Straight Talk on Client Protection – Aggressive Sales Techniques!

> Posted by Sergio Guzmán, Lead Specialist, the Smart Campaign, CFI

In preparation for the launch of its Certification Program, the Smart Campaign’s Straight Talk blog series highlights standards that may be overlooked by microfinance institutions but that are an important part of client protection. This seventh post in the series by Sergio Guzman describes what aggressive sales practices are and makes a call to industry practitioners to help further identify practices we’d like to see disappear.

“You know, Sergio, I strive to do what is best for my clients, but the competition makes it very difficult for me to be transparent. They use very aggressive sales techniques,” said a microfinance provider in a country that I won’t disclose. “What are these aggressive sales techniques?” I inquired with curiosity.

Sadly I have had similar discussions during many of the Smart Assessments I have done throughout my time at the Campaign. There appears to be a unified consensus among providers that they are treating their customers adequately, but that the competition behaves badly. Sometimes I think that aggressive, non-transparent practices may be everywhere!

The Client Protection Certification standards indicate that for an MFI to be certified it must not use high pressure or aggressive sales techniques. Aggressive sales practices must be looked at through the lens of clients but also through the lens of the competitive landscape. Indeed in a competitive market the MFIs must captivate their clients attention to acquire products, but in doing so they must never resort to deceptive practices.

I’d like to share a list of other aggressive sales practices that we would like to see disappear. At the Campaign we have not seen all of the examples that are out there, but with enough help from you, we can identify more of them.

Some examples of aggressive sales practices are:

  • Giving clients cash bonuses or awards for referrals of other clients, which has been a method favored by organizations seeking to grow very fast and has been responsible for the collapse of more than one institution.
  • Marketing products in front of the branches of other MFIs, especially when agents actively discredit other MFIs’ pricing or credit methodology as “more expensive.”
  • Forcing clients to acquire products without studying the terms and conditions (forced signing of contracts) because otherwise loan officers cannot commit to maintaining the prices or conditions of products.
  • Offering clients of other MFIs larger loans to gain market share without fully studying their payment capacity – otherwise known as overselling.
  • Intentionally lowering stated product prices or disaggregating interest to make one’s own products seem less expensive (see Straight Talk: Hiding Fees when Quoting Interest Rates).
  • Mis-selling products – knowingly providing products clients cannot afford or are otherwise unsuited to their circumstances and needs.

Now, I have heard many providers say to me that they wish their competitors did not use some of these practices, and if they do in fact operate in this way, they want someone to do something about it. Well, MFIs, this is your chance. Tell us what aggressive sales practices you have seen, and how we can identify them in the field.

We look forward to reading your comments.

Image Credit: Philanthropedia

Have you read?

Straight Talk on Client Protection – Monitoring Client Indebtedness

Straight Talk on Client Protection – Hiding Fees When Quoting Interest Rates

Straight Talk on Client Protection – What’s Internal Audit Got to Do with It