Mechanisms for Complaints Resolution

8/11/2019 Mechanisms for Complaints Resolution

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BOX 1

The Smart Campaign

Client ProtectionPrinciples

1.Appropriate ProductDesign and Delivery

2.Prevention ofOver-Indebtedness

3.Transparency

4.Responsible Pricing

5.Fair and RespectfulTreatment of Clients

6.Privacy of Client Data

7.Mechanisms forComplaint Resolution

For more information, seewww.smartcampaign.org

HOW TO DESIGN A COMPLAINTS MECHANISM

Who ShouldUse the ToolThis tool can be used by FIs and

those who support them, includingtechnical assistance providers,professional associations, donors,and others. FIs with existingmechanisms can use the tool torethink and strengthen their currentmodel for receiving and resolvingcomplaints. Those without anexisting mechanism can use it tounderstand their options and designan effective mechanism.

Additionally, FI employeesand other stakeholder seekingto convince managers of theimportance of an effectivemechanism will find this tool usefulfor crafting these arguments andproposing new ideas.

Client ProtectionStandards for ClientProtection Principle 7

This tool responds to ClientProtection Principle 7 Mechanismsfor Complaints Resolution (see Box1). The Smart Campaign definessuccessful implementation of thisPrinciple as having in place timely andresponsive mechanisms for complaints

and problem resolution for clients and

using these mechanisms both to resolve

individual problems and to improve

products and services.

The Smart Campaigns ClientProtection Certification Standardsexpand on the above definitionand provide the foundation for therecommendations found in this tool.Annex 3provides the complete list ofCertification Standards for Principle 7.

A complaints mechanism refers to a systemfor collecting, resolving, and responding to clientquestions and complaints, and for using client

feedback to improve products and operations. Aneffective mechanism is one that allows for a timelyresponse to clients and enables the institution toaddress both individual and systematic problems.
http://www.smartcampaign.org/http://smartcampaign.org/certification/certification-standardshttp://smartcampaign.org/certification/certification-standardshttp://smartcampaign.org/certification/certification-standardshttp://smartcampaign.org/certification/certification-standardshttp://www.smartcampaign.org/


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By assuring clients that theyhave the right to ask questions andcomplain, ensuring that they faceno negative consequences whenthey do complain, and respondingquickly with an answer or

resolution, clients gain confidencein their consumer rights. Use offinancial services may become lessintimidating and clients may beencouraged to continue to use formalmeans to manage their money.

Complaints mechanismsbenefit the institution.Institutions that offer one ormore complaints mechanisms

have the opportunity toaddress issues before clientsbecome dissatisfied or leave theinstitution, and can use clientfeedback to make operationaland product improvements.

Improve ClientRetention and LoyaltyYour institution is at risk of losingclients who are confused by, and/or dissatisfied with your products.For example, these clients may notrenew their loan or make savingsdeposits. In particular, clients thatdo not know how to communicatetheir problems to the institutionmay find it easier to change to adifferent financial service provider.This risk is particularly high incompetitive markets.

Your institution needs theopportunity to resolve questionsand complaints before they interferewith client loyalty and retention.Many issues are fairly simple toresolve for example, questions

about loan terms or complaints abouta chronically late loan officer andare not worth losing clients. Evenmore serious issues require aresponse, so that dissatisfied clientsdo not spread word of unethicaltreatment or seemingly unfairbusiness practices.

Gain a Reputationfor Client Care

and Improve YourCompetitive PositionIn the same way that a complaintsmechanism allows you to avoida poor reputation brought on byconfused and dissatisfied clients,it also gives you an opportunity tobecome known as an institutionthat cares about clients. Yourresponsiveness to clients questionsand complaints can give you acompetitive edge and foster clientloyalty, particularly in competitivemarkets and those in which effectivecomplaints mechanisms are rare.Additionally, clients who feel heardand valued may be more likely torespond positively to your institution,even in difficult situations such asloan delinquency, fee increases, orerrors on the part of the loan officer.

Gain ValuableFeedback on YourProducts, ServiceDelivery, andOperations

Complaints data is a valuable formof market research. Your institutionshould certainly employ othermethods of market research thatinform product design and delivery,as questions/complaints are biasedtoward poorly performing clients andthose with grievances against theinstitution. However, client questionscan reveal operational issues such

as gaps in loan officer knowledge,and complaints can spur productdesign ideas such as a grace periodfor loyal clients. Such information,when analyzed and discussed bymanagement, can also help theinstitution narrow the focus ofadditional market research.

