be more self-driven and personalized. Employees will be able to learn when they want, access as few or as many resources as they want, and practise difficult material repeatedly until they feel comfortable with it. The HR team will be able to track who is learning what, identify areas where people are having trouble, and design new content with gamification, which it believes will be more engaging. All but one of the MFIs are investing in employees’ capacity to use digital collaboration tools, hoping that the relationships built through virtual collaboration will bind employees to each other and to the organization just as in-person tools used to do. Clearly, digital tools are making it possible to share a lot more information and train a lot more people than before, but that doesn’t mean the information and training are bringing value. People are increasingly overwhelmed with information, and they easily lose attention in a virtual training. When they watch a recording rather than participate in an event, they engage less, which usually means they learn less. According to Mr. Sanchez, it’s requiring HRD professionals to be more creative than ever. The boss factor The “boss factor” is what a 2020 McKinsey study referred to as impact that supervisor-employee relationships have on employee engagement. “Relationships with management are the top factor in employees’ job satisfaction, which in turn is the second most important determinant of employees’ overall well-being.” None of the case study MFIs referred to that study, but several came to the same conclusion of their own accord. At VisionFund Guatemala, exit interviews and an annual climate survey highlighted the issue. “We saw that many people left the organization because they did not receive support, or they did not feel developed, or they did not feel inspired,” says Nancy Camey, People and Culture Manager. “Statistics tell us that people leave organizations because of their leader, so we want our leaders to be transformational leaders.” Three case study institutions are investing in new leadership development programs that strengthen the skills and motivation of managers to support the growth of the people they supervise. The programs range from three weeks to nine months. Crystal and VisionFund Guatemala started with one-on-one coaching for the most senior leadership and plan to cascade down to all levels of management. FINCA Guatemala developed one program for branch managers and one for others. Three of the other MFIs interviewed already have some kind of management development program in place. Employees can grow every day, even within the same position, if they’re supported to make their own decisions, take ownership of those decisions, and learn from those decisions. The fourth blog in this series will explore how MFIs are trying to develop managers who can encourage this kind of HRD. Photo 1: Buusaa Gonofaa Photo 2: Bank Avrand Photo 3: ASKI About the Author: Cheryl Frankiewicz has more than 20 years of experience building human and organisational capacity for greater financial inclusion, being specialised in diagnostic and design services, training and workshop facilitation, training-of-trainers, and coaching. She holds a master’s degree on Economic and Political Development from the University of Columbia - School of International and Public Affairs, US, and an MBA (Finance) from the University of Ottawa, Canada. Cheryl has been working with the e-MFP Human Resources Action Group (AG) since 2018. She was involved in the design and implementation of the worldwide HR survey among financial services providers conducted by the AG, as well as in the analysis of survey data and preparation of the report “Human Resource Development practices in the microfinance sector”. She is also the lead consultant in the preparation of thematic case studies based on the report recommendations.

Author: Cheryl Frankiewicz. In September of this year, the European Microfinance Platform published the results of a survey that mapped Human Resource Development (HRD) Practices in the Microfinance Sector and highlighted opportunities for acting on those results. This blog is the fourth in a series of thematic case studies which explore the actions that some survey participants have taken to address each area. The profiled institutions were selected based on the quality of their HR practices and their willingness to share experiences. We are extremely grateful for their time and effort to contribute to this important research. As noted in the first and third (part 1 and part 2) blogs of this series, managers play a critical role in HR development. They establish expectations, identify needs, facilitate learning, nurture individual potential, and coordinate teamwork. They are expected to model preferred behaviors, motivate performance, and ensure discipline. It’s a daunting job description – and that’s only the HR part. To explore some of the ways that MFIs are supporting managers to carry out these functions, this blog uses the 9Buckets framework, which was inspired by research conducted with CGAP on employee and agent empowerment. Each of the buckets in the framework represents a type of resource that MFIs might provide to increase managers’ ability or willingness to carry out their HR role. Resource category #1: Information and knowledge There are many kinds of information that could prove useful to managers. Some of the examples mentioned by survey respondents include: a description of the HR functions that managers are expected to perform; job descriptions that clarify what each employee is expected to deliver; succession planning guidelines; data on the performance of individuals and teams; and results from employee and climate surveys. VisionFund Guatemala and Bank Arvand in Tajikistan both conduct regular engagement surveys. They share organization-wide results with all employees, but they also segment the data by branch and share that analysis with branch managers so they can see what is working well and what needs to be improved within their span of control. Resource category #2: Skills and habits The second way that MFIs can support managers in their HR role is to provide opportunities for them to strengthen their HRD practices. More than three-quarters of all survey respondents train managers to assess their employees’ technical and soft skills, provide professional feedback, or identify employees’ individual strengths and delegate tasks accordingly. 