Market research
MFIs often design products with the target clients in mind, but end up reaching a different or broader market than intended. DBACD (Egypt) found that some of its micro-enterprise loans were being used for consumption purposes by clients who were not business owners (DBACD’s primary target market). Rather than try to prevent these loans from being made, it found a creative way to separate this newly discovered client segment from those that represented its original target market.
You should use market research to understand how best to reach your target clients, but also to ensure that you are not excluding target clients due to policies, processes, or staff or clients’ own perceptions. For example, female clients might be more responsive to radio advertisements, while male clients might respond to a newspaper ad. In Egypt, staff from one MFI felt that women were not ‘profitable’ due to needing small loan sizes. With encouragement from a support organisation, the MFI researched and designed a new product for women with lower loan sizes. The real innovation was that they hired women loan officers (all loan officers up to that point were male) to go into women’s homes (where men who were not family were not allowed). The MFI had tremendous success with new female clients, and the programme had a positive effect on profitability.
Repackaging loan products to distinguish target from non-target clients
DBACD, a microfinance NGO in Egypt, conducted several market research surveys and client exit interviews and has adjusted its micro-enterprise product in response to clients’ needs and preferences. As the Executive Director, Hassan Faried, explains: “Our research has found that not all our clients actually run a business, and some of the loans end up used for consumption, rather than for productive purposes.”
In an effort to clearly understand and track its target clients’ needs, DBACD decided to repackage their standard loan product as an ‘event’ loan, which could be used for a variety of consumption purposes, including education and weddings. By creating a new name for this same product, DBACD is sending a message to a new client segment that it understands and wants to respond to their diverse needs.
This repackaging facilitates DBACD’s ability to isolate and track the effects of its loans for business or consumer purposes, to better assess repayment capacity, and to design and modify products for each target segment in the future.