Avoid Sector-WideProblemsAll institutions should contribute toa stable financial sector by resolvingclient issues before they becomemajor problems. Some marketshave experienced public outcry bydissatisfied clients who have voicedtheir complaints to the media and/or the government. In such cases,politicians or the media may reactin a way that negatively affects allfinancial institutions in a givenmarket. Clients that have access to

effective complaints mechanismsmay be less likely to take theirgrievances to public sources.Additionally, your institution maybenefit from demonstrating effectivecomplaints resolution to regulatorsand policymakers.


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THE SMART CAMPAIGN8

Keep Costs Low for Clients.Cost presents a significant barrierfor clients. When cost is an obstaclefor clients, they may decide notto ask a question or make acomplaint, which could result inbigger costs in the future, such asa missed loan payment or a lapse

in insurance coverage.Some costs are unavoidable,but to the extent possible, yourinstitution should shift the costs ofaccessing the mechanism away fromthe client and onto the institution.

For example, calling a customerhotline should not create additionalcosts for the client (e.g., fees) beyondusing their own airtime to makethe call. It is also best to give clientsa means to ask questions and makecomplaints without needing tocome to a branch office. This

presents travel costs (e.g., bus fare)as well as the opportunity cost ofbeing away from their business, ifthey need to contact the branch at atime other than during a regularlyscheduled visit.

BOX 2

Field example: Yehu Microfinance, Kenya SurveysClients on Which Mechanisms to Create

When choosing the mechanisms your institution will use to resolveclient complaints, consider asking clients how they would preferto communicate with the institution. During Yehus complaintsmechanism review and redesign process, the institution held fourfocus groups with existing clients, asking them to discuss theirexperience with the current mechanism and their preferencesfor new mechanisms.

The institution found that clients were overwhelmingly dissatisfiedwith the current mechanism (verbal complaints passed from clientsto center chiefs to loan officers) and suggested that the MFI introducethe following list of client complaints mechanisms:

Introduce a customer service desk in the head office and at each

branch, with a dedicated line/queue and staff.

Provide clients with branch managers and credit officers cellphone numbers.

Conduct regular client training both during client orientation andregularly on how to complain and what to expect in response fromthe institution.

Introduce open meetings between clients and management duringwhich clients can raise issues.

Schedule regular visits between customer service representativesand clients, particularly during center meetings.

Schedule regular visits between branch managers and clients visits

to center meetings and a sample of individual client businesses.


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Put Specific Staff in Charge ofComplaints.All staff should knowhow the mechanism works andhow to explain it to clients. Inaddition, your institution shouldgive designated, staff-specificresponsibilities for handling clientcomplaints. These responsibilitiesinclude recording complaints,reporting them to the appropriatemanagers, resolving complaintsand responding to clients, and

analyzing them for strategic use bymanagement.

Table 1 provides examples ofhow your institution might designatestaff to complaints resolution tasks.

Create an Escalation Process.Yourinstitution should be clear on which

types of questions and complaintsare handled at different levels ofthe institution. For example, youmay develop a list of frequentquestions and complaints that allemployees are authorized to handle,as well as a separate list of morecomplicated issues that should behandled by designated customerservice staff. More serious problemsshould be reserved for upper-levelmanagers and/or a special Ethics/Complaints Committee selected

for the task. Serious problemsinclude ethical issues such as abuse

BOX 3

Field example:UGAFODE Ugandas

Escalation ProcessEach of UGAFODEs brancheshas an Inquiries Desk, staffedby a Customer Service Officer(CSO) who receives verbal, in-person questions and complaintsfrom clients. When a CSO cannotresolve a clients complaintsimmediately, s/he records theissue in an electronic complaintsregister and sends it to the BranchManager on the same day it

was received. When the BranchManager resolves the complaint,s/he records the resolutionin the complaints register andthe case is closed.

If the issue cannot beresolved at the branch level, theBranch Manager escalates it to thesupervisor in-charge of customerservice at the head office. Mostof these escalations relate tocomplaints on products featuresand delivery channels such as

complaints about the interestrate or requests for new services.Serious cases of staff misconductare also escalated. The BranchManager then informs the clientthat senior management isreviewing the issue.

After the supervisor in-charge of customer servicereviews the complaints fromthe Branches, s/he contacts thecustomers if necessary (e.g., to getmore details about the issue) and

then makes recommendationsto management on how thecomplaint should be handled.S/he then communicates themanagement decision to theBranch Manager who gives thisfeedback to the customer. Thisprocess is typically completedwithin 14 days.

