Cost-effective Client Assessment in a Small Microfinance Institution: The Experience of DEMOS in Croatia

This paper is a case study of a client assessment initiative carried out by DEMOS, a savings and loan co-operative in Croatia:

• To provide clients with customized and appropriate products and services, in tune with the changing market situation;
• To actively promote the demand for its own services.

The author dwells on certain aspects of the client assessment process that needs improvement, namely:

• Allowing staff to better analyze the client results, rather than relying on management to conduct the analysis;
• Adequately documenting all approaches, tools and systems used in the process, with specific rules, policies and methods.

The paper finds that by institutionalizing the knowledge of its clients:

• DEMOS has enhanced client loyalty;
• The cost-effectiveness of its lending activities has simultaneously increased.

As per the author, some of the lessons learnt are:

• To survive in a competitive environment, rigorous market and client assessment is possible for a small MFI with limited resources;
• Support from external agencies is often helpful for such an initiative;
• Staff motivation and acceptance is critical for the success of the initiative;
• After the process is institutionalized, cost of client assessment gradually diminishes.