MABS Luzon Regional Manager Jove Tapiador provides the final part of Marketing to the Filipino Microentrepreneur series. (Read Part 1 / Read Part 2)

In the RBAP-MABS Regional Roundtable Conference last November in Manila and Davao City, participants were provided with an overview of how to handle the changes in the evolving microenterprise market over the next five years. The roundtable focused on what to consider as rural bankers expand their microfinance operations in the Philippine countryside.

1. Tailor-fitted Products

In summary, the Filipino microentrepreneur is evolving and banks must evolve with them as well. Potential clients are asking rural banks to be more responsive to a full range of financial needs rather than standard group or regularly amortized microfinance loans. They are asking for more options and tailor-fitted loan products attuned to their cashflow. They are also looking for simple, interest-bearing and hassle-free voluntary savings deposit accounts with low or no maintaining balance. From the usual damayan or peer-based informal insurance protection, micro-entrepreneurs are asking for formal insurance products to cover death, illness, and disability with fast and simple claims processing procedures. They are asking for services that allow more flexibility so they can pay loans or deposit cash at their own convenience instead of defined collection times and schedules. They are becoming more interested in branchless banking options such as receiving loans or withdrawing money from an ATM or via mobile money.  They are also interested in instant communication and updates about the status of their loan application, deposit balance, loan amortization reminders or confirmations, and information on new products via SMS or call centers.

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MABS Luzon Regional Manager Jove Tapiador shares lessons learned during the RBAP-MABS Regional Roundtable Conference 2010.

In the RBAP-MABS Regional Roundtable Conference last November 23 and 26 held in Manila and Davao City respectively, participants were treated to an overview of what to expect in the microenterprise market over the next five years. The roundtable opened the participants’ eyes on what to consider as they expand their microfinance operations in the Philippine countryside.

The challenge for rural banks is how to create and deepen customer loyalty especially when market preferences shift as competition heats up and clients have more choices. The marketing experience should therefore revolve around how to convince microenterprise clients that your rural bank is the first and best choice.

Fortunately, rural bank branches and often the owners themselves are rooted in the same community where the client resides. This allows the bank and its officers an opportunity to view their target market and the local culture in an advantageous position over outsiders. The key therefore is how to influence the decision making process of existing and new clients so that they choose to bank with your rural bank rather than other financial providers.

Using a framework applied by Mr. Ricardo de Vera, a management consultant and regular contributor to the Philippine Daily Inquirer, we can look at different perspectives and approaches to making sure potential clients place your rural bank on top of the many choices that are available.

1. The Personal Process

Microentrepreneurs are highly aware of market trends and what they perceive to be winning businesses with high market demand. Cellphone accessory shops, small franchised food kiosks, low-priced clothing stores (ukay-ukay), and even small internet cafes/photocopy shops are just some of the new businesses that have begun to dominate the local retail market over the past few years and are expected to continue to expand in the next five years. These same enterprising entrepreneurs are also demanding access to banking services that are tailored to meet their needs such as longer and more flexible operating hours, ability to transact with the bank remotely whether making a deposit, withdrawing funds, or obtaining a short-term 30-day loan. Banks that are able to provide tailored financial products and services to meet the needs of these emerging or dominant businesses will have the opportunity to shape and capture this market.

2. The Interpersonal Influence

But as we move outside the microentrepreneur’s personal space, his decision-making is strongly shaped by the influence of family, society, and cultural norms. The Filipino microentrepreneur is very much family-oriented and this is expressed by how they consult with their spouses and children with regards to business decisions. They see the business as truly a family enterprise wherein every member of the household is expected to pitch in time, effort, or ideas. Cultural factors such as the family’s image or status in the community also play a significant role in allocating scarce resources. Social obligations especially during town fiestas, important birthdays, weddings, or funerals often trump regular bills and financial obligations. Thus, a rural bank that incorporates members of the household into the loan agreement or deposit service arrangement creates a stronger family commitment to meet their financial obligations. In addition, a rural bank’s high profile support for town events creates a favorable impression in the community.

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MABS Luzon Regional Manager Jove Tapiador share lessons learned during the RBAP-MABS Regional Roundtable Conference 2010.

In the RBAP-MABS Regional Roundtable Conference last November 23 and 26 held in Manila and Davao City respectively, participants were treated to an overview of what to expect in the microenterprise market over the next five years. The roundtable opened the participants’ eyes on what to expect and what to consider as they expand their microfinance operations in the Philippine countryside.

1. 1. Microentrepreneurs are TRANSFORMING.

Market researchers and observers have noted the changes among microentrepreneurs regarding their understanding and knowledge of banking and microfinance services. From not having many choices or access to information about microfinance providers ten (10) years ago, they have now grown accustomed to various microfinance providers as well as types of products and services. As a result, they are now more knowledgeable about various microfinance products that are available in their market than even the account officers servicing them! This is due to their exposure to various creditors with varied offerings. As a consequence, they have become choosier about their credit providers.

2. Microentrepreneurs need to be SEGMENTED further.

Rural banks engaged in microfinance have to change their market segmentation strategies. In the past, the typical clients targeted were usually based on age (18 to 60 years old), gender (women), and marital status (married). Currently, rural banks have added ‘type of business’ as a further screen to classify and target new clients. However, in the future, it is observed that younger males with non-traditional businesses are entering the market. With more young, college-educated females becoming employed, and out-competing lesser-qualified males in the process, there is more entrepreneurial direction coming from the non-traditional male microenterprise market. Furthermore, the emergence of new types of businesses such as cell phone servicing, software programming, and electronic media retailing opens opportunities for new players that are different from the usual small variety store (sari-sari) or public market commodity stores. It is therefore in the interest of rural banks to start looking at new market segments as sources of future growth.

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