34% provide training in all these areas. At some MFIs, such as ASKI in the Philippines, HR training is a requirement for promotion to a supervisory position. Training isn’t the only type of opportunity being provided. Coaching is increasingly popular and is offered by 65% of survey respondents. MFIs like Crystal in Georgia and FINCA Guatemala have developed programs that combine training with practice and coaching to build HRD skills through a series of interactions – but with considerable differences: Crystal’s program lasts three weeks, while FINCA Guatemala’s lasts nine months. Managers are expected to practice what they learn in between training sessions and discuss the results each time they reconvene. Resilience training is an important part of the agenda, strengthening managers’ ability to respond to whatever circumstances may arise. Resource category #3: Values and attitudes Managers are more likely to fulfil their HRD role if they believe that doing so is important and feasible. MFIs can’t force managers to believe in HRD, but they can nurture that belief through their messages, targets, and culture. VisionFund Guatemala’s transformation leadership initiative started with a simple message, “You’re not just responsible for making sure employees stay with you forever; they’re supposed to grow.” That message is supported by the work of the People and Culture Department, which strives to get everyone in the organization thinking about the culture they want to work in and taking concrete steps to live it. At Buusaa Gonofaa in Ethiopia, General Manager Teshome Dayesso was able to guide his managers through a particularly difficult period during the COVID-19 pandemic by asking them to identify one thing that they could do something about. “As soon as that was clear,” he says, “everyone was relieved, and the mood went up [a lot].” Resource category #4: Dialogue and support In interviews with case study MFIs, this resource category was mentioned more often than any other. MFIs are providing managers with opportunities to access other people’s knowledge, skills, energy and influence through formal coaching and mentoring programs, participatory performance management processes, informal feedback sessions, discussion guidelines, periodic field visits, phone calls and WhatsApp chats. “Sometimes we just speak to our branch managers and say, ‘Okay, how is your team doing?’” Fermin Sanchez, CEO of FINCA Guatemala, asks members of his management team to visit branches regularly so that those in the field recognize that they are part of a bigger company. At Buusaa Gonofaa, company level joint feedback sessions allow branch managers to learn from each other’s success, failure, and challenges. At ASKI and VisionFund, regional representatives play an important role, providing HR guidance and one-on-one support on the ground in a relevant context. And at Bank Arvand, midterm reviews offer an opportunity to discuss whether managers have what they need to meet expectations. When a change affects all employees, having a dedicated person that supports managers with timely implementation can be helpful. One of the ways that ASKI overcame employee resistance to a new mobile app was to have a dedicated person communicating with employees, helping them register and login, and designing creative strategies to help people see the benefits of the new app. Resource category #5: Control and influence To play a productive role in HRD, managers need to be given responsibility for specific HR functions, have the authority to act within their span of control to fulfill those functions, and be held accountable for the results. Ideally, they would also have channels for influencing HR decisions outside their span of control, especially when those decisions impact their team. The case study MFIs seek to clarify managers’ HR responsibilities through job descriptions and annual performance agreements. They hold managers accountable for achieving specific HR results as part of their standard evaluation process. Most often, what gets measured is employee satisfaction and retention, but some MFIs measure whether the professional development plan for each employee has been met. All the case study MFIs that conduct regular employee surveys ask managers to develop action plans that address areas of weakness. At VisionFund, these action plans are followed closely each quarter by the Senior Leadership Team and the Board; even the Audit department uses survey results to identify risks and follow-up on corrective actions. MFIs are also finding opportunities for managers to influence HR decisions that are outside their span of control. 57% of survey respondents consult managers on the design of learning and development (L&D) programs to ensure they are practical. 