Balancing Social and Financial
Performance: 6 insights from AMK
Cambodia for Successfully Delivering on
Good Intentions
Session speakers: Katherine Knotts, Ind ependent Consultant, and Anton Simanowitz,
Independent Consultant
The session leaders, Katherine Knotts and Anton Simanowitz, recently wrote a book about AMK
entitled “The Business of Doing Good.” The book looks at AMK’s innovative designed to balance its
financial and social performance, framing it around six main insights. The session will also be
framed around these insights.
Background and history: Katherine Knotts
Katherine started the session by walking through early AMK mile markers:
Beginnings. In 1993, AMK started as a charity microfinance program run by Concern Worldwide. In
2002, there was a law that required all such programs with portfolios above $250,000 to become
formal financial companies, which started the process of AMK becoming a formal MFI. Meanwhile,
Concern had heard worrisome stories from the field about unintended consequences of product
design that were failing client needs. “It was a landscape of missed opportunities – good intentions
but unintended consequences.”
Becoming a formal financial organization. Concern did not just spin off the entity and then walk
away. Concern and AMK created a framework agreement.
 Concern guaranteed decision-making autonomy of new entity.
 It also provided it security and stability in terms of financing. AMK had its own
portfolio, its own staff.
 Concern made sure AMK kept its focus on the social mission. In early years, Concern
occupied all board seats and made sure focus was on social mission. As they started
involving external people as board members, they made sure that vision was shared by
new board members.
Why is AMK interesting?
 Scale. They have more than 400,000 clients.
 Outreach. AMK reaches every province in the country.
 Poverty focus. If you live in Cambodia, you have a 20% chance of living below food
poverty line. If you’re an AMK client, you have a 50% chance.
 Multi-product, multi-channel. Started out as primarily credit. Now many products
and channels because clients have a broader range of financial needs.
 Outcomes. Have done studies and have research programs that are coming up with
concrete, verifiable outcomes (i.e. food, education, cash flow)

Successful business. AMK is achieving positive social outcomes, but they also have
financial success.
Six key insights for delivering on good intentions: Anton Simanowitz
PART 1: Shedding assumptions about clients.
1. Don’t just offer products; respond to client needs. AMK makes distinction between
clients’ needs and preferences. They’re not just responding to market.
a. For example, most MFIs do cash flow analysis before loan. AMK also does a
home appraisal process. For clients, it means it takes longer to get loan. For
AMK, it adds cost, time. So it is not the easiest option, but it is the best in terms
of understanding clients.
b. AMK has a strong research department that had developed understanding of
clients. For example, with agriculture, AMK realized that clients needed loans at
different times because of harvest cycle; that people’s need for money were
linked to expected events as well as unexpected events; and that people needed
flexibility (Clients can draw out loans when they need to draw out loan so
they’re not getting a loan and then sitting on half of it, paying interest, until they
need it later.)
2. Ask good questions; have good conversations. How do you go from a good
understanding of clients to start to become a good organization that’s really aimed at
better practices?
a. Credit research helped them understand client needs, but there was concern at
board, management and frontline staff levels about implementing. Connecting
research to reality of operation was essential to making this operational.
b. Disaggregation of data is key to understanding clients. If we look at poorer
clients, what is their satisfaction compared to the average?
c. Organizations are often good at listening to clients, but they often don’t know
who they are listening to. This can lead to mission drift, as the loudest voices
often tend to be the best clients.
d. AMK has SPM committee on the board. Before every board meeting, the SPM
committee meets for the entire day to discuss the SPM angle for board decisions.
Entire management tends to join.
PART II: Translating good intentions
3. Manage what matters. There’s often a gap between theory and practice. At some point,
under pressure for growth, AMK started taking shortcuts, such as skipping home visits.
Then, AMK was hit hard in the financial crisis, partly due to this slack in cash flow
analysis. Afterward, AMK started zero tolerance policy for home visits and fired about
30 people due to this rule.
4. Motivate staff to do difficult work in an excellent way. It is vital to build
organizational culture, motivation, etc. around the social mission.
a. AMK value staff in terms of money, particularly with general staff. With
comparison to peers, they pay well on the bottom of the scale and then are
weaker in terms of management pay.
b. AMK tries to break down the hierarchy in the organization. They want people to
talk to each other. When something isn’t working, they want them to tell
someone. Everyone calls each other “brother” instead of “sir,” and everyone,
from driver to CEO, has the same per diem.
PART III: Building a business model that works
5. Own the dirt road. There’s a distinction between the business case and business
model.
a. We hear a lot about win-win when talking about focusing on clients and strong
organizations. But in reality there’s not always a business case for a focus on
clients. There are places where doing what is best for your clients is not the
most profitable for your business. However, there may be a business model for
doing that profitably.
b. AMK decided to start on the poorest, most remote part of the country and then
work their way back in. Many thought that was crazy. AMK made it work by
increasing productivity. At one time, 900 clients per client officer. They
increased the efficiency of the organization.
