International Journal of Management (IJM)

Volume 11, Issue 9, September 2020, pp 1667-1674, Article ID: IJM_11_09_159

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ISSN Print: 0976-6502 and ISSN Online: 0976-6510
DOI: 10.34218/IJM.11.9.2020.159

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MARKETING STRATEGIES OF MICRO

FINANCE INSTITUTIONS IN INDIA
Dr. M. Geeta
Associate Professor
K L University, Hyderabad, India.

Dr. Ennala Deepa

Assistant professor
K L University, Hyderabad, India.

ABSTRACT
Despite digitalization in Microfinance institutions, the marketing orientation and
strategies will play a major role in success of micro finance institutions. Marketing
concept is recognizing and understanding the customers need and designing the
product according to customers’ needs. Micro Finance institutions are predominantly,
considered as the supplier of credit to low income groups and to some extent it
fulfilled this objective profitably. One main aspect the Micro finance institutions have
to concentrate on new product development which fulfils the customers’ needs. The
high levels of dropouts after every loan cycle is there, because usually the Micro
finance institutions have short term credit products. The present study is on the
marketing strategies that a Micro Finance institution has to follow to control these
dropouts and more emphasis is given on relationship banking. Transition from
product orientation to market orientation has been done in all major industries. The
Micro Finance institutions are following the same product orientation concept and it
is a big challenge for them to concentrate on marketing orientation concept and its
relationship with the success of institutions. The present study is how marketing
strategies will boost the performance of the Micro finance industry and also to study
the adoptability of these strategies by the Micro finance institutions. The data is
collected from the secondary sources from international journals and other reports
which provide the performance of Micro finance institutions. The analysis is done
through descriptive statistics, tables and other analytical tools.
Keywords: Strategic Marketing, micro finance, production, product.
Cite this Article: M. Geeta and Ennala Deepa, Marketing Strategies of Micro Finance
Institutions in India, International Journal of Management 11(9), 2020, pp. 1667-
1674.
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 M. Geeta and Ennala Deepa

1. INTRODUCTION
Strategic Marketing – as defined by Philip Kotler “Marketing attempts to understand the
needs of the client and to adapt operations in order to meet those needs and achieve greater
sustainability. ... Marketing is a comprehensive field aimed at strengthening the institution by
maintaining focus on the client. In doing so, it creates exchanges that satisfy individual and
organizational goals.”
Marketing strategy is the comprehensive plan made to achieve the objectives of an
organization. The marketing strategy follows after a thorough marketing research plan.

2. DESIGNING THE MARKETING STRATEGY

The marketing strategy mainly focuses on target group of customers which buys our products
and helps the organization to earn profits. There may be certain group of customers who are in
need of our products but due to internal and external barriers we may not reach that target
group.
The organization should give importance and gather all the marketing mix, i.e., the four P’s of
marketing in an appropriate mix. Various decisions have to be made on Place, product, price
and promotion.

3. IMPORTANCE OF MARKETING STRATEGIES

Competitive edge: Forward looking approach to achieve the goals and objectives.
Coordination: It coordinates the employees to complete a task or goal united.
Clearly defined roles: By having a defined marketing strategy, the roles and responsibilities
also will be distributed to the employees.
Target customers: Marketing strategy will help you in finding target customers.
More professionalism in business: If the organization has knowledge about their customers
then it will be easier to sell the goods according their preferences. Personalized approach to
every single customer leads to better understanding and better service.

4. MARKETING ORIENTATION
Marketing orientation is an approach that gives priority to the customers’ needs and design
products according to the needs of customer. Marketing orientation is a customer centered
approach. Marketing research is a prerequisite to gather the information of customer needs
and preferences’.
The marketing orientation enhances the brand loyalty and word of mouth advertising for the
organizations.
There are five marketing orientation concepts. 1. Production 2.Product 3. Sales 4. Societal 5.
Market.
 Production orientation: this approach focuses on lowering production costs.
 Product orientation: This approach focuses on product quality.
 Sales orientation: This approach focuses on target sales.
 Societal orientation: This approach focuses on the impact of organization and its
products on society.
 Market orientation: This approach focuses on the market and target customers.

