EDUFINANCE TECHNICAL ASSISTANCE Social, Sales And Marketing
ACADEMY OF GERMAN COOPERATIVES (ADG)
EDUFINANCE TECHNICAL ASSISTANCE CONTENTS 1. Introduction ................................................................................................................................. 2 2. Module A: Social aspect of EduFinance and customer protection .................................. 4 2.1
Importance of education ................................................................................................... 4
2.2
Reasons for financing education needs ........................................................................ 6
2.3
Opportunity International’s mission and values ........................................................... 8
2.4
Importance of Know Your Customer ............................................................................. 10
2.5
Customer Protection Principles (CPP) ........................................................................... 12
3. Module B: EduFinance ............................................................................................................. 16 3.1
EduFinance product specifications – school fee loans ............................................. 16
3.2
EduFinance product specifications – school improvement loans ........................... 18
3.3
EduFinance product specifications – savings and insurance (EduSave) ............... 21
3.4
Customer journey I (school fee loan) ............................................................................ 22
4. Module C: Sales and customer service for education loans ........................................... 26 4.1
Salesperson ....................................................................................................................... 26
4.2
Sales techniques…....………………………………………………………………………………………………28
4.3
Client acquisition .............................................................................................................. 29
4.4
Closing the sale ................................................................................................................. 31
4.5
Handling client objections .............................................................................................. 32
4.6
Customer relationship management (CRM) ................................................................ 35
4.7
Strategies for selling EduFinance products ................................................................ 36
5. Module D: Communication..................................................................................................... 40 5.1
Parameters of communication ....................................................................................... 40
5.2
Different Levels of communication and their interpretation .................................... 42
5.3
Active listening.................................................................................................................. 45 II
01. INTRODUCTION
Introduction
1. INTRODUCTION This document is a reader accompanying the training modules on Sales & Marketing within the framework of trainings on EduFinance. The document will serve all involved parties to prepare for the trainings. It also gives an overview over the scope of topics that will be discussed during the five modules of the training. It serves as well as a guide for participants during the training and as a reference after the trainings. This reader accompanies the following modules: • Module A: Social aspects of EduFinance and customer protection This module builds the bridge between the following three issues related to EduFinance: the importance and structure of education in country; financing of education (problems and solutions) and the impact of education loans and indicators/objectives for the future; the importance of knowing your customer well (family background, financial background, level of financial education, needs, education preferences) to avoid over-indebtedness of clients. • Module B: Get to know the product and the client This module covers the specifics of the financial institution’s range of products on EduFinance, the product marketing material, and the target groups for the range of products. Participants will be made familiar with the clients’ needs and alternative financing options and how to identify existing as well as new clients for EduFinance products. • Module C: Develop strategies to approach your client This module covers specific techniques and technical knowledge on sales of EduFinance products. This includes the definition of different target groups; client segments; understanding of clients’ needs and alternative financing options; points of contact to attract new clients (school meetings, village meetings etc.); how to approach existing clients; how to analyse current client portfolio to identify potential clients for education loans, etc. • Module D: 101 on communication and customer service This module covers general communication skills required for successful client interaction (presentation & communication skills; negotiation & selling techniques). • Module E: Engaging with your client on education loans This module leads into exercises covering techniques learned and put them into the specific setting of EduFinance products. Participants will learn/practice how to “step into customers’ shoes” and practice to actively approach (existing and new) clients.
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02. MODULE A: SOCIAL ASPECT OF EDUFINANCE AND CUSTOMER PROTECTION ..
Module A: Social Aspect Of Edufinance And Customer Protection
2. Â MODULE A: SOCIAL ASPECT OF EDUFINANCE AND CUSTOMER PROTECTION This chapter gives an insight into the social aspects of financing education. The key challenges in accessing education are presented as well as the solutions people develop to face the challenges. Additionally, the initiatives Opportunity International (OI) has started to encounter the key challenges, are presented. An introduction to the concepts of Know Your Customer (KYC) as well as the Customer Protection Principles (CCP) are concluding this chapter.
2.1 Â IMPORTANCE OF EDUCATION Before highlighting the importance of education, this chapter gives an overview over the education system (example of Uganda) and explains the framework conditions. After depicting the challenges of education, the benefits of it are explained.
