CIDR - MICROFINANCE TECHNICAL SUPPORT CENTRE

WORKSHOP ON NEW ZONES EXTENSION AND CURRENT ZONES

ASSESSMENT

I. EXTENSION

I. I. IDENTIFICATION OF NEW ZONES OF INTERVENTION

A. PRIOR-IDENTIFICATION OF POTENTIAL ZONES

B. COLLECTION OF INFORMATION ON THE PRE-SELECTED ZONES

o Objective

o Sources of information

C. CRITERIA FOR THE SELECTION OF THE ZONE

I. II. MARKET SURVEY

A. POTENTIAL (=NON-) CLIENTS SURVEY

B. COMPETITION ANALYSIS

II. ASSESSMENT OF CURRENT OPERATIONS

II. I. CLIENT SATISFACTION ANALYSIS

A. CLIENT SATISFACTION SURVEY

B. DROP-OUT SURVEY

C. CLIENTS FOCUS GROUP DISCUSSION

II. II. MARKET SURVEY

A. NON-CLIENT SURVEY

B. COMPETITION ANALYSIS

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CIDR - MICROFINANCE TECHNICAL SUPPORT CENTRE

IDENTIFICATION OF NEW ZONES OF INTERVENTION

A. PRIOR-IDENTIFICATION OF POTENTIAL ZONES

- Pre-selection according to the MFI strategic plan

- Pre-selection of 3 or 4 zones

B. COLLECTION OF INFORMATION ON THE PRE-SELECTED ZONES

- Objective: to have a clear picture of the zone at different levels:

o Administrative structures
o Population
o Economy
o Infrastructures
o Social structures
o Financial sector and services (competitor’s analysis)
o Main development actors
o Main problems/constraints

- Sources of information
o Statistical Offices
o Meeting with Woreda officials
o Meeting with other resource persons: e.g: local elders, leaders,…
o Interviews with potential clients (through questionnaires)
o Group discussions with potential clients
o ….

- Team work
o To avoid bias, the collection of intervention should be a collective work:
Operations Manager, Op.Officer, future Branch Manager, GM,…

--> Group work on which information is relevant to collect

--> Develop Discussion guide (if enough time)

C. CRITERIA FOR THE SELECTION OF THE ZONE

- On the base of the available information, define practical criteria that will lead to the
selection of the zone.

- Goal: to find “objective” criteria to enable an optimal selection of the zone

It is important to formulate the criteria as a “desired situation”.

--> Group work to identify the relevant criteria to look at T2

CIDR - MICROFINANCE TECHNICAL SUPPORT CENTRE

COMPETITION ANALYSIS IN THE MICROFINANCE SECTOR

A. COMPETITION

In the economic theory, competition is optimal: it is supposed to be beneficial for the

clients (decrease of prices and increase of quality of services) and for the MFIs, as it will
improve their performances and eliminate the less efficient ones.

The role of regulations is to enhance a “fair” competition between the various actors.

B. REASONS OF INCREASED COMPETITION IN MICROFINANCE SECTOR

- Extension of existing programmes or MFIs

- Apparition of new or different actors: formal banks, NGOs, government
programmes,…

C. CONSEQUENCES OF COMPETITION

The consequences of increased competition in the microfinance sector are, however, not
always following the economic theory….:

- Positive for the client:

o decrease of interest rates,
o improvement of services and of the flexibility of the product,
o creation of new products, wider range of products,
o increased global impact of the Microfinance programmes.

- Positive for the MFI: in front of competitors, the MFI will be forced to improve
its management and methodology to become more efficient.

- Negative: risk of multiple debts (if more than one loan is taken simultaneously).
This in turn will decrease the repayment rate, affecting the growth and
sustainability of the MFI.

- Risk of decrease of repayment rate: one of the main motivation of the client to
repay is the hope to get a new and higher loan. If now, another MFI will give him,
at any time, a new higher loan, why to repay the current one?

- Risk: loss of efficiency of the group guarantee.

- Risk: change in the client’s relationship: there is a risk that the MFI will go away
from its initial target clientele to be able to deal with bigger volume of credit more
rapidly.

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CIDR - MICROFINANCE TECHNICAL SUPPORT CENTRE

- D. POSSIBLE REACTIONS IN FRONT OF THIS INCREASED

COMPETITION

1) MFI reaction:

- To do as the competitors do: not the best reaction

- To clearly analyse its own position towards competitors and to define its
“competitive advantage”: with which clientele and which types of products can
the MFI have a strong position on the market?
- So there are 3 major solutions:
o To face the competitors --> need to improve
o To change its position: e.g.: to shift to more rural areas
o To choose another strategy: totally new products, ideas,…

2) Regulatory Authorities reaction:

- To impose more requirements for the new entrants in the industry,

- To centralize data on defaulters,
- To penalise illegal competitors,…

3) Donor agencies reaction:

- To decrease support for MFIs that are already financially sustainable?,

- To stop supporting the apparition of several MFIs in a same narrow area of
intervention (which is the one where the donor is working)?,
- To analyse the competition environment where they want to intervene.
- ….

