Insight: Don't just offer products; respond to client needs

Five years ago, I was heavily pregnant with my second child. The sun had not yet risen when I realized that I was bleeding heavily. I remember how my heart sank when the village midwife told me that I needed to go to the provincial hospital for an emergency caesarean section. Welcoming a baby into this world is supposed to be a happy event, but without the $50 I needed for the operation, I feared for the worst. I knew they wouldn't even let me enter the hospital, let alone see a doctor. What could I do? As the contractions became more regular, all I could hear was the midwife's warning in my mind: 'You'll lose your baby, and your little girl might lose her mother too.' My family couldn't help me with the money but fortunately the neighbour, who had heard the commotion, came to the door. She was the president of our village bank, and reminded me that I could get an emergency loan from AMK. I had been in the group for more than six months, so I could apply. She lent me her phone, and even dialled the numbers because my hands were shaking so much. When I talked to the client officer, I couldn't believe what he was saying to me. I could have the loan. I didn't need to travel to the branch, I didn't even need to fill out any papers. He just said: 'Go to the hospital now. I'll meet you there with the money. The paperwork can wait.' And so I did. I still remember that somehow, that day, the distance between my village and the hospital in town had doubled – every bump on that long road caused me pain. I was in agony – but I was also full of hope and amazement at what had just happened. I wasn't going to lose my baby after all. It seemed like a dream. But sure enough, an hour later, I met the client officer on the steps of the hospital. He told me that he had already paid the money, and that they were waiting for me inside. And do you know? The client officer came back the next day, to visit me and my beautiful new son. He was as proud as any uncle – and his eyes just shone when I told him that I decided to name my son 'AMK'.

Samnang (AMK client)

Here we have a story of a microfinance client in a desperate situation, and an organization that supported her when she needed it most, at precisely the right time and in the right way. From a client perspective, the emergency loan is a great product. Loans of up to the equivalent of $100 (with a 10-month term) are disbursed within four hours of being requested, and often the client officer will deliver the money to wherever the client happens to be at the time. The paperwork is handled at a later date, only one guarantor is needed (and this too is sorted out afterwards), and during the loan term only interest repayments apply (charged at a lower rate than AMK's other products). What we also find notable about this story is the business value that the emergency loan represents: introduced in 2005, it is a product that was then (and still is) unique to AMK, and which enables AMK to clearly distinguish itself in a crowded marketplace. From an institutional perspective, the emergency loan is potentially risky, at least on paper. AMK lets funds go out the door quickly, with no up-front checks, for less profit, and with fewer guarantees than it requires for its other products. On the other hand, AMK defines 'emergency' quite narrowly (health or family funeral expenses), which acts to limit its portfolio exposure. In fact, AMK's experience is that although this product accounts for less than 1 per cent of its books, clients consistently cite it as a cause for satisfaction with AMK's work. That is, even if they don't use it very often, clients feel secure knowing it's available when they need it.

However, the most interesting part of the story isn't the loan itself, or even the benefit to the client. Of most interest is what came before Samnang's tale even began: the steps that led AMK to understand the challenges faced by its clients, and to design an appropriate response. So how did it do it? It began by throwing out its assumptions about clients and, instead, sought to find out who its clients were, what was really happening in their lives, and what it was they really needed to improve their lives.

This might sound like a radical (and complex) approach, but there's a real history to AMK's 'no assumptions' mindset. This history was described poignantly as we talked with Theresa McDonnell Friström, the Concern Cambodia Country Director between 2002 and 2005 (and former chair of AMK's Board):

What became clear to me was that despite trying to help our clients, we didn't really understand their needs and living conditions. I recall the day that the finance manager walked into my office with bad news. After two years of devastating floods, bad debts in one branch were double what we had anticipated them to be – totalling $75,000. My immediate instinct was to write off the bad loans. I felt if countries can write off debt, why can't we do the same for poor people who are vulnerable to natural disaster? My idea, however, met with unexpected resistance. Management staff convinced me that we should visit the villages and get a sense of what was really happening with clients. The results, I must say, really shocked me. In only three villages were clients genuinely unable to repay; clients in the other six villages were able but merely unwilling, and using the flood as an excuse not to repay. Could we really afford to not understand our clients' lives? No sooner was this behind us than we found instances of staff fraud. To achieve their poverty targets, client officers were creating 'ghost clients', using the names of the poorest households on the loan applications – but then taking the loans for their own use and putting clients under pressure to repay loans that they never received. How is it that we were hurting the very people we were trying to help? I believed, and still do, that people should not be worse off as a result of our development initiatives. For this to happen, it's clear that our work needs to be rooted in a deep understanding of clients' needs, and we need to recognize the potential of quite serious harm we could cause clients as a result of poorly designed and managed systems.

In light of these experiences, one of the critical lessons from the Concern Programme (which resonated with many members of the new AMK Board) was that making assumptions was to be avoided at all costs. The new organization...