EDUCATION SYSTEM: OVERVIEW (EXAMPLE UGANDA)
PLE (primary leaving exam)
Primary school (7 years) Nursery (2-3 years) Alternative:
UCE Uganda certificate of education (O-Level)
UACE Uganda Advanced Certificate of Education (ALevel)
Tertiary/ university
(Lower and Upper) Secondary school (6 years)
Technical, vocational education and training (TVET) (2-3 years)
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The picture above shows, the set-up of an education system along the example of Uganda. Before reaching primary school age, children can go to nursery for a duration of up to 3 years. Once they have reached the age of six, children go to primary school for 7 years. After completing primary school with the primary leaving exam (PLE), there is a choice of attending secondary school for a duration of 6 years to obtain the Uganda certificate of education (UCE, equivalent of O-Levels), which qualifies them to attend tertiary education (i.e. university). Or children can attend a technical or vocational education and training school (TVET) for about 2 or 3 years to obtain a more practically-oriented education. In many countries, public/government schools are free of charge and the attendance of a minimum number of years is obligatory by law. Schools, also private ones, need to be registered at the responsible authorities for their completion to be approved. 4
Module A: Social Aspect Of Edufinance And Customer Protection
The following picture shows some of the financing needs parents face, when trying to send their children to school:
NEEDS IN FINANCING EDUCATION
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To come up with the funds needed for education, parents have several different options:
WHAT ARE TYPICAL WAYS TO FINANCE EDUCATION? § § § § §
From income or own savings Borrowing money from relatives or friends Lending money from street sharks Selling of personal items Remittances (or financial gifts) from family members
OR § Borrowing money from a financial institution à EDUCATION LOAN
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7
Module A: Social Aspect Of Edufinance And Customer Protection
How people view me
UNDERSTANDING YOUR CUSTOMER
What I say I am
What I really am
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However, a key challenge to the successful implementation of the KYC concept, is to carry out an effective group-wide approach. The KYC process in an institution must be consistent across the head office, branches and all other subsidiaries. The following picture gives reasons as to why KYC is so important for the successful business relationship with minance or banking clients:
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03. MODULE B: EDUFINANCE
Module B: EduFinance
3. MODULE B: EDUFINANCE EduFinance uses typical microfinance approaches to develop products that help families and students or schools to overcome the challenges they face in accessing and finishing or offering quality education. EduFinance offers lending, savings and insurance products, as well as trainings that help clients to overcome key education barriers.8 This chapter gives an overview over the main characteristics of education finance products developed by the Opportunity International initiative EduFinance. Additionally, the typical clients for education finance are described. The chapter closes by giving an example on the customer journey in regard to school fee loans as well as school improvement loans.
3.1 EDUFINANCE PRODUCT SPECIFICATIONS – SCHOOL FEE LOANS This chapter covers the EduFinance school fee loans in more detail. This loan type exists for individuals as well as members of group lending schemes.
SCHOOL FEE LOAN (INDIVIDUAL AND GROUP) – PURPOSE
3
In the picture below, the most typical purposes for an individual education finance loan are depicted. Parents/guardians to learners or students above 18 years may be requiring financing for the payment of school or tuition fees, accommodation expenses or other school related expenses (see picture below).
8
For more specific information on key education barriers and development outcomes of EduFinance, please refer to chapter 2 – Module A: Social aspects of EduFinance and customer protection.
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Module B: EduFinance
As summarized in the following picture each loan has set terms, fees, and requirements that need to be fulfilled in order for a loan application to be approved. Key for the determination of the loan amount and installments are the client’s needs, their capacity to repay, as well as the collateral value offered as well as loan repayment history with the institution. Before a final loan decision can be made, the client needs to provide a set of legal documents. These include proof of ownership of all sources of income, evidence and justification of how the loan amount will be spent, and a completed loan application form. The duration and determination of a loan is linked to a schools’ calendar (i.e. term dates), however the loan cannot be longer than 12 months.
