Assessment of Marketing Practices of Selected Microfinance Institutions in Addis Ababa
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Date
2007-07
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A.A.U
Abstract
In Ethiopia the institutionalized microfinance industry is a relatively a new
phenomena and development. It was formally legalized in June 1996 under the
proclamation 40/ 1996 and to date, the industry has grown to service some
721,100 clients (based on data made available at the end of June 2003) with an
estimated national market penetration of 7% . The industry continues to develop,
evolve and face many new challenges in a market that is currently supply -driven.
However, as the marketplace develops the microfinance institution (MFI) will
increasingly need to identify customers' needs, aspirations and demands, if it
wishes to achieve sustainability. Indeed, some MFLs are already attentively
beginning to explore the need of customers, for example, develop new products to
meet changing market needs .
For this project, even through there are several research methodologies, but in the
current circumstance and considering the nature of the topic under review, it was
considered appropriate to use exploratory research technique. This approach would
allow defining the parameter and the background in which marketing exists,
enabling to uncover the salient points that are relevant and to a fuller understanding
of the environment. because of the complex nature of the subject, it was also felt
that individual interviews would provide a greater depth and richness of
information than if alternative methods were used e.g. postal questionnaires .
Finally, structured questionnaires, for senior officials, and operation employees
of selected MFIs were used to ensure consistency throughout the program, using a
variety of open and closed questions.
The research findings , detailed in this study, are based, where appropriate, on the
responses to the interview and the main issues raised by the MFIs together with a
number of examples that interviewees have highlighted . The interviews were
analyzed under each of the major set of marketing criteria.
The microfinance industry is service-oriented industry, in exchange for a fee
(interest rate), the customers either borrow or lend money from or to the MFI. If
the customers are satisfied with these services, they will continue to use them and
thus the ultimate success of the MFI business depends on its ability to service the
customers' needs, wants and demands.
Largely, for MFIs, marketing is about understanding the customer and how to retain
their business. This simply means that the MFI needs to focus on defining its target
markets, its market share and its size in its chosen market place. MFI then needs to
clearly identify if its product line effective meets the perceived needs of its current
and poetical customers.
Marketing includes the entire element motioned above, as well as a number of
others and they all fall under the marketing planning process. The final outcome is
documented in strategic marketing plan. In strategic marketing plan, one would
expect to clearly identify the organization's objectives' resources, timing and
responsibilities.
For the purpose of this exercise, the possible barriers to entry into the
market place were ignored. Indeed those that may exist are relatively low. All
potential sponsors of MFIs are free to enter into the marketplace. The minimum
capital investment requirement is 200,000 birr (23,255 USD) and current legislation
preventing forging capital owners from investing directly in MFIs are also
important and additional barriers. However, to date, none of these barriers have
been shown to be of any real significance.
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Keywords
Addis Ababa, Assessment of Marketing, Selected Microfinance Institutions