46% ask managers to assess the impact of L&D measures on their employees’ performance. In many MFIs, managers do not control the hiring of new employees, but they influence hiring decisions by participating on selection committees. Resource category #6: Tools and infrastructure There are many types of tools that can make it easier for managers to fulfil their HR role, but interviews with case study MFIs highlighted three: tools for understanding employees, their performance, and their motivation; tools for communication and collaboration; and a coherent system of policies and procedures that create a safe and equitable work environment. The better managers can understand their employees’ knowledge, performance, and motivation, the more appropriately they can guide and support their employees’ development. Knowledge tests, competency management systems, scorecards and employee surveys make it easier for managers to identify what an MFI expects of each employee and the extent to which employees are meeting those expectations. Bank Arvand’s assessment system creates an automated report for each employee that summarizes input from the employee, supervisor, any tests or trainings taken during the evaluation period, quantitative and qualitative performance indicators, as well as contextual information such as the number of years the employee has been working with the company. The report provides the basis for discussions between the employee, their supervisor, and the HR department. Salome Kvakhadze, Head of Talent Development and Management at Crystal in Georgia, commented on how the digitization of performance data increases the speed with which managers can access information about employee performance and use it to improve results in the current period. “Manual data is past data and it’s more static,” she explained. “Digitalization helps us be more proactive.” For communication and collaboration, case study MFIs found platforms like WhatsApp, Zoom and Microsoft Teams to be game changers, particularly during the COVID-19 pandemic. Two organizations also mentioned using the DiSC® model to help managers understand team member personalities and improve working relationships. With respect to policies and procedures, interviewees spoke in general terms about the need for guidelines that would help to ensure fair treatment (such as protocol for resolving complaints), and structures that could help managers create better routine practices (such as quarterly performance reviews to encourage more regular feedback). Resource category #7: Rewards and penalties Even if managers know what their HR role is, and can perform it, they may not choose to do so if they don’t enjoy it or, as mentioned above, they don’t think it is important enough to warrant their attention. Rewards and penalties can motivate managers to take their HR role seriously, and guide, motivate or discourage specific actions. 42% of survey respondents incentivize HR goals (either employee retention or specific learning and development objectives). 9% reward managers when the employees they supervise are promoted. Among case study MFIs, ASKI makes a point of recognizing top performing managers on social media, something which is generally highly valued in the Philippines. Resource category #8: Time and energy Time and energy are finite resources. There are only 24 hours in anyone’s day and people have limited energy, so if MFIs want managers to spend more of their time and energy on HR functions, they have only three options: Help managers use their time and energy more efficiently by providing one or more of the resources described above; De-prioritize some of the tasks that currently consume managers’ time and energy so they can spend more on HR functions; or Bring in other people to help. Case study MFIs have used all three approaches, but primarily adopt the first. They are providing information, tools and skill building opportunities. They’re also engaging managers in conversations about the kind of support that would make it easier, or more enjoyable, to carry out their HR roles. Sometimes it is the existing tools and infrastructure that may make the job difficult or unappealing, and in these cases reengineering a process, rather than replacing an entire system, can have a significant impact. Resource category #9: Money The ninth type of resource that could be used to support managers in their HR role is financial. Interestingly, none of the MFIs interviewed mentioned money as a constraint or a lever for this purpose. That doesn’t mean it can’t be useful. Money is typically needed to acquire new tools and improve the infrastructure, for example, but MFIs usually find it more cost-effective to purchase or develop tools for all managers to access rather than give each manager money to buy tools themselves. The good news for HRD is that many of the resources discussed above can be provided without additional financial resources. It’s part of what makes this an exciting and promising area for action within the microfinance sector. Photo 1: Bank Arvand Photo 2: ASKI About the Author: Cheryl Frankiewicz has more than 20 years of experience building human and organisational capacity for greater financial inclusion, being specialised in diagnostic and design services, training and workshop facilitation, training-of-trainers, and coaching. She holds a master’s degree on Economic and Political Development from the University of Columbia - School of International and Public Affairs, US, and an MBA (Finance) from the University of Ottawa, Canada. Cheryl has been working with the e-MFP Human Resources Action Group (AG) since 2018. She was involved in the design and implementation of the worldwide HR survey among financial services providers conducted by the AG, as well as in the analysis of survey data and preparation of the report “Human Resource Development practices in the microfinance sector”. She is also the lead consultant in the preparation of thematic case studies based on the report recommendations.