SCHOOL FEE LOAN (INDIVIDUAL) – PRODUCT CHARACTERISTICS UGANDA *) Amount
UGX 500,000 – UGX 5M *)
Depending on need, repayment capacity, collateral, and loan repayment history
Term
1 – 12 months *)
Depending on start and length of school term
Interest rate
(2%) *)
Declining balance
Fee(s)
(to be customized)
Application, loan set-up, stamp duty, credit reference, insurance, monitoring, late payment, early settlement
Repayment
Monthly *)
Both interest and principle
Security
At least a combination of two: Fixed deposits; Chattels; Motor vehicle log books; Land titles; Guarantors
Other
Previous loan fully serviced with clean repayment history
*) Data needs to be customized according to country setting. 5
Repayments are made on a monthly basis. Interest charged for individual school fee loans is calculated on a declining basis. Collateral/Securities provided by a client, needs to be a combination of at least two elements of the following: fixed deposits, chattels, log books, land titles, or guarantors. During the loan cycle, the client also needs to provide evidence of the students’ admission to the school, as well as evidence of educational cost, as the loan amount will be disbursed to the client. The MFI representative prepares quarterly monitoring reports. Similar requirements exist for school fee loans provided through a group lending scheme. As opposed to the individual school fee loans, the minimum term is 3 months, the maximum loan duration remains the same at 12 months. Its final determination however, will be based on the school’s calendar. Before a final loan decision can be made, the group needs to provide a set of legal documents. The following picture summarizes the set terms, fees, and requirements that need to be fulfilled for a group scheme school fee loan application to be approved. Key for the determination of loan amount and installments are calculations based on the client’s needs, capacity to repay, collateral value offered as well as loan repayment history with the institution. Repayments are made on the basis of weekly / fortnightly installments, with flat interest rates (as 17
Module B: EduFinance
opposed to individual loans). As securities/collateral a group provides a combination of a loan security fund of 15%, a group guarantee, and other collateral like land, chattels, and log books pledged to the lending group. These include proof of ownership of all sources of income, evidence and justification of how the loan amount will be spent, and a completed loan application form. During the loan evaluation phase, the client also needs to provide evidence of the students’ admission and attendance into the school, as well as evidence of education expenses, even though loan amount will be disbursed to the school’s account. The MFI representative prepares weekly monitoring reports.
SCHOOL FEE LOAN (GROUP) – PRODUCT CHARACTERISTICS UGANDA *) Amount
Max UGX 3M *)
Depending on need, repayment capacity, collateral, and loan repayment history
Term
3 – 12 months *)
Depending on start and length of school term
Interest rate
(to be customized)
Flat
Fee(s)
(to be customized)
Application, loan set-up, credit reference, insurance, late payment, early settlement
Repayment
Weekly / Fortnightly *)
Security
At least a combination of two: Fixed deposits; Chattels; Motor vehicle log books; Land titles; Guarantors
Other
The clients borrow in groups after undergoing thorough orientation and financial literacy
*) Data needs to be customized according to country setting. 6
3.2 EDUFINANCE PRODUCT SPECIFICATIONS – SCHOOL IMPROVEMENT LOANS This chapter covers EduFinance school improvement loans in more detail. The picture below shows the most typical purposes for a school improvement loan. Owners of private schools and learning institutions may be requiring financing for acquisition of land, construction activities, furniture, equipment (such as computers, laboratory equipment), school material (i.e. books), teacher training, or other purposes related to improving the school’s quality.
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Module B: EduFinance
SCHOOL IMPROVEMENT LOAN – PURPOSE
9
As summarized in the following picture each loan has a set of terms, fees, and requirements that need to be fulfilled for a loan application to be approved. Key for the determination of loan amount and installments are calculations based on the school’s needs, repayment capacity, collateral value offered as well as loan repayment history with the institution. The duration of a school fee loan will be linked to the school’s cash flow statement and the resulting repayment capacity. Instalments might be linked to the schools’ calendar (i.e. term dates) to mirror phases of high cash inflow and others with lower cash inflow. In general, loans have a minimum duration of 3 months and are limited to maximum of 60 months. Interest for school improvement loans is calculated on a declining balance. School improvement loans are reimbursed on the basis of termly installments, usually within the first month of a new term (after school fees have been paid to the school). Grace periods are possible for school improvement loans based on cash flow calculations. As securities/collateral the owner of a school/ learning institution has to provide at least 2 person guarantors/corporate guarantee and additionally chattels and/or land property. If the borrower is a company, debenture is required as collateral. The guarantors must be with reliable character and verifiable sources of income. As a final key requirement, the school needs to be within 50 km of the MFI’s branch. During the loan phase, the borrower / school owner must provide a termly monitoring report on the school’s status. The MFI representative also prepares termly monitoring reports.
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Module B: EduFinance
SCHOOL IMPROVEMENT LOAN – PRODUCT CHARACTERISTICS UGANDA *) Amount
Max UGX 625M *)
Depending on need, repayment capacity, collateral, and loan repayment history
Term
3 – 60 months Termly payment *)
Interest rate
(to be customized)
Declining balance
Fee(s)
(to be customized)
Application, loan set-up, stamp duty, credit reference, insurance, monitoring, late payment, etc.
Repayment
(to be customized)
Grace period based on school calendar/ cash flow and loan purpose; should be within first month of term
Security
At least 2 person guarantors/corporate guarantee; Chattels; Land property; Debenture if borrower is a company; Guarantor must be with reliable character and verifiable income
Other
School must have operated for at least one year Experience of owner at least 2 years.
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*) Data needs to be customized according to country setting.
