Microfinance, Uganda. Strengthening customer focus to rebuild trust and performance
Summary
UGAFODE, a Ugandan microfinance institution, was losing clients, staff and money after its products, incentives and collection practices drifted away from client needs. Working with social investor Oikocredit, I supported a rapid impact/social performance review and a series of practical changes to strengthen customer focus. Within two years outreach grew, portfolio quality improved and the institution was voted the most trusted MFI in Uganda, showing how aligning commercial decisions with client needs can rebuild both impact and financial performance.
The challenge: when growth loses sight of clients
Ugandan microfinance institution UGAFODE was losing clients, staff and money. Outreach was falling, complaints were increasing and the organisation had developed a poor reputation. Products and services were not well aligned with client needs, debt collection practices were damaging relationships, and default levels were rising.
The underlying problem was not simply operational. The institution had lost focus on the people it existed to serve.
I worked on this assignment as a consultant for social investor Oikocredit, supporting a review of UGAFODE’s practices and the implementation of practical changes that could be introduced quickly while strengthening the institution for the longer term.
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The process: identifying practical changes that matter for clients
We began with an impact/social performance health check to understand how well the institution was serving its target clients and where gaps existed between policy and practice. The review looked at product design, branch operations, staff incentives, information systems and client protection practices.
Three priority areas emerged.
The first was access. If UGAFODE wanted to reach its intended clients, it needed to think more carefully about where services were located, how products were designed and how staff were rewarded. The institution introduced better tracking of client profiles and began reporting this information to senior management and the Board so that outreach to target groups became part of regular decision-making.
Second was increasing the benefits clients received. Loans, savings and insurance were redesigned to match how clients actually use financial services, to invest in business, manage irregular income and cope with shocks. New loan products were introduced, minimum loan sizes were reduced, voluntary savings products were launched, and insurance coverage was expanded.
Third was client protection and service quality. UGAFODE introduced a staff code of conduct, strengthened complaint mechanisms, brought debt collection back in-house, and aligned incentives to reward service quality and client retention as well as portfolio growth.
The focus throughout was on quick wins: practical changes that would deliver visible benefits to clients and build momentum inside the organisation. This made impact/social performance a tool for improving the business, not an additional reporting requirement.
What changed
Within two years, the turnaround was clear. UGAFODE returned to profitability with loan client outreach increasing by about one third and the loan portfolio almost doubling. Bad debt fell sharply, with portfolio at risk dropping from double-digit levels to around 3 percent, and client exit rates falling from around 15 percent to 5 percent. In a national survey, UGAFODE was voted the most trusted microfinance institution in Uganda.
More important than the numbers was the shift in how decisions were made. Management began to ask consistently: who are we trying to serve, and how do our services help them? Product design, branch expansion, staff incentives and reporting were all reviewed through that lens.
Impact stopped being a separate initiative and became part of normal management practice. Client focus, portfolio quality and financial performance began to reinforce each other rather than compete.
The experience showed that customer centricity is not an abstract principle. When it is translated into concrete decisions about products, incentives and systems, it can rebuild trust, strengthen performance and create a more sustainable business.