This is the final in a publication series of three interview pieces with the three finalists for the European Microfinance Award on Financial Inclusion through Technology. e-MFP: How is the technology initiative that you presented for the Award particularly innovative? KMF: We believe the innovation comes through the opportunity to process a loan application from the beginning to the final decision, including financial analysis and getting the results of requests to the Credit Bureau and the State Center for Pension Payment immediately, and this information can be accessed while at the client's place of business. This includes the ability too of loan officers to work remotely – increasing both the convenience for clients as well as mobility and flexibility for employees. This system – called Mobile Expert – is an online version of a Customer Relationship Management (CRM) system – providing loan officers’ planning, loan application schedules, zoning and monitoring (planning of visits to clients whom a loan officer should visit) and statistical reports – including loan repayments by clients, number of clients, loan portfolio size, birthday reminders, and salary calculators. What this all means in practice is greater convenience, easier and more reliable communication channels between branches and loan officers in the field, the opportunity to obtain a preliminary decision at the moment of writing a loan application, and if an application is approved at the level of a loan officer, then to obtain senior approval on a loan application and rapid disbursement of that loan. Any employee wants to know how much he or she earned today, but this information is especially crucial for a loan officer, whose salary depends directly on acquisition of clients, on the size of the loan portfolio, on the quality of the loan portfolio and other factors. Therefore, the opportunity to see one’s earnings at any time is another advantage of the Mobile Expert. e-MFP: Could you give one or two examples of challenges you’ve faced in implementing your initiative, and how you have had to change or adapt your activities as a result? KMF: We’ve seen psychological barriers among employees to the introduction of the Mobile Expert, which have required a complete restructuring of lending processes and procedures. Loan officers and credit administration specialists initially did not trust data from the Mobile Expert, as previously all data were submitted to the Credit Administration Unit on paper, and after that Credit Administration specialists entered all data into the software. Now, all client data are entered electronically by a loan officer, which they directly migrate to the software. For some time, though, scepticism among loan officers and credit administration specialists lead to double verification of information, and inefficiencies. Automated blocks were implemented in the software to prevent this duplication, and trust and comfort with the systems has significantly increased over time. e-MFP: Could you please give an example of something that has surprised you during the process of introducing or expanding your technology initiative? KMF: We were pleasantly surprised by the changes that became possible due to the introduction of the Mobile Expert – especially the increase in productivity of loan officers (up 22%), the decrease in new loan application processing periods (from 2.5 days to 1 day on average), the increased number of applications processed per working day (up by 150%), and a reduction in overhead expenses by 37%. e-MFP: What are some of the (general or specific) risks that are possible when using technology to serve clients, and what do you think the financial inclusion sector can do to protect those clients or institutions from those risks? KMF: One in particular – the risk of information leakage. Institutions like ours are obliged to protect client information and take all necessary measures in this area. e-MFP: What are some of your future plans to further utilise technological opportunities in serving your clients? KMF: We are looking to establish a Mobile Credit Committee, enabling consideration of a loan application on a tablet by the credit committee members, making possible a loan decision while the loan officer is at the client’s place of business. The entire lending process client monitoring, including mobile collection, mobile credit controllers will be implemented. We also wish to expand Mobile Collection – meaning expedited analysis of the results of debt recovery activities conducted by the Collection Unit, helping us plan our approaches with problem borrowers, including restructuring repayment schedules. The winner of the €100,000 European Microfinance Award 2018 will be announced during the ceremony which takes place on the 15th November in Luxembourg in the framework of European Microfinance Week. For further details on the Award visit the European Microfinance Award website. author: e-MFP

This is the second in a publication series of three interview pieces with the three finalists for the European Microfinance Award on Financial Inclusion through Technology. e-MFP: How is the technology initiative that you presented for the Award particularly innovative? ESAF SFB: Our technology initiative was innovative in its approach to end-to-end customer experience and scope. Rather than attempting to re-work one or a few pieces in the customer journey, the initiative went back to the drawing board on all processes. It transforms the entire processes of customer onboarding, including capturing account creation request (on tablet using texts and pictures), financial literacy training (via queue management, using tablets and multimedia content), customer appraisal (including house verification visits and Group Recognition Tests, loan application appraisal (via automated straight-through processing through an external Credit Bureau and in-house business rules engine), e-KYC verification (using biometric identity and the Aadhaar database) and AML. Once loans are sanctioned, Pre-generated Kits (PGKs) with debit cards are allocated and entire set of documents is auto-printed from the system. Then the customer is scheduled to come to outlets wherein she signs the pre-generated document and the funds are electronically transferred to her savings account. She is given the PGK to use at any ATM of her choice and withdraw money. Further, for ongoing repayments, transactions are captured on a tablet, which talks with Core Banking Software (CBS) on a real-time basis. This approach has helped reduce