Competitive Analysis
Competitive Analysis
Competition has arisen in the last two years between microfinance institutions (MFIs) and the Se
lf-Help Group (SHG) movement. In Uttar Pradesh around 20-30, MFI coincide with each other
and some of them have common set of consumers.
Participants were part of an MFI at 10 am in one of the groups visited and borrowed / repayed to
another MFI at 10:30am without the party having to leaving the meeting.
The period of low competitiveness allowed MFIs to concentrate on the methodologies and mana
gement systems needed to reach scale and sustainability. Yet rising competition is not special to
India, indeed, for many years, competitiveness has been a major factor in several countries
around the globe.
Such industries provide opportunities to learn about the impact of pricing on microfinance
institutions and their consumers.
Microfinance institutions must change their minds in a dynamic environment in order to adapt to
different challenges
1) GOALS : reaching more people and becoming financially viable.
2) INTERNAL FOCUS : Improve external skills of the organization and maximize
performance.
3) MOTIVATION TO DRIVE : Exposure to financing.
4) PRODUCTION : High potential production. For several successive years, several MFIs
have increased their investments annually without competition and with sufficient donor /
bank funds.
5) MARKET EVALUATION : There is little need to take into account the actions of other
participants.
6) REQUEST FROM CLIENTS : Taken as stated. For unchanging, common goods,
companies will expand and be competitive.
Competitive stage
1) GOALS : maintaining or growing market share whilst staying competitive
2) Internal issues remain always crucial, but there is extra focus: recognizing the external
environment and integrating the awareness into the business strategy. Concerns such as
corporate branding , strategic messaging, and governance are becoming increasingly
influential.
3) MOTIVATION TO DRIVE: to draw and retain customers.
4) EXPANSION : low growth, deflation or even a decline in the assets, even for broad well-
managed MFIs.
5) BUSINESS EVALUATION : Should observe the actions of consumers, prospective
customers, and rivals, or have serious consequences.
6) CUSTOMER DEMAND : Would evaporate quickly if there is better service from
competitors. Micro finance institutions that think strategically, meet the needs and
preferences of consumers, and develop intelligently are likely to do well.
The surge of credit development powered by both microfinance and mortgage borrowers created
a bidding war, with rivals competing for buyers by providing larger loans, faster service and
lower interest rates.
Multiple participation calls not only for structures such as credit offices to be made, but also for
more practical developments in providing safe financial services while diversifying the spectrum
of promotional products. It is an opportunity in this sense as much as a challenge.
Consumer demand / discernment
when consumers gain access to greater choice, they become more competitive and discerning, an
d many have chosen to leave group-based lending institutions to person lending-focused instituti
ons ideally. In India, with the entrance of Non-Banking Finance Companies into
the microfinance market segment, we may see the accelerated monitoring of the individual
lending strategy.
In comparison, the operating concepts of community guarantee may even raise the risk profile in
highly stressful or competitive circumstances.
It is this possibility that pushes MFI field workers to continue to give loans in the well-
established groups to the good payers-after all they have built a strong credit history-and thus co
ntradict the community guarantee concept.
And that is why the usefulness of the community guarantee concept, given all the hype, is
restricted to the first few loan periods.
Niche market prospects
As competition heats up, this approach may prove to be a necessary and important survival
strategy for Indian poverty-focused microcredit organizations.
Most rural areas, including clients of lower incomes, are under-served as do many lenders from
SMEs. Identifying and expanding on less competitive consumer niches has proven to be a
viable strategy as MFIs seek new ways to servicing both disadvantaged consumers and small bus
inesses traditionally exempt by selective targeting.
This shift may also be mirrored in India as MFIs are increasingly moving towards commercial
and person lending or servicing remote rural areas in some instances.
Differentiation based on prices
Perhaps the most obvious strategy for MFIs to follow, albeit limited to the highly competitive
market segment (typically working capital loans for market traders), could be to distinguish on
the basis of quality.
The consequences for the Indian market, where prices are already such a politically charged
problem, remain unclear, but it is reasonable to suggest that prices are likely to decline.
Analysis : -
It is evident that highly competitive markets pose risks to both MFIs and their consumers.
MFIs may follow less strict loan appraisal or acceptance criteria; or may be pushed out of their tr
aditional markets into new ones with higher risk profiles and cost structures; or may be forced to
lower rates in the more attractive niches of the industry.