CHARACTERISTIC 2

The institution can respond ina timely way to address andresolve individual complaints.

TABLE 1

Example Staff Responsibilities for Complaints Resolution

STAFF POSITION

Two staff designated

to the complaints

hotline (each at

50% time)

All area branch

managers (each

at 10% time)

Customer service

representatives

at each branch

(each at 25% time)

SPECIFIC RESPONSIBILITIES FOR COMPLAINTS RESOLUTION

Respond to complaints over the phone answerquestions and solve simple problems

Record calls in the databaseContact the appropriate manager on more serious issuesUpdate the database when a complaint is resolvedRespond to complaints appropriate for higher-levelmanagementAttend group meetings or visit individual clients at theirbusiness premises both scheduled and impromptu

visits to check for and resolve client complaintsDiscuss complaints trends at management meetingsMake operational/product improvements basedon client feedback

Respond to complaints in person answer questionsand solve simple issuesRecord complaints in the databaseContact the appropriate manager for more serious issuesUpdate the database when a complaint is resolved


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THE SMART CAMPAIGN10

of clients and theft, and widespreadproblems such as delayed loandisbursement across an entire branchor malfunctioning ATMs.

Automate the System.Your

institutions complaints systemrefers to the process of recording acomplaint in a database, recordingthe resolution process, and analyzingthe database of complaints for trendsand institution-wide issues. Thissystem should be as automatic aspossible. For example, each complaintis recorded in an internal databaseand is automatically assigneda reference number. Additionaldatabase entries are recordedwhen that complaint is in process

(e.g., being reviewed by an EthicsCommittee), and when it is resolved.

The database should allowyour institution to easily aggregatecomplaints and analyze them bytype (e.g., loan questions, employeemisconduct), location, and otherrelevant factors. Ideally, the

database will also generate reportson complaints trends, thoughyour institution should also use aspecialized staff person to generatein-depth complaints analysisand management reports (seeCharacteristic 3).

Respond Quickly.Your institutionshould strive to respond as quicklyas possible to client questions andcomplaints. Many issues can beresolved on the same day they are

raised. These issues include thefrequent questions/complaintsthat all employees are authorizedto handle. Others will requirefollow-up and investigation, such asaccusations against an employee orproblems using a product or service.Create a timeline for complaintsresolution, including realistic butresponsive timeframes for dealingwith different types of issues.Even the most serious/complicatedissues should be resolved withinone month of submission bya client though most shouldbe resolved much sooner.

Verify that the Mechanisms AreEffective.Your institution shouldverify the effectiveness of thesystem on an ongoing basis. Thismeans that the internal auditteam or some other controls teamshould conduct periodic checksto assess how many complaints

are being registered this testswhether clients are using the systemactively and what actions weretaken. To do this, it is helpful toinvestigate a sample of complaints,which should include follow-up visitswith clients, to monitor not onlywhether the issue was resolved, andhow quickly, but also whether theclient was informed of the outcome.

BOX 4

Field example: Ujjivan Indias Complaints Policy

Your institution should have a written complaints policy, to ensurethat employees understand the complaints mechanism and applyit uniformly across departments, branches, and over time. Ujjivanincludes the following topics in their complaints policy:

Descriptions of the mechanisms Describes the various channels,including field-based customer care representatives, a customerhotline and complaints logs in branches.Objectives of the mechanisms Describes their importance andwhy they exist, including to resolve client problems and informproducts and delivery.Escalation matrix Defines how serious complaints will escalateto senior staff, and how complaints are categorized based on severity.Timeline for responding to complaints Defines the time in whichdifferent types of complaints must be resolved.Staff roles and responsibilities Defines roles and responsibilitiesof staff in handling complaints and informal client feedback.

Staff Training Describes how staff handling complaints will be trained.Use of Client Complaints and Feedback Provides information onhow often the data will be analyzed, published, and shared with theBoard of Directors.

Read more on this example from the Smart Campaign:http://smartcampaign.org/tools-a-resources/911
http://www.ujjivan.com/http://smartcampaign.org/tools-a-resources/911http://smartcampaign.org/tools-a-resources/911http://www.ujjivan.com/


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HOW TO DESIGN A COMPLAINTS MECHANISM 1

Analyze and Report ComplaintsTrends.In addition to respondingto individual client issues, yourinstitution should be able toaggregate, analyze, and report clientcomplaints information. Such reportsshould describe the number of clientcomplaints received in a time periodand over time, the mechanisms usedto receive complaints (e.g., 40 percentof complaints received through

suggestion box and 60 percent byphone), and the issues raised byclients (e.g., interest rate complaints,confusion on savings productterms). See Annex 3for an examplecomplaints analysis report.