various types of risks within the core business for the institution. It reduced the hassles for staff on accounts of moving with paper based applications, poor database quality owing to multiple stages of data capture and digitisation, operational risks associated with significant cash in-transit, process deviations, as well as general customer dissatisfaction on account of long processing times. Most importantly, it facilitates fast decision making by supervisors due to easy availability of data and visibility on various stages in the process. e-MFP: Could you give one or two examples of challenges you’ve faced in implementing your initiative, and how you have had to change or adapt your activities as a result? ESAF SFB: The most important challenge was training staff and supporting them in adapting. More than half of our field force are women, most are over 40, poorly educated and with low technological literacy. Making them technology-ready was a herculean task. A well-structured training program was devised to overcome this challenge. Cadres of Regional Managers and Area Managers were first trained to initiate branch level staff into the process change on anvil. Further, branch managers were trained to pass-on the learning and comfort to the front-end cadre of field officers. However, once the transition was implemented, it led to huge disruption in service delivery. Weakness in at least one technology module to handle huge volume also added to the problem. Owing to this, business growth expectations were tampered and for almost three months, not much incremental business was done. The period was utilized to stabilize the new technology initiative and to make the staff comfortable. Business was slowly started and the staff was encouraged to move slowly. Another month into the restart, staff became comfortable enough to regain the tempo. As the technology proved useful in reducing workload on them, the business expanded rapidly in the following months. e-MFP: What are some of the (general or specific) risks that are possible when using technology to serve clients, and what do you think the financial inclusion sector can do to protect those clients or institutions from those risks? ESAF SFB: Some of the risks around use of technology are customer dissatisfaction due to lack of familiarity with technology solutions, newer ways of committing fraud, data abuse, possible exclusions of those who are not very tech-savvy, risk of obsolescence etc. One generic risk around technology is lack of sufficient awareness on using it safely. Our new process entailed depositing funds directly into clients’ savings account and giving them a debit card. This exposed some of them to new risks of unauthorised use of their debit card. In light of this, the bank came up with a list of Do’s and Don’ts to be shared with customers. e-MFP: What are some of your future plans to further utilize technological opportunities in serving your clients? ESAF SFB: Emboldened by success in achieving a large-scale technological transformation, ESAF SFB wishes to continue to assess ways and means to improve customer experience using technology. One of the key bottlenecks facing the inclusive finance ecosystem is heavy reliance on cash at the customer end. In addition to myriad costs, it also adds to abusive practices like being paid less than declared. It may be mitigated in two ways: by establishing a wide network of easily accessible cash transaction points wherein a customer may deposit, withdraw, or transfer very small amounts of funds; and promoting the use of digital money by bringing small shops to accept it as an acceptable alternative to hard cash. The government-initiated UPI payment mechanism is a significant step in this direction, which the Bank will use to push in its operating geographies through popularising its usage on smartphones, printed QR codes etc. The winner of the €100,000 European Microfinance Award 2018 will be announced during the ceremony which takes place on the 15th November in Luxembourg in the framework of European Microfinance Week. For further details on the Award visit the European Microfinance Award website. author: e-MFP

This is the first in a publication series of three interview pieces with the three finalists for the European Microfinance Award on Financial Inclusion through Technology. e-MFP: How is the technology initiative that you presented for the Award particularly innovative? Advans CI: Advans CI’s technology-enabled-services are innovative because the target clients are an underserved segment. There are currently about one million small cocoa farmers in Côte d’Ivoire. 72% of farmers are still below the poverty line and less than 10% have an account at a formal financial institution. Low financial inclusion among farmers leads to several crucial challenges: cooperatives often pay their farmers in cash, creating security problems with a high number of violent robberies and lack of transparency because payments are difficult to trace. Our solution is based on a value chain approach. Advans partners with cooperatives that then help to promote the service to their farmers. This has two main benefits: 1) it prompts farmers to open a personal bank account and receive their crop revenues on this account; and 2) it reduces operational costs: cooperatives build awareness on the benefits of services for farmers. The solution is also designed with client needs in mind: the mobile banking service comes at minimal charge so as to limit the cost for farmers. The digital school loan is specially designed to fit the farmers’ calendar, with the loan being delivered at the start of the school year during the ‘hunger gap’ period but loan instalments paid during the three months of crop revenue. Finally, it enables clients to gain control of their finances: the solution is focused on increasing farmers’ account usage thanks to a full range of tailor-made services; increased financial literacy thanks to dedicated training sessions, and adapted delivery channels. e-MFP: Could you give one or two examples of challenges you’ve faced in implementing your initiative, and how you have had to change or adapt your activities as a result? Advans CI: Financial education is key. Producers are accustomed to being paid in cash and lack trust in financial institutions. 