Market Expansion via Product Diversification

Training on Expansion Strategies September 13, 2011 RBAP Bldg, Intramuros

STRATEGIZING OPTIONS! OPTIONS!

What Should We Do?

Introduce new loan products to existing clients?

Introduce new loan products to new markets segments?

Exploit new distribution channels? Expand branch network to new region? Move upmarket to target bigger customers? Form strategic alliance with other institutions & cos.?

Growth Objectives

MF Growth Strategy 2011 2014

1. Whats my strategic growth objective?

2. How do I assess competing opportunities?

9 Ways to Build Demand: Mix and Match PRODUCTS

Existing Existing Modified
Modify current products and sell more of them to our existing customers (Product Modification) Offer and sell modified products to new geographical markets Offer and sell modified products to new types of customers

New
Design new products that will appeal to existing customers (New Product Dev.)

M A R Geographical K E New T

Sell more of existing products to our existing types of customers (Market Penetration) Enter and sell our products in other geographic areas (Geographic expansion) Sell our existing products to new types of customers (Segment Invasion)

Design new products for prospects in new geographic areas Design new products to sell to new customers (Diversification)

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Source: Philip Kotler, International Marketing Guru & Professor, Kellog School of Mgmt, Northwestern University, Illinois

Why Should We Do It?

Why This Technology? Why This Channel? (Ex.: ATM; MP Banking; MBOs) Increase efficiency? Improve distribution? Improve cost-effectiveness? Expand markets? Reach more unbanked areas? Improve income?
Think Throug h Analys is

Why This Product Innovation? (Ex.: New microloan prods; savings prods; microinsurance)

Respond to client needs? Increase Client Retention? Remain competitive? Fill market gap? Expand markets? Improve Income?

Regulations provide opportunities to diversify MF products

Microinsurance

More micro loan products housing, agri

Micro savings products

microfinance principles and methodologies

- small loan amounts -alternative forms of collateral -character & cash flowbased - regular amortization - short-to longer-term (for housing)

Home Improvements Home Construction House/Lot Acquisition

Small Farm Production Farm tools & equipment

*/CGAP

ME loan product
Small loan size up to P150K

HMF
Larger loan size up to P300K

Micro Agri Loan

Small loans up to P150k

Short term: Not more than 12 months

Longer Repayment Term: up to 3 to 5 years

Short term: up to 12 months

BSP recognizes loans for housing to low income groups as microfinance but with loan amount and term that may extend beyond P150k and 12 months, respectively.

LOAN SIZE
HOME IMPROVEMENT: Not more than P150K BUY OR BUILD NEW HOME: Up to PhP300k

TERM
UP TO 3-5 years

UP TO 15 YEARS

BSP guideline allows up to 15 years to pay a loan for new housing or purchase of lot Bank can set lower maximum term.

Progressive Housing Outputs

OUTPUTS
Improved Asset, Shelter & Home-based Enterprise Stronger Community & Economy

Better Credit History

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MABS APPROACH TO AGRI MICROFINANCE

Market segment - Farming households with multiple sources of income* Regular loan payments (option: regular with balloon payment) - not totally dependent on success or failure of farm production* Cashflow - determines amount a farmer can borrow & pay* Value chain finance pursue opportunities to reach farmers who are linked to markets, technology, training which reduce farmers risks*

Where to classify the Micro Agri loan Product? In January 2006, The BSP Monetary Board approved the classification of the Micro Agri loan Product as microfinance. Why is this important?
No need for Financial statement No need for TIN

Examples of Agricultural Products Financed Under MAP

RICE

ABACA

VEGETABLE

COPRA

POULTRY

MARINE PRODUCTS

FRUITS

FARM ANIMAL

SMALL FARM TOOLS and EQUIPMENT