Management should reviewthese reports on a regular basis(e.g., quarterly), looking for potentialoperational and product-relatedissues that are systemic and/orconsistent over time. Managementshould address such issues bydiscussing possible improvementsto the institutions operations andproducts. In this way, complaintsdata is a valuable form of marketresearch and can also be used toavoid client complaints in the future.

Use Analysis for OperationalImprovements.Table 2 providesexample trends that might appearin a client complaints report,alongside corresponding operational

improvements that managementmight discuss.

Use Analysis for ProductDevelopment.Table 3 providesexample trends that might appearin a client complaints report,alongside corresponding productdevelopment ideas that managementmight discuss.

TABLE 2

Example Complaint Trends and Operational Improvementsto Address Complaints

EXAMPLE COMPLAINT TREND

Lengthy wait time

to speak to a teller

at branch offices

Clients are surprised

by fees when making

a savings withdrawal

Client account

information is frequently

out of date and inaccurate

EXAMPLE OPERATIONAL IMPROVEMENT

Open an additional teller window; Use customer service

desk to answer simple questions that do not require

teller involvement; Offer clients additional product

information while they wait

Improved staff training on how/when to disclose fee

information; Introduction of transparent marketing

materials with savings account information

Improvements to IT systems that allow more frequent

updates to client account information; Staff refresher

training on how to keep accurate client records; Spot

checks of client account information by internal audit,

to increase staff attention to the issue

TABLE 3

Example Complaint Trends and Product Development Improvementsto Address Complaints

EXAMPLE COMPLAINT TREND

Loan size increases

are not sufficient

to capitalize clients

growing businesses

Mandatory insurance

coverage is largely

unused

Clients want the

same savings interest

rate offered by

commercial banks

EXAMPLE USE FOR PRODUCT DEVELOPMENT

Increase in loan size limits for well-performing clients;

Strengthening of loan capacity assessment procedures

Inquiry into the types of risks clients face, needs for

insurance coverage, and desire to pay for coverage;

Changes to insurance products and/or prices based

on new understanding of clients insurance needs

Design of savings account with a higher interest rate,

made sustainable by requiring a higher minimum

balance and/or limits on withdrawal frequency

CHARACTERISTIC 3

The institution can usecomplaints information toaddress systemic problems.


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BOX 5

Field example: Tameer Bank, Pakistans CustomerServices Unit

A 2007 client delinquency crisis forced Tameer Bank to reevaluate itscredit policies and procedures. As part of this process, Tameer realizedthat they needed to offer their clients better ways to communicatedirectly with the institution. The bank wanted to strengthen theirrelationships with clients, better understand client needs, and respondquickly to client problems.

In line with these goals, Tameer established the Customer ServicesUnit (CSU). Among other responsibilities, the CSU was responsible formonitoring and addressing client complaints. The CSU accepts clientcomplaints using a specific phone line and a dedicated staff to answerclient calls.

When the CSU receives a call, an employee logs the details in acomplaint-tracking database. If the complaint or inquiry is simple, it is

resolved immediately, over the phone. Otherwise, the CSU contacts theappropriate bank department or branch office. For example, if a clientcomplains about receiving the wrong loan amount, the CSU contacts theclients branch with the issue, and requests that the branch follow upwith the client directly.

In the majority of cases, Tameer contacts the client within 24 hoursof the initial complaint. If the bank needs to investigate further, theycontact the client and inform him/her of the process and the expecteddate that they will provide a response.

Tameer actually receives more questions than complaints. Typicalquestions include topics such as interest rates, monthly repaymentamounts, and other credit terms. By providing answers to thesequestions, the CSU keeps clients informed and also increases clientsatisfaction and understanding.

Finally, the CSU is also responsible for producing reports thathighlight possible risk scenarios. These reports are based in parton client complaints, and they include risks such as client over-indebtedness, staff fraud, and client unwillingness to repay. Thesereports provide valuable information for management.

Read more on this example from the Smart Campaign:http://smartcampaign.org/tools-a-resources/589
http://smartcampaign.org/tools-a-resources/589http://smartcampaign.org/tools-a-resources/589


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TABLE 4

Solutions to Common Issues With Complaints Mechanisms (continued)

ISSUE

Management suspects

that field employees

do not report all complaints

Clients fear reprisal

for reporting problems

to field staff

Clients are predominately

illiterate

SOLUTION IDEAS

Field employees that receive client complaints

may not always report the complaints. To check

for this issue, use internal audit/risk management

staff to check client understanding of the official

mechanism(s), and to check whether clients have

unresolved issues previously addressed to field

staff. Also, ensure that clients have at least one

way to contact non-branch staff (e.g., a customer

service employee at headquarters).