47% of the cocoa producers Advans serves are illiterate, with 21% having left school before the Secondary level. Providing financial education was therefore essential to the delivery of the service and to building trust with the farmers. In 2017, we deployed a network of financial inclusion field agents. Their role is to increase awareness amongst the farmers of the importance of the savings through workshops on the field and the USSD mobile solution, and assist the cooperatives in setting up the digitalisation of part of the cocoa payment flows. Their coaching role is essential in order to increase the success of digital financial services in rural areas. Secondly, we had to give farmers access to cash at low cost. Even if producers are paid electronically, they need to be able to carry out simple cash transactions. As they have limited resources and are reluctant to pay for services, these transactions need to be as low cost as possible. Because producers are remote and dispersed, we had to find a reliable partner to offer these cash services. Since 2014 we have developed a strong partnership with MTN, the MNO providing Mobile Money through a network of 12,000 agents. Advans CI built up a tailored wallet-to-bank and bank-to-wallet transfer service, enabling farmers in remote areas to access these accounts directly from their mobile phones and withdraw or deposit money at the closest MTN Money cash point. We also succeeded in negotiating that the transfers between mobile wallets and Advans accounts should be free for the producers. e-MFP: What are some of the (general or specific) risks that are possible when using technology to serve clients, and what do you think the financial inclusion sector can do to protect those clients or institutions from those risks? Advans CI: One risk is client protection when using digital channels. This includes whether the client understands the service they have signed up for – especially for credit services, with high levels of credit risk for digital credit providers and clients being blacklisted by credit bureaus. Secondly, for clients with low literacy skills, even simple menus can be difficult to use. Finally, because the client-institution contact is mainly digital, the client may not know how to complain about the service or who to turn to if they have a problem. These issues can be addressed by financial institutions properly educating clients on the terms and conditions of the services and their commitments. e-MFP: What are some of your future plans to further utilize technological opportunities in serving your clients? Advans CI: Advans CI aims to capitalise on its experience with the current branchless banking solution in order to continue to increase its outreach and improve the range and quality of services on offer for farmer clients. We’ll look to scale up the digitisation of crop payments for farmers by rolling out the branchless banking solution in other value chains. We’ll also improve the quality of services on offer through the current mobile solution via developing a more extensive range of tailor made products and services for farmers; improving the training of Advans staff and agents and communication tools to ensure that clients are adopting and using services; and further developing alternative delivery channels and digital finance services for farmers to increase proximity and ease of use. The winner of the €100,000 European Microfinance Award 2018 will be announced during the ceremony which takes place on the 15th November in Luxembourg in the framework of European Microfinance Week. For further details on the Award visit the European Microfinance Award website. author: e-MFP

Author: Jeff Ashe. Last year the European Microfinance Award focused on “Encouraging Effective and Inclusive Savings.” Several European Microfinance Week 2020 sessions delved into various aspects of savings, including a plenary on creating an environment for effective and inclusive savings, a session on the needs of VSLAs during COVID-19, and a debate on the role of investors in encouraging savings. This blog by Jeff Ashe is another important entry in this important discussion. It was the summer of 2004. Mamadou Biteye[1] and I met a group of women traders at a market two hours from Bamako, Mali’s capital. Before we made our pitch for Saving for Change, the Savings Group Initiative I directed at Oxfam America, I asked, “Are any of you saving in a tontine.” Their hands shot up. One woman said, “We save money every week and each of us in turn receives her payout.” She described in detail how she organized her tontine as the others listened intently. Another woman chimed in “We save for a year and then divide the money when most of us need it.” Another added, “We save so we can buy what we need to sell wholesale. That way we make a lot more money.” In less than an hour, they described three solutions for saving money in useful amounts adapted to their specific needs. We listened politely, but we already had the answers. Like most of us in the development businesses, we saw ourselves as the experts. I had spent two years evaluating Pact’s Women’s Empowerment program in Nepal, Self Help Groups in India, and Village Savings Lending Associations (VSLAs) in Zimbabwe. My team and I had spent incalculable hours poring over the operating manuals and systems and creating the Saving for Change model. What else was there to learn? Saving for Change in Mali was a success; 425,000 of some of the world’s poorest women were organized in into 20,000 groups by the staff of our NGO partners. [2] Based on Mali’s success, we later replicated SfC in Senegal, Cambodia, El Salvador, and Guatemala. Nevertheless, what those women said about their tontines at that market years earlier haunted me. What could Saving for Change have achieved, I thought, if instead of introducing OUR model, we learned more about how THEIR informal groups worked? What if, instead of training teams of local university graduates to organize SfC groups in villages, we asked the tontine leaders how THEY would advance the expansion of quality savings circles in their villages with a focus on the poorest? They (we call them the “community geniuses”) would receive a small stipend to train more tontines in their own and neighboring communities. They would also set up committees to better channel some of the remittances sent to into these villages to fund savings circles, build local businesses, improve infrastructure, and help the destitute. Unlike the university-trained staff, these tontine organizers (most of them women), live in the villages, speak the local language, are known and respected in their villages, and can walk, or ride on the back of a motorcycle, to travel to nearby villages to train more groups. How they organize their