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 Marketing Strategies of Micro Finance Institutions in India

5. OBJECTIVES
 To study the marketing strategies of Micro finance institutions in mobilizing the funds
and credit delivery in India.
 To assess the marketing orientation among Micro finance institutions in India.

6. RESEARCH METHODOLOGY
The data is collected from the secondary sources like international journals, RBI reports,
NABARD reports, blogs and websites. The data Analysis is done through Descriptive
statistics.

7. LITERATURE REVIEW
Graham A.N. Wright, David Cracknell, Leonard Mutesasira and Rob Hudson (2003)
“Strategic Marketing for MicroFinance Institutions” has pointed that the services to the
customers and how this optimizes the delivery and communication systems.
Graham A.N. Wright, David Cracknell, Leonard Mutesasira and Rob Hudson (2005)
“Strategic Marketing for MicroFinance Institutions” has discussed the importance of
marketing orientation in retaining the customers for Micro finance institutions.
Philip Megicks, Atul Mishra and Jonathan Lean (2005) “Enhancing microfinance outreach
through market-oriented new service development in Indian regional rural banks” discussed
about the rural banks product oriented approach rather than market oriented. They also
discussed about the market orientation of these banks and impact of these on the performance
of bank.
Priyanka Jaya Shankar, Goedegebuure, Robert, (2012) in their article “Marketing Strategies
in the Microfinance Sector: A Case Study on Hand in Hand Microfinance Pvt. Ltd,” has
discussed the significance of marketing strategies in success of Micro finance institutions in
Tamil Nadu, India.
Ms. Nishi Pathak, Dr. Arvind Singh (2017) “Microfinance in Indian Economy in 2020” has
analyzed about the growth, trend and projection of Micro finance in Indian economy by
analyzing the data from 2010 to 2015 for loans disbursements.

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 M. Geeta and Ennala Deepa

Sharif Mohammad (2018) “A Study on the Performance of Microfinance Institutions in

India” Emphasized on the performance and role of Microfinance institutions in development
of India. In his study he found that micro finance business models has become urban centric
and the rural client base has declined. The outstanding loan amounts of microfinance
institutions to the banks increasing day by day.
Pratap . B.N and K.C. Subramanya(2018) in their paper “Microfinance Delivery –
Challenges and Remedies” has discussed about the challenges faced by MFI’s in delivering
loans and other services.
Nitin Navin and Pankaj Sinha (2019) “Market Structure and Competition in the Indian
Microfinance Sector” has studied the focus on Market structure of the Indian micro finance
market. The study also evaluates the competition levels of Indian Micro Finance sector during
2005-2017.
“Financial Inclusion, Deepening and Efficiency in Microfinance Programs: Evidence from
Bangladesh”(2019) by Md Aslam Mia, Lucia Dalla Pellegrina, Patrick Van Damme &
Mahinda has studied the growing competition and regulation and the maintenance of their
social mission may have led microfinance institutions (MFIs) to compromise their
performance, in terms of efficient production of credit services.

8. DATA ANALYSIS

8.1. To study the marketing strategies of Micro finance institutions in mobilizing

the funds and credit delivery in India.
One major strategy to penetrate the rural market is Micro Finance Institutions- bank linkage
programme.

8.1.1. MFI’s – Bank Linkage Programme:

Microfinance institutions are being considered, as one of the most effective tools of reducing
poverty. Microfinance institutions have a significant role in bridging the gap between the
formal financial institutions and the rural poor. The MFI’s access financial resources form
banks and other main stream financial institutes and provide loans for rural poor.

8.1.2. Progress under MFI/ MFO-Bank Linkage Programme.

The Progress under MFI-Bank linkage programme during the last 3 years is shown in the
following table.

