The last post (# 59) in Theme Five concluded that group membership is valued for its own sake, most likely for the social capital gained and the empowerment that comes with that—with this caveat in post # 13—if the field agents who serve the groups are recruited, trained, supervised and incentivized to support positive group dynamics.
Group dynamics are important. Of course, the culture and personalities of group members must be huge factors. These combined with their mutual connectedness prior to forming their group constitute the social capital dimension they bring to group microfinance. In Michael Woolcock’s terminology (post # 54), the group members bring this integration dimension to the social capital package. However, the field agent who helps the group form and function and connects them to a microfinance provider or an NGO service organization is important, too. That person is typically from outside the group’s community; she or he helps the group increase its integration and also brings a new dimension of social capital—linkage to an outside organization. To complete the social capital package described by Woolcock, that organization must bring its own internal integrity (a third dimension of social capital) and its ability to create synergy with the group and its larger community (the fourth dimension of social capital), through appropriate policies and products, transparent communication and sincere listening, all mediated by the field agent.
Woolcock contends convincingly that the group-field agent-organization social capital package has to score high on all four dimensions to make it possible for true economic development to occur. You can see just how pivotal is the field agent—variously known as loan officers, credit officers, field officers, promoters or animators, they can accompany and guide poor clients on their journeys toward the mainstream society and economy and can be social intermediaries between the poor and whatever services and opportunities are available in the larger world outside their communities. The importance of such facilitation increases in proportion to the isolation of the poor, which is especially severe for women and those in very poor, rural communities.
That is the theoretical case for honoring the role of the field agent. What is the evidence to support this case? I offer three lines of evidence.
First, the recruitment, training, supervision and incentives for frontline staff seem to be key precursors for healthy and happy group dynamics. This effect seems to be an underappreciated by-product of the training and support of frontline staff by microfinance providers who offer some form of education at regular meetings with their clients. In the experience of the partners and affiliates of Freedom from Hunger, Pro Mujer, and Opportunity International and several independent microfinance providers, training and support to enable field staff to become facilitators of a learner-centered process (suited to adult learners with considerable life experience) teaches the field agents to interact with their clients in more respectful, supportive and mutually satisfying ways. Some microfinance institution leaders believe such training and support for their field agents make them better agents in all respects, not just for offering education to their clients.
Frontline staff members engaging their clients in education seem, on average, to have much more personal and respectful relationships with their clients than those who solely perform as loan officers and collection agents. While the evidence is hardly conclusive (particularly because so few efforts have been made to find such evidence), I can offer one intriguing result from a natural experiment that occurred in Bolivia during the 1999 debtors’ revolt, when microfinance clients throughout Bolivia were organized and encouraged by political opportunists to default on their loans en masse. All the major microfinance providers were hit extremely hard by this collective action—except for CRECER and Pro Mujer, the only two that provided good-quality adult education to client groups. We asked several of the CRECER clients why they did not join the revolt and default on their CRECER loans. The typical answer was, “Because we can tell that CRECER cares about us.”
Such positive relationships seem to turn group membership and meetings from a net cost to the client (in terms of travel, time at meetings and peer pressure to repay) into a net benefit (in terms of knowledge of options, personal and group self-confidence, mutual assistance and connections with the outside world). This effect seems to occur regardless of particular education content other than group self-management and knowledge of the microfinance provider. If training field agents to be education facilitators was in fact the cause of CRECER and Pro Mujer clients declining to join the debtors’ revolt, the benefit of the training accrued not only directly to the clients but also indirectly to the microfinance institution as increased client loyalty.
The second line of evidence comes from Antoinette Schoar’s report of a randomized trial involving overdraft products of ICICI, India’s largest commercial bank, for small businesses. The overdraft functions like a credit card account. The target group of borrowers includes small manufacturers, trading companies and service providers. This is a very different product line and clientele than I’ve been discussing in this blog! However, Schoar’s experiment compares the effects of different levels of intensity in the relationship between individual staff of the bank and the individual borrower. Here is her abstract:
This paper documents a widely overlooked dimension of relationship lending: the personal interaction between the borrower and the lender reduces the willingness of the borrower to engage in moral hazard and default on the loan officer. We conduct a randomized experiment with small business borrowers of the largest commercial bank in India to test the impact of three different levels of interactions between the borrower and the bank. Borrowers who are regularly called either by a single assigned relationship manager or by one manager randomly selected from a small team of managers shows much better repayment behavior and greater satisfaction with the bank services than borrowers who either receive no follow up or only receive follow up calls from the bank when they are delinquent. The results are economically and statistically significant: borrowers who receive the more intensive treatment see a large reduction in the number of late payment spells and delinquencies.
It pays to read the paper’s long introduction, at minimum, because it is clear that the greater intensity of getting phone calls from the same person at the bank over time produces better borrower performance than getting calls from a random selection of personnel. However, there are issues of statistical power that limit Schoar’s confidence in this result. But it makes sense, doesn’t it? Think how much more intense is the face-to-face relationship between the typical field agent and the typical group in group-based microfinance.
The third line of evidence is a study, called Voices from the Frontlines: A Research Project Focused on Listening to Microfinance Credit Officers, which Freedom from Hunger undertook in order to listen to the frontline workers of financial service providers who utilize the village-banking model as a platform to provide financial and non-financial services to groups of poor women. Freedom from Hunger worked with five microfinance institutions to conduct this research. Almost 200 interviews and focus-group discussions were conducted with field agents, clients and supervisors to answer five key questions: 1) What motivates field agents? 2) What is the state of the relationship between the field agent and the client? 3) What can we learn from field agents about the people they serve? 4) How can we better support field agents? and 5) How faithfully are programs, policies and procedures carried out by field agents?
In summary, Bobbi Gray, Cassie Chandler and Megan Gash (with several undergraduate and graduate student field interviewers) found field agents of these five institutions to be primarily socially motivated and that their relationships with clients are crucial for client as well as organizational success. These relationships can either make or break client recruitment and retention. Product attributes and relationships with field agents are intertwined. There is an inherent tension for field agents: they have a stake in the well-being of their clients, but they also must have a stake in their employer’s successes. Field agents acknowledge that policies and procedures are in place to protect the client and the institution and yet they often make their own decisions within their interpretation of the rules. When they bend the rules, they feel they are doing this for the benefit of the client.
This study suggests that field agents are underappreciated for the important role they play in mediating the needs of the clients and the needs of the organization. They should be seen as “real levers for change.”
The theoretical case and the supporting evidence (such as it is) indicate that social capital is built by formal financial services almost by design—“almost” because it is most often unintentional on the part of the designers. The social capital impacts, and the personal empowerment that come from these impacts, are expected to be so much greater when the design is intentional—formation of groups and service to these groups by field agents intentionally recruited, trained, supervised and incentivized to support positive group dynamics and to mediate between these groups and outside service organizations.