The Evolving Filipino Microentrepreneur (Part 1 of 3)

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

JoveIn 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.

3. Microentrepreneurs are more DISCERNING.

Faced with a competitive microfinance market, microentrepreneurs have become discriminating in their choice of credit providers. They have realized that it is a buyers’ market and that credit providers are now more accessible than ever before so they have the ability to demand more in terms of their privileges as borrowers and are more sensitive to the best deals they can get from rural banks and other microfinance institutions. They even look at the ‘friendliness’ of an account officer as a gauge to a rural bank’s customer service-orientation. Rural banks therefore need to continuously innovate their service and product offerings to retain and expand their client base. They must explore ways to improve their products and services to meet service this new demand for more timely financing demands as well as other services such as deposits, money transfer services, payment options, cash management solutions, and insurance.

4. Microentrepreneurs are more PERCEPTIVE.

When faced with delinquencies due to natural calamities or negative life events (death/illness), microenterprise clients are often subjected to hard collection tactics that often embarrass them. As a result, they have become more sensitive to lenders who can see them more on equal terms as partners rather than as mere short-term borrowers. They are also becoming increasingly aware of their rights so rural banks which can successfully strike the balance between customer rights and proper collection techniques can reap long-term brand recognition and customer loyalty.

5. Microentrepreneurs need access to more timely INFORMATION.

Clients are also demanding more timely access to information from wherever they are located.  With the increasing access of mobile phones and the ease of providing semi-automated SMS information as well as reminders, rural banks can easily acquire improved customer relationship management systems. This allow clients to access information about the opening hours of the bank, the status of their loan application, reminders about loan payments or contractual savings, the balances of their deposit accounts, as well as information about other bank products and services.

In sum, rural banks are faced with an increasingly competitive marketplace that demands them to improve their value proposition for their clients. Given changing market expectations, they must ask themselves how to focus on value-added features to meet the needs of the evolving Filipino microentrepreneur. Those institutions which are able to continuously engage customers in terms of better and more timely communication, a better range of products and improved customer service will be the ones to capture this large market. Those rural banks that do not adapt their products and services to meet the demands of this ever-changing market will lag further behind. As service providers, rural banks must begin to balance their focus on both improved product development and, more importantly, on customer relationship management. They must be able to create an articulated strategy to support the new microenterprise market and provide a full range of banking services backed-up by robust internal support systems and well-trained personnel.