Below the required documents are listed, that need to be provided by the owner of a school before a decision can be made: •
License and/ or certification of registration from the relevant ministry or authority
•
Resolution to borrow/ loan application
•
For companies: Memorandum & articles of association; certificate of incorporation and Company Form
•
For Partnerships: Partnership deed and statement of particulars
•
Solely owned schools: Certificate of registration and statement of particulars and registration of business Name
•
Financial card for the school/borrower
•
Bank statements for at least 6-12 months (not mandatory)
•
Financial statements
•
Audited accounts for loans from 50m/= and above
•
School records (to support financial statements)
•
Security e.g. land agreement/title, motor vehicle, guarantors, and debenture for companies etc.
•
Performa invoice or bills of quantity (where purpose is asset acquisition or construction)
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Module B: EduFinance
3.3 EDUFINANCE PRODUCT SPECIFICATIONS – SAVINGS AND INSURANCE (EDUSAVE)
EDUSAVE INSURANCE – PURPOSE
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Opportunity International has also designed a savings and insurance product, EduSave. EduSave’s purpose is to provide clients the opportunity to receive insurance benefits through maintaining an active savings account with a minimum required savings amount. This product allows a client to secure their children’s education even in the case of unfortunate circumstances, such as the death of the income provider (usually the parent). The insurance benefit paid in the event of death will allow the beneficiaries to pay for tuition fees and other school related expenses. In the case of Uganda, an active client receives GHS 200.00 for every GHS 50.00 saved. However, the assurance is terminated in case the depositor’s monthly minimum deposit falls below GHS 50.00 for a given month. A client needs to provide names and details of next of kin and family members (usually the spouse and one child). In the case of the clients’ death or permanent disability, the insurance benefits will be paid to the people stated by the client. The following two pictures show EduSave’s purpose, target group, and product characteristics.
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Module B: EduFinance
The picture below on the other hand, describes a customers’ and an MFIs’ journey through an entire cycle of a school improvement loan. The key characteristics are the same as for the above described school fee loan journey. However there are some major differences, which will be highlighted. For a school improvement loan it is important for the MFI to closely analyze the schools’ business plan and prepare a monthly cash flow statement. The school should be visited regularly during all phases of the customer/MFI journey. The loan file and preparation of the credit committee are more complex and include more documents. This is mainly due to higher loan amounts being handled. Finally, the monitoring phase of a school improvement loan cycle also needs to be carried out with same upmost care. Depending on the loan purpose (especially for construction), milestones might be set in the loan contract. These need to be critically analyzed in order to release the next payment or to intervene before a real problem arises. Again, as for the school fee loan cycle, after the successful repayment of a loan, both sides of the deal could continue to grow their business relationship. It is important for the involved MFI representatives (loan officers, desk officers, relationship managers, etc.) to make the first step, without being aggressive and showing the client what other opportunities could exist for them.
CUSTOMER JOURNEY– SCHOOL IMPROVEMENT LOAN – MFI JOURNEY • Getting information • Payment options • Search for experience Awareness • Visit MFI/FI
• Target figure EduFinance • Visit schools etc. to inform about EduFinance
• Learning about requirements for • Clarification Information • Receive loan officer Collecting • Loan request • Providing documentation • Loan offer
• Inform client about requirements • Installment calculation • Visit to school • Collect documents
Decision Making
• Clarification • Sign loan contract • Receive loan amount
• Save to repay • Repay • Meet loan officer Repayment • Ask for time/ restructuring • Continue reayment
• Visit to school • Appraisal of documents • Business plan • Prepare loan file (incl. excel sheet) • Credit committee • Loan approval • Monitoring & regularly visiting school • milestones • Unwillingess or incapacity • Re-evaluat/ restructure loan • Offer new loan
Marketing/ Communication
Information Providing
Evaluation/ Credit Appraisal
Follow Up / Monitoring
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04. MODULE C: SALES AND CUSTOMER SERVICE FOR EDUCATION LOANS
Module C: Sales And Customer Service For Education Loans
4. MODULE C: SALES AND CUSTOMER SERVICE FOR EDUCATION LOANS In the past, businesses were traditionally built to be predictable, consistent and stable. Processes were designed to ensure consistent output and to control employee behavior to produce efficient outcomes. However, technological changes and other factors have transformed businesses as we used to know them, into a more dynamic environment characterized by a faster speed of processes and changes than ever seen before. Customer service is one of the greatest keys to any business success. It is also considered as one of the Critical Success Factors of any organization. The client has more power and influence than at any time in history. Initially, clients used to beg for good service from businesses like MFIs, however with the changing trends and diversification as well as client empowerment, clients have gained a more powerful position. Customer Service is highly linked to Sales. A definition of sales is “to exchange products or services for money or kind - to convince of value”. This sentence is made up of two parts, on the one hand it is about exchanging products or services for money or kind. On the other hand it is about convincing their client of the value of something, which is the more challenging part of sales, as it is the client who decides what is of value to them, and what isn’t. However, it is the salespersons’ responsibility to show a client or convince them of a value in a specific product or service. In order to do so, they need to develop a relationship. To build this relationship with the client, they need to create trust, so the client feels comfortable sharing the information. To successfully build this relationship and therefore delight their clients, businesses need to understand the importance and details of the client experience, regardless of sales channel. The focus must be to look beyond competition and market share to more fundamental questions of survival and sustainability in a turbulent and continuously changing environment if they are to enjoy distinct a competitive edge/advantage. This chapter gives an insight into different attributes and techniques that help to be successful.