E. “UNFAIR” COMPETITION

- For example: entry of MFIs or NGOs offering very low interest rates because they
are supported by donors or government that allow them to “sustain” while not
being “sustainable”!
- Government administration favouring unfair repayment,
- This is a major threat to the microfinance industry.

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CIDR - MICROFINANCE TECHNICAL SUPPORT CENTRE

COMPETITION ANALYSIS AT THE AREA LEVEL

A. WHERE TO GET RELEVANT INFORMATION ON COMPETITORS IN

CURRENT OR PRE-SELECTED AREA OF INTERVENTION?

o Direct information from the competitor (MFI, NGO, Woreda,…)

--> see data sheet to collect the information

o Indirect information through other actors (AEMFI?, Woreda,…)

o Drop-out analysis (in case of competition analysis of current area of

operations)
--> see questionnaires for drop-out

o Meeting with resource persons

o Group discussions with potential or non-clients or survey for non-clients

--> see questionnaires for non-clients

o ,….

B. POSSIBLE REACTIONS?

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CIDR - MICROFINANCE TECHNICAL SUPPORT CENTRE

The Client Survey

Type of tool:
Quantitative (individual questionnaires)

Overview:
The Client Survey has a dual goal: to collect information in order to
- assess the impact of the programme
- improve the programme.

Can we choose only the second goal? Implications on the questionnaire?

Hypotheses tested by this tool:

- If we want to assess the impact, the hypothese to be verified is that the
programme brings positive impact to the client in terms of enterprise
development, economic growth, family/household economic security, and
community development.
- If we want to improve the programme, there is no hypothese: this tool will focus
on client satisfaction and provides information targeted to improving the
programme rather than identifying its impacts.

Purpose:
The purpose of the Client Survey is to find out and track the following
information:
1. What the client thinks about the programme’s impact on her/him and her/his
business;
2. How is the client running his/her economic activity;
3. How did the client spend and repay the loan;
4. What the client thinks about the programme’s strengths and weaknesses.

Cross-sectional approach versus longitudinal one

- cross-sectional study = at one point of time
- longitudinal = same study at two points of time

The Comparison group

- Needed for assessing impact; less for client satisfaction tool.
- Which group to take as a comparison group: non-clients or freshly coming
clients?

Amount of time required to administer the tool:

30 to 60 minutes

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CIDR - MICROFINANCE TECHNICAL SUPPORT CENTRE

The Non-client Survey

Type of tool:
Quantitative (individual questionnaires)

Overview:
The Non-Client Survey seeks information about
- potential clients and their behaviour and wishes as regards to credit
and savings as well as their economic potential
- non-clients to see if their situation has improved as well as the
clients (comparison group)

Hypotheses tested by this tool:

In case of impact study: the hypothesis is that the non-clients have
seen less improvement in their business and personal situation than
the clients.

Purpose:
The purpose of the Non-Client Survey is to find out and track the
following information:
1. How is the client running his/her economic activity;
2. What is his/her savings and credit behaviour;
3. What is his/her current demand for credit;
4. What are the main financial intermediaries working in the client’s
environment.

Amount of time required to administer the tool:

40 minutes

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CIDR - MICROFINANCE TECHNICAL SUPPORT CENTRE

The Drop-out Survey

Type of tool:
Quantitative (individual questionnaires)

Overview:
The Drop-out Survey seeks information about why the client left the
programme, as well as the clients’ opinion about the programme and
its impact.

Hypotheses tested by this tool:

None. This tool focuses on clients’ satisfaction and their reasons for
leaving the programme.

Purpose:
The purpose of the Drop-out Survey is to find out and track the
following information:
1. When the client left the programme;
2. Why the client left the programme (--> role of competitors,…)
3. What the client thinks about the programme’s impact on her/him
and her/his business;
4. What the client thinks about the programme’s strengths and
weaknesses; and
5. When (or if) the client will rejoin the programme and/or
recommend the programme to friends and family.

Amount of time required to administer the tool:

20 minutes

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CIDR - MICROFINANCE TECHNICAL SUPPORT CENTRE

Client Satisfaction – Focus group discussion

Type of tool:
Qualitative

Overview:
The Client Satisfaction tool is a focus group interview tool that will
help users learn the extent to which clients are satisfied with the
programme and what specific changes would better meet their needs.

Hypotheses tested by this tool:

None. This tool focuses on client satisfaction and provides
information targeted to improving the programme rather than
identifying its impacts.

Purpose:
The purpose of the Client Satisfaction tool is to
Determine client satisfaction with programme products and
services; and
Solicit client suggestions for improving the programme.

Amount of time required to administer the tool:

60 to 120 minutes

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