Understanding National Lending Trends and Local Markets: The Role of Market Research

This paper presents key findings of market research that five organizations conducted with funding by FIELD. A FIELD report on private sector lending trends indicated that for-profit lenders will expand efforts to reach markets historically served by MFIs. This study was undertaken to help practitioners in responding to this new context.

The study used different research methods such as focus groups, interviews, surveys and literature review. Key findings from the research include:

• Banks are using credit scoring to serve the microenterprise market, but have only succeeded in reaching the least risky borrowers;
• Banks and other lenders are using credit cards to make the smallest microloans;
• On-line lending services hold potential for increasing outreach to unserved clients;
• Microlenders need to understand their market positions in relation to banks in order to compete with them;
• Microlenders must adopt mixed strategies that blend competition, collaboration and the targeting of niche markets.

The paper states that national trends in the financial industry have critical implications for non-profit microlenders. They must find ways to understand the evolving market trends in order to adapt and respond successfully to the changes.