tontines and ensure accountability has been honed over generations, but is constantly evolving. Tontines are incorporating VSLA concepts into their groups and using WhatsApp to keep records, all without outside support. Given that millions of Mali’s twenty million inhabitants are already part of savings circles (many times the number of SfC group members,) and that many thousands (most of them women) are already organizing tontines, we would have an inexhaustible number of candidates to choose from. And, since they lived in these villages, they could continue their work indefinitely as the groups they trained paid them for the help they received. Instead of promoting our model, the task of the local staff would be to identify tontine organizers with the strongest groups and a passion for helping their community. Each cluster of 25 or so community geniuses who lived in the region would be responsible for approximately 100 villages. They would meet at least monthly, either virtually through their cell phones or in person, to share their experiences, and set goals for the next month, all with a focus on reaching those who were not part of a tontine or did not save at all. We would listen, ask questions, learn, and monitor and evaluate the outcomes. The best of these “geniuses” could share what they learned with newly emerging clusters of geniuses in nearby communities. Furthermore, villagers who were leaders of Saving for Change groups could share that methodology or develop a SfC/tontine hybrid that better met their needs. All this would require a bit of external funding, but a fraction of what it cost to train savings groups – VSLA, SILC, Saving for Change, etc. What if a small amount of the grants that promote institutional financial inclusion – banks, MFIs and digital finance - were spent on strengthening informal financial institutions, tontines, tandas, susus, dhikutis (every country has its own name)? One hundred million dollars per year over ten years would provide 100 million of the world’s poorest a place to save and have regular access to a useful lump of money and to be part of a group that would stand by them in time of crisis, a kind of “virtual insurance” policy. Their capacity to manage their finances would be greatly enhanced without necessarily a connection to a financial institution, while reaching a population virtually untouched by institutional financial inclusion. The estimated cost would be about $10 per group member. “Proof of concept” funding could enable practitioners to test these ideas immediately. If this sounds expensive, consider that every year billions of grant money and much more from investors is poured into MFIs, banks, and mobile money providers. MFIs, and certainly banks, do not serve the truly poor, too many of the much ballyhooed savings accounts aren’t used, and mobile money is used mostly for sending money home. Online lending is too often expensive and can push users into a cycle of debt. To be fair, these institutional strategies are often useful, but it is time to look for saving and borrowing alternatives beyond financial institutions. Most help, whether from governments, non-profits, or foundations, assumes that resource-constrained communities are somehow deficient in their capacity to solve problems, even though these communities have survived famine, war, drought and flooding for many generations without outside support. Grassroots Finance Action embraces the mantra, “They already have the answers, just ask.” What if practitioners stopped what they were doing for a few days, ask questions of the tontine organizers as Mamadou and I did years earlier? They would be amazed what they would learn. About the Author: Jeffrey Ashe is Chair, Grassroots Finance Action and Adjunct Associate Professor, Columbia University. Jeff was the Director of Community Finance for Oxfam America between 2004 and 2013. He was a microcredit pioneer at Accion International, led the first study of microcredit funded by USAID (the PISCES project) and designed and evaluated peer lending MFIs in 34 countries. In the USA he launched Working Capital with operations throughout six states. Jeff started learning about savings groups in 2000 and he and his students started studying ROSCAS in 2017. https://mangotree.org/Resource/How-to-Achieve-the-American-Dream-on-an-Immigrants-Income. He teaches Finance for the World’s Poorest at Columbia University. For more information contact jeffaashe@gmail.com [1] Mamadou Biteye was Oxfam West Africa’s Senior Program Officer at that time. He later became the West Africa Director for Oxfam Great Britain and then worked for the Rockefeller Foundation. [2] Ashe, Jeffrey with Kyla Neilan. “In Their Own Hands: How Savings Groups Are Revolutionizing Development.” Barrett-Koehler Publishers, San Francisco. For a free electronic copy contact me at jeffaashe@gmail.com.

About the Author: Rob Kaanen. The COVID-19 pandemic is the latest crisis that is putting pressure on financial service providers (FSPs) globally. Lockdowns and regulatory moratoriums on loan repayments, together with a lower business activity are putting serious constraints on FSP’s liquidity positions. Early in the Covid pandemic, there was widespread concern that liquidity constraints could wipe out many of the financial institutions that serve low-income customers and small- and medium sized enterprises. Improved liquidity position allows financial service providers to focus on pandemic recovery Two recent reports issued by CFI/e-MFP and CGAP point to the vital importance of managing liquidity in the midst of a crisis. As the CFI/e-MFP report puts it: After all, the quickest path to failure of an FSP is running out of cash. Available liquidity should be used to retain the confidence and trust of both customers and creditors while continuing to operate and paying staff. Once stability is achieved, an FSP can start its recovery, but this cannot be achieved without retaining the confidence of customers, investors, staff, and the regulator. Evidence of successful crisis response Scale2Save is a partnership between WSBI and the Mastercard Foundation to establish the viability of small-scale savings in six African countries. To analyse the impact of the Covid crisis on the liquidity profile of our partner FSPs, we compared the pre-crisis liquidity position at end of year 2019 with that at end of 2020 when a cautious and gradual recovery of the Covid pandemic had set in. Across our programme partners, we collected liquidity gap reports from four banks and three deposit taking