Clients may believe that they will be suffer negative

consequences for reporting problems to field officers,

such as being denied a service. In all communication

with clients about the complaint mechanism(s),

reiterate that clients have the right to complain,

and will face no negative consequences. Train field

staff on the importance of client complaints in

improving client relations and mitigating risks such

as client exit. Use internal audit/risk management

staff to check field officer handling of complaints

and possible instances of reprisal against clients.

Also, ensure that clients have at least one way to

contact non-branch staff (e.g., a customer service

employee at headquarters).

Client literacy levels are an important factor

to consider when choosing an appropriate

mechanism. Institutions serving predominately

illiterate clients should choose mechanisms that

allow clients to complain/ask questions orally.

These mechanisms are elaborated in Annex 1, and

include in-branch customer service representatives,

a telephone number/hotline, field visits by

managers, and a telephone number of field officer

and/or branch manager.


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COMPLAINTS MECHANISM

Telephone

number/hotline

Telephone number

of field officer and/or

branch manager

ADVANTAGES

Access.Easy for clients to

access, if they already have

cell phones.

Cost.Can be free for clients

if the number is toll-free,

or low-cost depending

on phone charges.

Understanding.Easy for

FI to explain how the

mechanism works and to

provide contact information.

Clients familiar with cell

phones can understand this

method easily. Allows clients

to make confidential and/or

anonymous complaints.

Response.Clients can receive

an immediate response to

their question/complaint

and/or information on how

it will be resolved.

All advantages apply from

the mechanism Telephone

number/hotline, above.

Response.Response time

may be faster, as branch staff

are more likely to know the

client and understand his/

her issue and may be more

motivated to resolve the

problem before it escalates.

CHALLENGES

Access.Difficult for clients

to access if they do not

have cell phones or accessto a landline.

Cost.If the number is not toll-

free, or airtime is expensive,

cost might be a barrier.

Understanding.Difficult

for clients to understand

if they are not familiar

with cell phones.

All challenges apply from

the mechanism Telephone

number/hotline, above.

Response.Clients may not

receive accurate or unbiased

responses if complaints

are the fault of the loan

officer/branch.


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HOW TO DESIGN A COMPLAINTS MECHANISM 17

COMPLAINTS MECHANISM

Field visits by

managers

Email address

Web and social

media (Facebook,

Twitter, website)

ADVANTAGES

Access.Easy for clients to access

during the time of the visit.

Cost.Free for clients, if visits

take place during normal

meeting times.

Understanding.Easy for FI to

explain how the mechanism

works, as clients are accustomed

to in-person conversations.

Response.Clients can receive

an immediate and in-person

response to their question/

complaint and/or information

on how it will be resolved.

Access.Easy for clients to use if

they have access to a computer

and email address, and are literate.

Cost.Free for clients that have

computer access; potentially

low cost for those with access

to a cyber caf.

Understanding.Easy for FI to

explain how the mechanism

works and to provide contact

information. Easy for computer-

literate clients to understand.

Allows clients to make confidential

and/or anonymous complaints.

Response.Allows quick

response time.

All advantages apply from

the mechanism Email

address, above.

Response.Publicly posted

responses may help to answer

questions and solve problems

for other clients who see them.

CHALLENGES

Access.Clients cannot use

the mechanism at any time

other than the visit, whichare typically infrequent.

Understanding.Clients may

not feel comfortable complaining

in-person. Does not allow clients

to complain anonymously and

is typically not confidential,

unless the visit is one-on-one.

Response.Response is limited by

the frequency of the visits i.e.,

clients cannot receive a response

unless a visit occurs.

Access.Very difficult for clients to

use if they are not familiar with

computers, illiterate, and/or do not

have easy access to a computer.

Cost.Costly for clients without

easy access to a computer-depends

on distance traveled and pay-

for-use charges associated with

accessing a computer.

Understanding.Requires

computer literacy.

Response.A quick response from

the FI may go unseen by clients

that do not have regular access

to computers.

All challenges apply from

the mechanism Email

address, above.

Response.Responses may be

limited, in order to preserve

the institutions public image.


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Documents

Mechanisms for Complaints Resolution