Microfinance workers as agents of change

The importance that microfinance brings to development is its ability to contribute to social and economic development in a sustainable manner. As a developmental tool, microfinance not only provides financial access to the poor, it can also transform the social orientation of targeted clients to make them efficient users of the financial assistance they receive.

For instance, a typical comprehensive microfinance programme always includes educative programmes such as financial management, leadership, health etc. to make them better managers of their micro-enterprises as well as better leaders at the household level.

Microfinance is transformational in nature: it works on the principle that poor clients accessing microfinance programmes must at least achieve a level of economic or social transformation, better than at the point of receiving the assistance or service. Some examples of the transformation include improvement in income levels of clients; improvement in micro-enterprise management; improvement in nutritional intake at the household level and the nature of quality decision-making regarding family health, birth, and raising children.

In spite of the very positive contribution of microfinance to poverty reduction, some people believe that microfinance programmes rather make the poor poorer.  They in most cases support their argument by quoting the factor of high interest rates charged by Microfinance Institutions (MFIs).

The cost of a loan can lead to over-indebtedness that can aggravate the financial hardship of clients. Most of the issues raised against the concept of microfinance can be well-addressed if appropriate methodologies are applied by people who have the required skills. One clear point is that the interest rate for the micro clients is not as important as access to loans. It is, therefore, important for key players within any economy to look at creating or enabling easy access to micro loans. In principle, increasing access to micro loans can have the tendency to force down the interest rates being charged on them by the MFIs.

The effectiveness of microfinance is largely dependent on the skills and understanding of the personnel administering the microfinance programme. The uniqueness of microfinance programme is built around the characteristics of the clients that microfinance seeks to target. For MFIs to remain economically and socially transformational, the skills and understanding of the entire workforce must be sharpened around the nature of the target clients.

It is important that microfinance workers have special skills to achieve transformation; however, the skills of front-line officers who come into daily contact with clients should be prioritised. This is not to say that other staff-members working for MFIs are not relevant to achieving the social and economic transformation that microfinance seeks to achieve.

There are various departments or units within a well-structured MFI. These departments or units can be put into what can generally be referred to as the back and front offices. The back office can include the board, management, ICT staff and other technically-biased skills like accountancy.

The front officers in most cases include the cashiers, mobilisation agents and credit officers. The front office area can be defined based on the interactive nature that staff working in this area have with clients.  The skills required by a staff working in the back office can be sourced from the main banking industry or from a specific generic field. The frontline skills are mostly of a secondary type that is built with the characteristics of the poor and the low income clients in mind. 

The nature of microfinance clients is clearly different from the clients of traditional banks, and therefore different skill-sets are needed by these staff in order to get the best out of microfinance programmes. For instance, the average microfinance client is noted to have a low literacy level, which therefore requires innovative approaches to educating them.

In addition to this, the majority also saves and takes loans in small amounts -- requiring special consideration in product development. Their source of income as well cannot be guaranteed, meaning that their income sources keep changing depending on several factors.

To make any microfinance effective, the role of frontline officers within the industry cannot be over-emphasised. The activities and posture of these staff can help clients to create and sustain personal desires to be liberated from poverty or to benefit from the assistance being provided by the MFIs.

It is important to note that the personal commitment exhibited by clients of microfinance is needed to complement efforts undertaken by MFIs toward achieving economic and social impact. The attitudinal changes made by clients through guidance, persuasion and assistance -- mostly given by the frontline officers -- are very much needed to make microfinance work effectively.

In practical cases most clients develop relationships with frontline officers who over time become their “counsellors”. The officers in a way become both business and household advisors for the clients. When this happens, the frontline officers are expected to provide all kinds of business and social advisory services to their clients. This, therefore, means that officers must be equipped with skills and experiences that will enable them to provide the needed support to their clients.

Frontline staffs of MFIs hold the key to making or unmaking microfinance relevant in achieving poverty reduction.
To enable MFIs to be effective in providing the needed service toward contributing to social and economic development, the key frontline staff should exhibit the following qualities which I have found to be critical:

•  Knowledge 
Microfinance is not entirely economics, finance, banking or sociology. The application of microfinance methodologies combines several technical academic backgrounds in order to be effective. There are some aspects of agriculture, sociology, developmental economics, banking, finance, management, etc. For instance, a frontline officer who does not consider the cultural orientation of clients can have challenges which negatively affect the performance of the service or products being offered.