microfinance institutions in four countries: Ivory Coast, Nigeria, Morocco, and Uganda. Liquidity risk arises from both the difference between the size of positions of assets and liabilities and the mismatch in their maturities. When the maturity of assets and liabilities differ, an FSP might experience a shortage of cash and therefore a liquidity gap. A liquidity gap report profiles assets and liabilities into relevant maturity groupings based on contractual maturity dates and is an important tool in monitoring overall liquidity risk exposure. A liquidity gap report is a standard disclosure included in audited financial statements of our project partner institutions. Increased customer deposit balances All partner financial institutions increased their customer deposit volume at the end of 2020 compared to pre-Covid crisis level. Perhaps more importantly, they also mostly managed to increase the proportion of customer deposit funding as part of total liabilities, as seen in the graph below. The partner banks seem to have been more successful in increasing deposit volume compared to microfinance institutions. However, caution needs to be taken in generalising this conclusion as country and institution specific factors are also at play. Lower dependency on borrowed funds International creditors have been very supportive to banks and microfinance institutions during the Covid crisis, granting waivers for breaches of loan covenants, providing for temporary suspensions of interest and loan repayments, restructuring of loan terms and new financing. However, given the ample liquidity available from customer funding and the higher cost associated with international borrowings and debt issuance, most partner institutions chose to run-off these borrowings during 2020 lowering the proportion of borrowings in the funding mix. The average maturity of outstanding debt dropped as a result, as the following graph reveals. Improved liquidity profile The maturity of customer loans and advances increased during the crisis due to loan moratoriums and the related rescheduling and restructuring. The loan maturity loan terms of all partner FSPs extended, with one example of a 216% increase, seen below, in the case of an institution which generally has extremely short loan maturities. On the liability side, contractual maturities of funding decreased for all partner FSPs, except one. This was mainly the result of international borrowings that expired or that were not rolled over. When considered from the perspective of contractual maturities, the combination of lengthening loan terms and shorter funding maturities would suggest a worsening of the structural liquidity position of an FSP. However, the anticipated maturity of retail customer current accounts, security and savings deposits is often much longer than their contractual maturity, when taking into account the behavioural characteristics of a large and diversified pool of individual accounts that exhibit “stickiness”. Only a proportion of these retail customer balances will be drawn down on contractual maturity date and the entire pool provides a more stable, long-term source of funding. This point can be illustrated with reference to the international liquidity standards issued by the Basel Committee on Banking Supervision for the calculation of expected cash outflows for two key liquidity risk indicators, the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR). The Basel standards assume that between 3% and 10% of retail deposits[1] would actually run-off over the next 30 days under an adverse liquidity scenario. The corollary of this is that 90-97% of retail deposit funding can be considered to be stable in nature and of longer duration. As short-term customer account funding (<30days) of our partner institutions make up a significant proportion of the total customer funding (between 30% and 90%), a large part of these funds can therefore be considered as “core” and provide a stable funding base to compensate for the extended loan maturities from Covid impacted loan rescheduling. The Basel global liquidity standards are meant as guidance and FSPs operating in less developed markets and more volatile environments may experience higher deposit run-off rates in case of liquidity stress. Nevertheless, a significant proportion of our partners’ customer account and savings balances can be considered as stable. Institutional resilience in face of the COVID crisis At the outset of the Covid crisis, our partner institutions invoked their pandemic crisis management plan and took protective measures for customers and staff to prevent infection and transmission. Partner institutions granted credit relief to borrowers in the form of loan moratoriums in line with regulatory forbearance measures. Digital access to customer accounts was stepped up, so customers could meet household consumption expenditure during the lockdown. Our partners have withstood the liquidity stress induced by the Covid crisis and successfully retained the confidence of customers and investors. With a cautious and gradual recovery from the Covid pandemic underway, FSPs can now focus on recovery steps higher up the hierarchy of financial institutions crisis management needs. These needs were described in the CFI/e-MFP report in the following order of priority: liquidity, confidence, portfolio and capital. (Diagram reproduced with permission from the “Weathering the Storm II – Tales of Survival from Microfinance Crises Past” report published by Center for Financial Inclusion and The European Microfinance Platform,) With stability restored, FSPs can now shift their recovery efforts to managing the loan portfolio by balancing collections of overdue loans with the need to continue lending to reliable low-income customers and small- and medium-sized enterprises and maintaining capital adequacy levels when Covid-related regulatory forbearance measures will expire. Through surveys and case studies the Scale2Save programme continues to investigate the driving factors that influence the different outcomes of Covid crisis management. About the Author: Rob Kaanen is a consultant at the Scale2Save programme, a partnership between the World Savings and Retail Banking Institute (WSBI) and the Mastercard Foundation working for financial inclusion in six African countries. [1] The 3% minimum norm would apply in the case of retail account balances covered by deposit insurance schemes to 10% in the case of high value deposits, foreign currency deposits or deposits that can be withdrawn quickly online.