To increase access to finance in the agricultural sector, various players have implemented initiatives to help smallholder farmers and pastoralists to access financial solutions. The many initiatives over time have had varying degrees of success.
One of the key barriers to successful agriculture financing is information asymmetry. In an effort to bridge the information gap, FSD Kenya has conducted several studies, including the Financial Diaries, FinAccess, and market case studies.
One of the most recent studies, for example, looked at the mango value chain financing in the Lower Eastern region of Kenya. It revealed several opportunities to support access to financial services through mango value chain actors.
The key opportunities were:
1. Support increased farmers’ productivity through access to inputs financing.
2. Increase business efficiency and capacity through access to working capital by supporting stockists, exporters and processors.
Many of these studies were designed to understand the financial transactions surrounding the various value chains, rather than to provide an in-depth understanding of stakeholders’ needs. This approach arrived at a very detailed view of what the financial flows were, and which financial tools and mechanisms people were using.
However, this work only partially answered why people were doing what they were doing. It thus inspired FSD Kenya to embark on a human centred design (HCD) approach, to better understand the real motivations behind customer behaviour.
HCD involves developing new products and services based on the real needs and behaviours of a target audience. It is a customer-centric approach built on a base of ethnographic research.
In this case, FSD Kenya intended to triangulate the insights from the HCD project with the findings of the mango value chain and Financial Diaries studies, in order to better inform the design of new products and services, and to improve delivery mechanisms.
The immersion spanned a few weeks in the Lower Eastern region of Kenya (Machakos, Makueni and Kitui counties). Fieldwork teams consisted of external consultants from Future by Design and included people from both FSD Kenya and each of the two financial institutions who partnered in the programme.
The fieldwork generated many new insights into the nature and behaviours of smallholder farming households, including this observation, from one of the fieldwork team: “We don’t know 75% of our customers!”
Spoken by a lady who runs a successful Financial Services Association (FSA) and spends much of her time in the field meeting with members, her words were particularly revealing; one would expect the nature of her work to give her an intimate understanding of her customers.
The insights generated are hugely indicative of the value of an HCD approach to product development and confirm that traditional market research methods often miss the mark. Products are often developed from a service provider’s “product-push” perspective, without any true understanding of the real needs of their target customers.
Traditional development processes inside these institutions tend to create new products that fit into their standard understanding of risk, pricing, delivery mechanisms and ability to scale. They tend to be built and tested according to a confirmation bias, displaying a tendency to interpret new evidence as confirmation of existing beliefs. This affects the slant of the customer research, which is undertaken to confirm that they are on the right track.
The HCD approach differs in that it begins with a completely blank slate to try and understand the real needs, wants and resultant behaviours of a particular audience. (In this case it even went beyond the narrow field of financial services.) It then builds solutions from the bottom up, finding ways to incorporate new product ideas within existing constraints. In some cases, the process may challenge the very existence of predetermined constraints, resulting in previously unforeseen product breakthroughs.
Using insights from the fieldwork, teams conducted co-creation sessions with members from FSD Kenya and from each of the two financial service providers. These sessions were held over two days and began with story telling from the field. Stories brought the voices of the customers into the room for everyone to experience first hand.
Stories included an update of the findings and learnings of the Financial Dairies and mango value chain studies. The second day moved into a co-creation session where the teams developed various new product concepts, informed by the experience of the story telling from the previous day.
Sessions always ended with a reflection from the participants to establish how their thinking had changed as a result of the process. In our view, the traditional product development process inherent in many service providers the world over was summed up in one sentence by a participant, who said: “It is clear to me, after this process, that you can’t pretend and try and sell people things that they don’t need”.
Four very useful product concepts emerged, from savings products to communal loan products, each with its own development pathway inside each of the two financial institutions.
The most profound insight was that you cannot get people to save and transact with a financial service provider if they do not understand the benefits of being part of the financial system. In many cases they do not understand the costs involved or how mobile or physical banking is superior to cash. In order to understand this, they need to be educated on these issues. This is not a new insight; the in-depth research merely reconfirmed the need for financial literacy above all.
Secondly, people need to know what they must do, how they can do it and why it is beneficial for them. In order to drive adoption of financial offerings, financial institutions need to teach them good banking behaviour.
Many other insights emerged from the process and should inform future solutions based on real needs and behaviours. These solutions should incorporate, amongst others:
1. The on-going use and importance of cash in the system
2. The use of informal sources of cash like family and community
3. Existing and flexible savings mechanisms like livestock
4. New banking business models which don’t rely on fees or interest
5. Tangible savings products which emulate the look and feel of cash, yet provide the safety and scalability of mobile platforms
Our key take-away was that people desperately need to be lifted out of poverty, and to be cushioned against the shocks that could push them back there. Financial institutions in their current form do not help them to do either. And, because many people have so little money to begin with, nor do they emerge as critical services.
A further output of the programme was the development of an HCD Africa Toolkit, which was designed in a way to make the HCD process understandable and easy to teach to incumbents on the ground. The concept and practice of HCD will therefore live on beyond the life of one project (for more information, see www.myHCD.org).