Over the last year, CGAP’s “Change Makers” series has been following the progress of two profitable MFIs: Compartamos in Mexico and Amhara Credit and Savings Institution (ACSI) in Ethiopia. While Compartamos is currently undertaking an ambitious transformation into a full-fledged bank, ACSI is working hard to strengthen its savings operations and attract more savers. Read how these two MFIs are overcoming these very different savings-related challenges. Complete episodes of both “Change Makers” series can be found at the Savings Information Resource Center or by clicking on the links at the left.
Fulfilling the Prerequisites of Savings Mobilization
With over 400,000 clients, Compartamos is the largest and most profitable MFI in Mexico. Although its primary product is village banking-style group loans, Compartamos recognizes that its clients need access to a full range of financial services, including savings and insurance. To provide those services, Compartamos decided in late 2004 to transform into a commercial bank.
When the transformation began, Gonzalo Ramirez, a manager at Compartamos, predicted that “the introduction of deposits will mean radical changes at all levels of the organization. Savings can’t just be seen as another product—they entail a change in our legal status, which will in turn trigger serious changes to our structure and organization.”
Ramirez’s estimation could not have been more accurate. Compartamos has spent most of the last year grappling with organizational changes that have touched every part of the organization. Although most are not directly related to new savings products, these changes must be completed before Compartamos can take a single peso in deposits. Changes have included:
- Recruiting new personnel while preserving the institutional culture. Compartamos knows that changing from an MFI into a bank will require personnel with different professional backgrounds than those currently in the institution. But they are equally determined that this new influx of people and skills should not change the institutional culture that they believe is key to Compartamos’ success. success.
Human Resources Director Ivan Mancillas explains his plans to accomplish this dual goal. “We’re going to invest in a training team, decentralize our training, and start using distance-learning techniques so that thousands of people can be trained at a time.”
The current practice of bringing new staff to headquarters for training is important in communicating the organization’s unique culture. To compensate for the loss of this opportunity, Ivan plans to introduce new ways to align individual staff with the institution’s vision. These include creating a dedicated Employee Services team to support projects like a new leadership program, which will help employees internalize the organization’s values.
- Reorganizing sales staff to support diverse products. Compartamos’ past record with product diversification has been mixed.
“Our solidarity groups and individual credit have not met their goals,” explains Ladislao de Hoyos, Regional Sales Manager. “We tried to replicate urban products from other markets in Latin America. We had fast growth initially, but risk and arrears also went up, and there was some fraud. So we overhauled everything – policies, procedures, personnel. Most importantly for me, we changed our sales philosophy: we now try to find out what the customers’ needs are and how to meet them, rather than figuring out whether they are ‘eligible’ for our products.”
Compartamos also hired dedicated personnel for its urban products. De Hoyos feels that the ability to deal with more sophisticated customers could make these newer loan officers well-suited to selling deposit products, which Compartamos plans to market not only to existing customers but also to a new, slightly more upscale clientele. However, he is not ruling out hiring additional salespeople specifically to handle savings.
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Transforming its management information system (MIS). An appropriate MIS is crucial to bank operations, but development has been going slowly. To speed up the process, operational staff were reassigned to the software team to act as resource people and ensure that the new system responded to Compartamos’ needs.
One of those reassigned staff was product manager Fernando Piña. Fernando says that organization and communication have been the two biggest challenges that the project has faced. "Our vendor is one of the best on the market, but wasn't adequately focused before," he observes. "But the delay was our fault too - we weren't involved enough."
Massive IT projects are challenging for every organization, but Fernando says that Compartamos has learned many lessons from this one. First, he recommends avoiding the common tendency to leave IT project management to technical experts.
"Get involved," he says, "Make sure things are going the way you want." Involvement cannot only be on the client's schedule, he warns; clients must also make staff available when project consultants need them. Finally, "Make decisions early," he says, "and pay attention to problems early."
With multiple changes happening simultaneously, Compartamos staff have been understandably shaken up. Strategy Director Javier Fernandez-Cueto came up with a colorful analogy for the experience. "It was like we put the whole organization in to a martini shaker,” he says. “The process is really disorienting, but the end product is going to be excellent."
ACSI: Reaching More Savers
With more than 400,000 borrowers and another 200,000 savers, ACSI in Ethiopia is one of the largest MFIs in Africa. Founded as a department of a local NGO, ACSI became independent in 1995 and has been profitable since 2002, recording its highest net profit of US$3.7milllion in December 2004. Portfolio at risk in June 2005 was 1.3% while operating expense ratio is 6%, showing ACSI’s extremely high efficiency.
Although operating in the poorest areas of Amhara region in Ethiopia, ACSI has always believed in the potential of client savings. “Poor people do save,” says Mr. Mekonnen Yelewem Wessen, ACSI General Manager. “Savings has been ACSI’s main source of funding and we have managed to collect more than US $21million in deposits. This figure is growing and our plan is to maintain the growth rate at the current level.”
In order to reach and attract more savers, ACSI is considering the following changes:
- Modernize its branch network and MIS. Unlike Compartamos, all ACSI offices are fully able to receive and handle cash. However, according to Yelewem Wessen, “when clients come to deposit savings, they need to have trust in the institution. Unfortunately, although safe, not all our offices create a positive image in the eyes of our clients.” So ACSI has started investing in infrastructure and modernizing its 175 sub-branches, as well as moving to computerize its operations and introduce a new MIS. “We hope that a stronger infrastructure will improve our image and encourage more trust and security among potential clients.”
- Improve transportation. Tesfaye Berhanie, sub-branch manager of a small office in the town of Tisabay, says “transportation is the first problem. Our clients live mostly in rural areas and our credit and savings officers must travel 5 to 6 kilometers by foot every day in order to reach them. This reduces the amount of time they spend in the office, which creates problems for clients that come to the office to deposit or withdraw savings. I believe that better transportation for loan officers will be crucial in ACSI’s efforts to reach more clients.”
ACSI plans to start working in these two areas in 2006. “Most of the changes are interlinked and connected and we will need to work on many things in the same time. For example, in order to introduce new MIS we will need to modernize the basic infrastructure in our offices, but also to train our staff and improve transportation" says. Getaneh Gobezie, Head of Planning and Monitoring.
Handling a plethora of simultaneous changes while keeping daily operations on track is one challenge that ACSI shares with Compartamos. Tune in to "Change Makers" to see how they overcome these challenges and increase access to savings services for poor clients. To receive e-mails about new “Change Makers” episodes, e-mail cgapsavings@worldbank.org