6. Adapt to the changing landscape. AMK started as credit organization and then
developed a range of products and services based on client need. The fundamental
organization of who the clients are and the needs of the clients has stayed the same, but
the way AMK approaches that has changed over time.
a. For example, AMK has always understood the need for savings. However, it took
2009 legislation that allowed for deposit-taking organizations for AMK to move
into savings in meaningful way. It also needed the financial crisis to make it
realize that you can’t just depend on foreign capital. When they developed
savings, they,
i. Focused on agent-based savings. They have 1,600-1,700 agents, which
allows for more contact with clients but is a costly, long-term strategy.
Not going to be profitable in a short period of time.
ii. Asked themselves, would this lead to mission drift? How do we make
sure we don’t just start focusing on people with savings? How do we
mobilize savings?
Speaker: Mam Choeurn, AMK Chief Operating Officer
Choeurn provided a brief overview of AMK’s history.
 When it started, it only had 3 branches and a staff of 50. It only had two products, both of
which were credit.
 It started in the provinces and then worked its way to cities.
 It developed additional products based on client’s need, such as emergency loan.
Questions/comments
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AMK has operational self-sufficiency of 117%. Reached OSS by 2005. During the crisis in
2008, the PAR for AMK was 2.8%. Now it’s 0.26%.
Focus on balanced growth. AMK has set targets around profitability levels, such as 1518% ROE. If they meet target, CEO gets his incentive. If they go above, the CEO does not
get incentive.
AMK has consistently been among the lowest MFIs in Cambodia in terms of average loan
size.
Breakout groups
After the presentations, the groups divided into four groups to further discuss the insights about
AMK. Groups were divided into four categories, which each met for an hour and discuss lessons
learned from the AMK case and then how to apply it to other organizations. Then, the group came
back to share insights
Products and services that meet clients’ needs, with a focus on AMK credit line. Breakout group
led by Sophy Pum, AMK Head of Research. Insights:
 The group was interested in the credit line’s flexibility and the complexity of putting that
into practice. How does that work with MIS? How do you explain it to clients? The
organization needs to be very clear on what the benefits are to staff and clients.
 The group thought AMK’s “product road maps” were very helpful: evaluation of existing
service, identifying issues and trends, pilot testing product models on clients.
 In terms of application, the industry needs to build flexibility into how we do things. Need
to look for other practical examples of this.
Managing what matters, with a focus on home visits, audit process and staff incentives. Breakout
group led by Choeurn, AMK COO. Insights:
 Importance of home visit in understanding client. The lack of home visits led to a loss of
quality which led to a loss of financial performance. The group wanted more examples of
that business case.
 If it affects social performance and financial performance, it’s easier to affect change. It
was easy for AMK to implement zero tolerance policy about home visits because
employees could see that PAR was high. Risk went to level that nobody in the company
was getting bonus, which made it easier to enforce the zero tolerance policy.
 Staff training, awareness and motivation are vital. It should not just be about staff
monitoring.
 To move forward, industry needs examples of:
o Business cases that link financial and social performance.
o Packages of management practices, not just a single action.
o Practical details, examples of incentive schemes that balance financial and social
performance.
Getting staff to do difficult work in an excellent way. Breakout group led by Peaing Pisak, Head
of Human Resources. Insights:
 Everyone in group was from Philippines, which made it interesting to contrast that
market to the Cambodian market. In general, the group felt affirmation that they were
doing similar things.
 AMK loan officers have 537 clients on average. Group thought this was huge.
 Loan officers travel 200 km per day. Group also thought this was a lot.
 Takeaway: organizations need to look at quality of staff benefits
 As an industry, we need to talk more and be more comfortable sharing trade secrets.
Nobody wants to share salary differentials between different levels. We need to share and
then use those conversations to propel it into an advocacy effort.
 We need to look at management skills and empower managers to be good leaders.
Leaders should value their staff and understand the value of their work. It would be good
to get a joint training on that.
Building a business model that works in from the outside in, with a focus on savings. Breakout
group led by Huot Sokha, AMK Chief Business Officer. Insights:
 AMK launched in 2003 with two goals: be financial sustainable and be No. 1 in terms of
number of clients. Had support of Concern Worldwide, which gave them foundation to
launch their strategy.
 Decided to scale by going to rural markets, which were harder to reach and had higher
costs. From beginning, they were frugal, careful on costs.
 Start of savings:
o AMK saw that there was strong demand for savings in rural areas. Clients were
saving in livestock and other ways. Also, clients couldn’t travel easily to branch.
o AMK also saw that this would be a good source of funds.
 In 2010, developed 2 savings products – one targeted toward poor and one targeted toward
middle income people.
 To reach rural clients, developed own agent network. Agents do the transfers, the deposits
and the withdrawals on mobile phones supported by AMK staff. They have the village
banking representatives become agents, which allows the alignment between value and
goals to become stronger.
 Results: Increasing client loyalty and developing source of funds. Goal is to be sustainable in
savings operations in 2018.