Particulars 2016-17 2017-18 2018-19

Loans disbursed by 19034.38 25515.23 14625.95
banks/FI’s to MFI’s.
Loans outstanding29225.45 35302.92 17760.68
against MFI’s as on
March 31st .
Source: Reporting Banks, NABARD 2018-19

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 Marketing Strategies of Micro Finance Institutions in India

8.1.3. Analysis of Progress under Bank linkage programme.

Particulars 2016-17 2017-18 2018-19. Total
Loans disbursed by 19034.38 25515.23 14625.95 59,175.56
banks/FI’s to MFI’s.
Loans outstanding 29225.45 35302.92 17760.68 82,289.05
against MFI’s as on
March 31st.
Increase in loans O/s 10,191.07 9,786.77 3134.73 23112.57
than borrowed
% Increase in loans 53.5 38.35 21.43.
O/S than borrowed.
% increase in loans 35.51% >42.90% <21.583
outstanding.

8.1.4. Interpretation
The loans outstanding in 2016-17 are 29,225.45. In 2017-18 there was a 35,302.92 which is
more than 2016-17 and there was a huge decrease in loans outstanding in 2018-19. This
shows that micro finance institutions could develop Marketing strategies and were able to
move capital amount in name of loans disbursement.
Calculation of Mean value of the loans borrowed from the banks and other financial
institutions.
19034.38+25515.23+14625.95/3 = 19725
The average borrowings of Micro financial institutions for 2016, 2017, 2018 from banks
and other financial institutions are 19,725 corers of rupees.
Calculation of Mean value of loans outstanding against Micro finance institutions.
29225.45+35302.95+17760.68/3 = 27,429.69
The average loans outstanding from micro finance institutions for the years 2016, 2017,
2018 are 27,429.69 crores.

8.1.5. Interpretation
The mean value of loans outstanding is more than mean value of amount borrowed. By this
we can infer that MFI’s are not able to penetrate in to the target customers group. The result is
the Micro finance institutions earnings may not be enough to pay the interest and for
operating the MFI. In view of this the Micro Finance institutions has to develop and
implement different market strategies to reduce the difference between borrowed and
outstanding loan amounts. To develop these strategies the Micro finance institutions has to do
financial services market research for better decision making.
The financial services market research is considered as the hardest Research among all
researches. Based on the studies the digitalization has helped the MFI in mobilsing the funds
to rural poor. The urban population is more benefited by the digitalization. More Marketing
strategies have to be developed to pierce the rural market.
The Microfinance institutions have to develop marketing strategies to have competitive
edge over the competitors. The following are some of the strategies by which the
Microfinance institutions can improvise their performance.

8.1.6. Brand and Identity strategy

The Micro finance institutions should develop their own brand and identity strategy which
differentiates from competitors.

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 M. Geeta and Ennala Deepa

8.1.7. Product Strategy

It includes product development and differentiation with the competitor’s product. Not only
development sales promotion strategies also have to develop by the Micro finance institutions
to sell their product in the financial services market.

8.1.8. Product delivery and Services strategy

It includes the product delivery may be like credit delivery and after sale services for the
customers like relationship banking.
All these strategies will be only successful when it is based on careful research analysis.
The sources of information for formulating strategies, may be from secondary sources like
RBI Report, NABARD report, and the MFI own information system.
Four types of Research may be done for proper analysis and decision making. They are
Market Analysis: Understanding the potential and target market for selling more financial
products.
Competitors Analysis: Understanding the competitor’s products and strategies in a formal
or informal way.
Customer Analysis: Understanding the customer perceptions towards the MFI’s services and
their preferences towards different type of products.
PEST Analysis: Political, Economical, Social and technological environments in which the
MFI is operating.
Not only have the above strategies the MFI’s has to concentrate on cost benefit and risk
analysis while introducing a new product or introducing a new technology. They also have to
conduct the feasibility analysis if they want to expand their services to the rural poor.
8.2. To assess the marketing orientation among the Microfinance institutions in
India
The main principle of microfinance institutions is to fulfill the twin goals of growth and
earning profits by rural poor from their commercial ventures. From an economic development
policy accessing the credit and investing in different business ventures is a highly difficult
task for rural poor. Micro finance sector has moved millions of poor people above the
poverty line but still there is a lot of gap in demand and supply of micro finance in India. To
fill this gap, the micro finance institution has to develop market orientations for fulfilling the
demand of rural people.
Market orientation is considered as a catalyst for implementing marketing strategies.
Marketing strategies provides information of selling existing products, whereas Market
orientation is an approach of identifying the needs and preferences of the customers.
At present it is found from studies that MFI’s market orientations are discussed in the
following table.

