Two Birds With One Stone: How Microfinance Staff Training Has Double-Sided Benefits

On the west coast of India, overlooking a deep natural harbor, sits the city of Mumbai, formerly known as Bombay. As far as world cities go, Mumbai is hugely significant in its size, economic output and cultural contributions. As the fourth largest city in the world, the metropolitan area of Mumbai is home to 19 million people and is the commercial and entertainment center of India. The city is responsible for five percent of India's GDP and is home to many of India's most powerful financial institutions, as well as the world famous Bollywood film community. Overwhelmingly dense and complex, Mumbai is rife with poverty and yet streaked with opportunity - if you know where to find it.

Microfinance is helping to bring more of India's lower class into the mix of those who are capitalizing on Mumbai's growth. And yet, in an environment like this, microfinance institutions need to understand and implement the very best practices for the region, not just the general best practices that apply everywhere. And that's where the ACCION Global Training Center demonstrates its potential.

Located near a railroad intersection that brings Indians from across the region into the central Mumbai location, the training center provides instruction and knowledge to microfinance practitioners on a daily basis so that they, in turn, can bring much needed financial services to the local populace - many of whom are unbanked, with no access to working capital or a safe place to save what money they have.

According to Valérie Kindt, Principal Senior Director and manager of the Global Training Center in Mumbai, "There is a direct correlation between the success of a microfinance institution and the training provided to its staff." And training is not just about keeping the bank's bottom line looking healthy, it is also critical to the underlying social mission of microfinance - to help the poor. Valérie explains that proper training for loan officers in the field up to high-ranking executives helps to ensure consumer protection, so that the clients get the services they need by the most respectful and helpful means possible.

ACCION's Global Training Center in Mumbai is one of five such training centers that will be located across India, with the other four opening by June 2010 in Patna, Bihar; Bangalore, Karnataka; Vadodara, Gujarat; and Pune, Maharashtra. In total, the Global Training Centers in India plan to award 2,500 certificates for training sessions to approximately 1,000 unique participants, providing them with the opportunity to benefit from multiple training sessions.

The strategy behind the Global Training Centers is to train microfinance practitioners of all levels and from any microfinance institution, but with tailored curriculums that address the challenges particular to their position and professional context. Generally, trainees fall into one of three categories: executives, mid-level managers and loan officers.

Executives receive training on the principals of consumer protection so that while they work to expand their bank's earnings, the social mission is never compromised. They also gain invaluable insight into microfinance investments and governance.

Mid-level managers require a unique set of skills and tools to enable them to manage a staff that is larger and more active than that of a traditional bank. Managers must train and oversee a staff that does not stand behind a counter or at a desk, but rather is sent into the streets, neighborhoods and markets to locate and service microentrepreneurs in need, and it requires many of them to reach all of the nooks and crannies of this bustling metropolis. Mid-level managers are also charged with the specialized task of marketing microfinance services to the local community, which requires accurate knowledge of the local market.

By far, the largest group of trainees (about 80 percent) are loan officers, who receive what is called "frontline training," or training for delivering financial services directly to clients in the field. This particular training is quite complex as they must be trained to deliver top-notch customer service while carefully monitoring to ensure that the client never becomes over-indebted. This is done in the absence of the client's credit score or documentation. Success depends on the loan officer's ability to assess a situation through observation. As Valérie explains, loan officers must determine "How much does this person need, and how much can this person pay back?" They must also have a clear understanding of local culture and dialects, which is why ideal candidates often hail from the communities in which they work.

Despite the deep expertise of ACCION staffers based in India, there remain significant challenges. Though certain principals of microfinance may carry from one continent to the next, many details of the training program must be regionalized to overcome obstacles in market conditions, local culture and language. For example, in India, microfinance institutions most commonly target rural and semi-rural, poor women via group lending products (although ACCION is also pioneering ways to better bring microfinance services into Indian cities). Conversely, in Latin America, microfinance is usually delivered to individual microentrepreneurs in urban areas, and the ratio of male borrowers to female borrowers is more even. Transferring expertise between these two regions requires this understanding. "You have to take what you know and adapt it to the local realities," says Valérie.

That approach is critical to the success of ACCION's training program as the Global Training Centers will go beyond India, reaching multiple locations throughout Asia, Africa and Latin America. The India location is funded by a generous grant from Credit Suisse, yet ACCION seeks funding for training centers in Ghana and Brazil to enable these initiatives to reach the level of success that the Indian program is achieving.

When asked what the most rewarding part of her job is, Valérie returns to the topic of the loan officers. Many times, the loan officers come from the same socio-economic background as the clients they serve. "Their parents are sometimes microentrepreneurs themselves, so they understand the importance of what they are doing," she explains. "And for them, this is continued education and an opportunity they wouldn't have through traditional banks to raise their quality of life."

There are multiple levers that can be pulled to increase the impact of microfinance on alleviating poverty. By investing in the human capital driving microfinance programs, the clients benefit while a wholly separate group of individuals are empowered. Valérie, and ACCION, intend on bringing this practice to scale. "We're talking about empowering hundreds and hundreds of loan officers," says Valérie, so they are able improve their economic wellbeing while better serving the working poor in their own communities.