4.1 SALESPERSON There are a number of key skills and attributes that a good salespersons must develop
in
order
to
improve
their
performance. These can be split into 3 different categories:
Attitude
Skills
Knowledge
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Module C: Sales And Customer Service For Education Loans
Attitude is the key factor in determining the success of any salesperson. This is the component that an individual has 100% control over. The most critical elements are: Ø Determination Ø Resilience Ø Motivation Ø Confidence Skills can be learned by any salesperson to improve their effectiveness and increase their success rate. The most important skills are: Ø Good communication Ø Emotional intelligence Ø Active listening Knowledge can be obtained. It takes hard work to obtain accurate knowledge on: Ø Market Ø Product Ø Client These attributes do not guarantee success as a salesperson. However, it is a good starting point for a professional salesperson to review their own performance in key areas of the sales process. It is also important that a good salesperson fully believes in their products and services. If this is not the case, clients and prospects will sense this immediately and the salesperson will lack authenticity. In such a scenario trust will not be established and the sales process will become more difficult, if not impossible. Additionally, it is critical that a sales person develops a strategy to determine their target market. A good salesperson does not speculatively target random prospects, but rather studies their market and approaches only those clients who are in their target market and who can give meaningful returns, consistent with the overall MFI strategy.
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Module C: Sales And Customer Service For Education Loans
The following are samples of methods that can be used to look for new clients: LOOK FOR REFERRALS FROM EXISTING CLIENTS
NETWORKING
CROSS-SELL TO EXISTING CLIENTS
UP-SELL TO EXISTING CLIENTS
JOIN LOCAL CLUBS TO BROADEN YOUR RANGE OF CONTACTS
JOIN LOCAL CHAMBERS OF COMMERCE OR TRADE ASSOCIATIONS
MINE EXISTING DATABASE OF CLIENTS
USE SOCIAL MEDIA
ORGANIZE BREAKFAST MEETINGS WITH A CERTAIN TYPE OF BUSINESS CLIENTS
ORGANIZE EVENTS IN FRONT OF YOUR BRANCHES TO GAIN ATTENTION
TAKE A STAND AT TRADE EXHIBITIONS OR FAIRS
USE LOCAL INFLUENCERS
GET A LIST OF POTENTIAL CLIENTS FROM A LOCAL DIRECTORY AND EMAIL THEM
UNDERTAKE A ROAD-SHOW IN YOUR MARKET AREA
USE CONTACTS IN THE VALUE-CHAIN – YOUR CLIENT’S SUPPLIERS AND THEIR CLIENTS
KNOCK ON ‘OLDDOORS’ – PROSPECTS WHO HAVE DECLINED TO DO BUSINESS WITH YOU IN THE PAST
ATTEND CHURCH, RELIGIOUS MEETINGS OR SCHOOL MEETINGS AND REQUEST TIME TO PRESENT YOUR PROPOSITION
USE BROCHURES – BUT ALSO USE AS A SELLING AID, NEVER JUST LEAVE A BROCHURE WITH A POTENTIAL CLIENT
PREVIOUS CLIENTS WHO HAVE DONE BUSINESS WITH YOU IN THE PAST
COLD CALLING OR DOOR-TO-DOOR
FAMILY AND FRIENDS
PARTNERSHIPS, FOR EXAMPLE WITH A LOCAL MOTOR DEALER
The best way to get new clients is by way of referrals. Salespeople should always ask for referrals from existing clients. The method that should be last on the list for every salesperson is ‘cold calling or door-to-door’. This is the most traditional way to get clients but it is also the most difficult and unproductive way for salespeople. When a salesperson meets a potential client, it is very important that they carry out an analysis of the clients’ requirements and needs. The client must be encouraged to do most of the talking. 30