The word “marketing” has a conventional definition. It is usually associated with advertising, promotions, and PR activities that aim to sell a product, service, or narrative. Marketing, in itself, can be seen as a whole body with many parts. Each part represents different actions, such as market analysis, segmentation, customer avatar, PR procedures, etc.
Arguably, marketing in microfinance is the same as marketing in banking or healthcare services. Maybe not the same approach or target audience, but it is slightly the same concept and foundational knowledge. For profitability to be possible, you need to have a considerable amount of income left after subtracting all costs, including the cost of production and marketing.
This article briefly gives an overview on profitability and how to approach it as a microfinance institution.
Significant causes of unprofitability in microfinance institutions
- Commercial bank rising as a competition :
Commercial banks have started to downscale to serve the traditional clientele of MFIs. The entry of commercial banks into the microfinance sector has led to market saturation. With multiple institutions vying for the same customer base, MFIs are experiencing reduced client acquisition rates and increased pressure to lower interest rates, adversely affecting their revenue streams. Digitally, acquisition cost is over the roof with microfinance institutions spending more and getting less from it.
- Operational Challenges:
Serving low-income clients involves small loan amounts with high administrative costs. MFIs may need help to achieve economies of scale, leading to higher per-unit costs than larger commercial banks.
- Marketing expenses :
Marketing expenses can be pretty expensive when aiming to acquire more customers than others. Many microfinance institutions can’t afford the marketing costs required to scale and penetrate new markets, which stunts their revenue.
- Funding Limitations :
Unlike commercial banks, MFIs often rely on donor funds or concessional loans, which may be unpredictable or have restrictions. This dependency can limit their capacity to expand services or invest in necessary technological advancements.
What are the benefits of marketing to solve unprofitability issues in microfinance institutions ?
Unprofitability in sectors like microfinance can occur in two ways: it can be due to internal factors, i.e., within the organization, or external factors, probably policies and inflation. The table below shows both internal and external factors that can improve profitability and the role of marketing in them.
| Determinant of Profitability | Effects/Benefits of Marketing |
| Improved repayment rates | Customer analysis can help identify the causes of low repayment rates—e.g., inappropriate product design, external shocks, and poor delivery—so that appropriate solutions can be implemented. Data-driven analytic tools and a proper feedback system can solve this. |
| Increased portfolio sizes | A market analysis can help identify potential target markets for the institution’s product. Marketing can help develop a positioning strategy that will assist the institution in creating a top-of-mind brand. Marketing can help with promotional activities like meta ads, PR, etc., to increase brand and product awareness. |
| Reduced client loss | A data analytic tool serves as an indicator for marketing specialists. With data analytics as a core marketing tool, MFIs can monitor customer behavior to anticipate potential drop-offs and address them before clients leave. |
| Competition | Marketing research gives you insight into the market and the competition. Giving you enough data to stay alive and profitable while amongst competition. |
| Economic environment | Market research can highlight factors affecting the local economy (weather, religious holidays, etc.) that could impact either clients’ demand for financial products or their ability to repay |
| Political/regulatory environment | Market research can pinpoint policies and regulations that could affect the interest rate. With an idea of marketing you can navigate these challenges. |
| External shocks | Market analysis allows MFIs to understand human behaviors and environmental circumstances and plot a move that helps both the brand and the customers. |
Marketing focus on attaining profitability in 2025
While many marketing activities may yield results, knowing where you are will suggest the marketing activities that can drive your results. However, categorically, here are the following aspects of marketing you should focus on in 2025.
- Niched-down acquisition channels :
Every business has acquisition channels that work for them. Primarily, everyone gets their customers from the internet; it can be via a community or meta ads. But finding the best acquisition channel you can milk for profit is paramount. For MFIs, acquisition may extend beyond the digital space, so there might be a need for on-site campaigns in communities, billboards, and other traditional means of acquisition.
Your marketing focus should begin with identifying and understanding the specific needs of potential clients and the means of acquisition, and then developing marketing campaigns to acquire them.
- Customer Retention :
The retention game for MFIs is intentional, knowing how competitive and costly it is to acquire and activate new customers. Your marketing effort should also pivot to developing marketing strategies that will retain customers.
This might include setting up reward systems or having ambassadors who will self-promote. It might even require the loyalty acknowledgement of some customers and public appraisal. The goal is to devise marketing strategies to ensure you retain your customers.
- Customer Engagement :
Another marketing focus for 2025 should be strategies to keep your customers engaged. Strategies may include influencer marketing, social media, SMS, and offline engaging campaigns. This marketing focus ensures that your brand is at the top of your mind when seeking a microfinance institution.
Conclusion
A business is no longer a business if it doesn’t make money. Microfinance institutions must focus on marketing efforts that will improve profitability. Contact us today for a fully optimized marketing strategy to increase your business’s profitability.