To illustrate this point further, let us assume that a project has the objective of providing loans to women in a community to support them in undertaking economic activities to improve their livelihoods. What will happen if the norms or beliefs of the community do not support women living within the project areas to contract loans? Practically no person will refuse such assistance, so the women who are the target clients will by all means contract the loans; but the likelihood that the loans will end up with the men within the community is high.  This emphasises the point for field officers to be able to understand and appreciate the sociological, cultural and religious inclination of clients regarding services or products being offered by the MFI.

Understanding the nature and demands of poor people is a very important skill needed by the frontline staff. The characteristics must inform the way and manner their training needs are executed to achieve the transformation needed. A microfinance officer or worker without an appreciation of how micro enterprises work cannot help to transform the micro business of the clients they serve.

The micro entrepreneurs largely operate their business with only their traditionally-bred management skills. They do not provide day-to-day recording of their financial transactions. This therefore makes it difficult to assess the financial needs of their businesses. In most cases there is also no clear distinction between their business and their households’ activities. Understanding their approach to business will enable the field officer of frontline person to offer appropriate support to help the low-income entrepreneurs to improve on their enterprises so as to support loan repayment.

•  Commitment

The work as a frontline officer requires sincere commitment toward raising livelihoods of the poor. The work sometimes involves long hours of trekking either to mobilise deposits or to collect loan repayments. This is because the majority of clients live in areas where it would be very expensive to use cars to reach them. In view of this, some field officers are either required to use bicycles, motor-cycles, or walk to meet their clients. All these activities can pose a hindrance to getting field workers for MFIs to work effectively.

Due to the nature of the clients, the work also requires officers to exercise extreme patience in dealing with their clients -- especially when it comes to explaining technical issues such as interest rates and loan conditions. It is commitment and love for the work that can sustain the interest and passion in working with the poor and low-income earners aside from the salary, which in most cases is not very lucrative or attractive.

•    Trust and truthfulness

The work of frontline officers cannot be effective without the element of trust. Poor clients look out for officers they can trust before they can become comfortable in dealing with a particular MFI. This is the case for deposit-taking MFIs. There are practical examples of clients who have categorically stated that they are saving with a named MFI because of  the character and nature of a specific frontline officer. The level of trust can have a direct impact on group management and even on the attitude of clients to loan repayment.

The interesting thing is that some clients will do whatever it takes to pay off their loans in order not to create problems for their trusted officers. This is all dependent on the value of the relationship that exists between the officer and his/her clients.  Trust is built by the posture of respect shown to the clients by the frontline officers. Frontline officers must avoid the know-it-all attitude and should avoid a posture that would suggest to the client that they are superior. Micro clients value trust and respect, and they equate the respect exhibited by the frontline officers with representing the values of the institution.

•    Training

The dynamic nature of microfinance requires staff with a trainable attitude as the microfinance sector keeps changing due to various factors. Some of the factors fueling the change are the changing needs of clients; national and global changes in economic factors; changes in the source of funding for microfinance programmes; microfinance regulations etc. These changes, therefore, require workers within the microfinance sector to be abreast of new and innovative products and services in order to be relevant in achieving both economic and social objectives.

There is so much happening in the area of research, training and workshops which can be a good source of skill and knowledge improvement for frontline officers. Unfortunately most workers within the microfinance sector fail to update their knowledge, and employers do not plan comprehensive training for their employees.  Most people within the microfinance sector therefore have limited understanding of local or global changes in microfinance, which thus narrows their contribution to making microfinance more effective toward poverty reduction.

Conclusion

The microfinance sector has many players and workers. Each contributor or worker has an important role to play in pushing the impact of microfinance to another level.  Some of the key contributors directly linked to the impact of microfinance are frontline officers, who in the case of Ghana include susu collectors and loans officers. The skill-levels and competencies of these officers are very much important since the sector depends on them to champion the cause of using microfinance in transforming the livelihoods of the poor and low-income earners. 

In order to make microfinance transformational toward economic and social empowerment of the poor and low-income clients, employers, government and other stakeholders must place the training of frontline officers within the microfinance sector on high priority -- since they are the product champions and the only means through which MFIs can get to the targeted clients.