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 Marketing Strategies of Micro Finance Institutions in India

Marketing orientations Micro finance institutions Action plan.

Short term profits Micro Finance institutions should not concentrate on short term profits
rather they have to look for long term profits.

Organizational culture
Competitors’ orientation
Customer oriented
Product oriented
Production Concept
Societal Orientation
The employees have to be trained enough to access and market the
products.
Should be aware of competitors’ products and also method of outreach
of the competitors. Some employees even have no idea about the
competitors.
MFI’s are not customer oriented, they have to concentrate on service
quality, understand the customer needs.
MFI’s are not focusing on the product quality that means they are
providing loans but they also have to do cost benefit analysis for the
credit delivered to the customer and for the MFI’s.
MFI’s has to face competition from commercial banks, In lieu of this
they have to develop products which are beneficial for the rural people
like Pradhan Manthri Jan Dhan Yojana, digitalization of Branches,
hiring Business correspondents etc.,
The basic objective of micro finance institutions is financial inclusion.
This concept has to be followed by the MFIS and instead of
concentration on short profits they have to concentrate on long term
profits.

8.2.1. Interpretation
From the table above it is clearly obvious the, marketing orientation of Micro finance
institutions is not customer oriented and profit oriented for the banking business.
In some cases the market orientation of banks may lead to the successful performance of the
MFI’s.

9. FINDINGS
 The mean value of outstanding loan amount is more than the borrowed amount.
 There is a gradual decrease in outstanding loan percentages from 2016 to 2017.
 The Micro finance institutions have to develop market strategies to penetrate the target
market.
 It is found that the market orientation of Micro finance institutions are very low and
almost nil.
 The Micro finance institutions are considered as bridge to the formal banks and rural
poor. But the performance of Micro finance institutions is not able to fill the gap
between these both.
 It is found that the organizational culture is not allowing the employment for training
activities.

10. CONCLUSION
The micro finance institutions are considered as one of the tools to remove poverty and
financial inclusion of the poor. These institutions access capital funds from formal banks and
other financial institutions. They take loans and they operate their business. This shows that
they depend on debt finance which is very expensive in terms of interest payments. To have
cost benefit analysis the MFI’s has develop market orientation and marketing strategies so

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 M. Geeta and Ennala Deepa

that it enables them in to successful organizations. Not only they have to develop and also
have to implement all the above aspects then they can make a significant contribution to the
economic development of India.

REFERENCES
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at SSRN: https://ssrn.com/abstract=2173214

[2] Nitin Navin, Pankaj Sinha “Market Structure and Competition in the Indian Microfinance
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[3] Graham A.N. Wright, David Cracknell, Leonard Mutesasira and Rob Hudson, “Strategic
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[5] Graham A.N. Wright, David Cracknell, Leonard Mutesasira and Rob Hu dson, “Strategic
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[6] NABARD Annual report 2018-19

[7] RBI Report 2018-19.

[8] Philip Megicks Atul Mishra Jonathan Lean, (2005),"Enhancing microfinance outreach through
marketoriented new service development in Indian regional rural banks", International Journal
of Bank Marketing, Vol. 23 Iss 1 pp. 107 - 125 Permanent link to this document:
http://dx.doi.org/10.1108/02652320510577393

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