This is the third in a series of blog posts exploring the impact of Smart Certification on the financial inclusion industry.
When financial service providers approach Smart Certification, they often have a number of questions. Many want to know if certification is worth the investment in terms of their financial bottom line. The answer we’ve heard from Smart Certified institutions is an unequivocal “yes.” As the Smart Campaign celebrates the recent milestone of 100 Smart Certifications, we’d like to explore the value of certification as Smart Certified financial service providers see it.
In partnership with Deutsche Bank, the Smart Campaign recently conducted a survey of certified institutions to understand how they view their experience with Smart Certification. (You can find the full survey findings in the Consumer Protection Resources Kit.) In an affirmation of Smart Certification’s value, 82 percent of institutions surveyed believe the cost of certification (in terms of both the servicing fee and internal staff time) was compensated by the value the institution received in return. This finding aligns with research from the European Microfinance Platform, which determined that consumer protection practices, such as price transparency, respectful collection practices and effective complaint resolution, are linked to higher financial returns and have a positive impact on the provider’s bottom line.
We heard a similar story, and much more, in our interviews with Smart Certified providers. Yes, they saw evidence of a positive impact on their bottom line, but they also reported a host of other benefits, including adherence to their social mission and a more positive internal culture. More specifically, here are some of the benefits certified institutions shared with us:
- Client Retention and Loyalty: Certification improves complaints resolution, leading to better customer service practices, strengthened client engagement and retention.
- Portfolio Quality: Certification strengthens the integrity of the loan approval process, contributing to the prevention of over-indebtedness and better portfolio quality.
- Employee Retention and Culture: Certification strengthens employment practices and enhances institutional culture, contributing to staff retention and better employee morale. Staff take pride in being part of a Smart Certified institution.
- Competitive Advantage: Certification increases brand recognition, and differentiates a provider from competitors in the eyes of potential clients, investors, and regulators.
To see evidence of the impact that certification has on client retention, look to Grooming Centre in Lagos, Nigeria, where the staff like to say, “The client is queen!” After becoming Smart Certified in 2016, Grooming Centre reported that certification helped them forge even stronger relationships with clients, leading to an increase in customer loyalty and improved sustainability of their portfolio. According to Maureen Abumere, Deputy Head of Training, Research, Documentation, and Customer Care at Grooming Centre, good customer service and timely complaints resolution have been key factors in fostering trusting relationships with their client and a sustainable business: “Smart Certification has really helped to balance the relationship between the institution and the customer. Now the customer understands that they have responsibilities as a client, and the institution knows about their responsibilities to the client.”
Pro Mujer, the first Smart Certified institution in Mexico, described that prior to certification it used a simple loan approval process with very few requirements. As it attempted to meet the certification standards, Pro Mujer developed a more formal policy for loan approval. Today the institution screens its clients through the national credit bureau, which helps control the amount of debt a client can carry. As a result, their bottom line is healthier and clients are happier. “Pro Mujer teaches us how to be more productive with our money,” said Laura Liliana Ortiz Brizuela, a Pro Mujer customer and owner of a textile company. “They explain to us how much interest we have to pay and they tell us how we can reduce that interest rate. Any questions we might have, we can call them on the phone and they provide answers.” Highly trained staff and knowledgeable loan officers are crucial to developing responsible clients – and to meeting Smart Certification standards. Improvements in staff training are another benefit of the institutional practices formalization encouraged through Smart Certification.
Providers also described how Smart Certification helped solidify their institutional culture. Pro Mujer has always prided itself on building supportive client relationships. While client protection was always part of the institution’s culture, certification helped Pro Mujer align mission with practices. Formal policies empower their employees and ensure that clients will still be protected even if leadership changes. Ninety-three percent of certified providers agreed that certification helped them reshape their corporate culture and enhanced the connection with social mission in that culture.
Institutions also noted that Smart Certification differentiates them from competitors in the eyes of regulators and investors. Samit Ghosh, Managing Director and CEO of Ujjivan, a certified provider in India, remarked: “Smart Certification helped us raise capital and transform into a bank. Among regulators, people feel Ujjivan is one of the better institutions, with ethical value and good governance. Smart Campaign helped in building this very important part of Ujjivan’s image.” More than 75 percent of certified institutions have received formal or informal commendation from the supervisory authority in their country, and many institutions reported that Smart Certification increased their international visibility, attracting new investment opportunities. According to a manager at FINCA Kyrgyzstan: “Certification separates us from our competitors when we speak to investors. They immediately know we’re a legitimate organization and that we play by international rules.”
The 100 Smart Certified institutions serve different markets, offer unique products, and have their own brand identities, but one thing they have in common is the understanding that protecting their clients’ interests strengthens their business and differentiates them from other financial service providers. They understand that building client protection into their operating model is not only the right thing to do—it’s the smart thing to do.
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