Sunday, December 28, 2008

Competitive Analysis for MFIs

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
- Sun-Tzu, The Art of War.

Recently I got into a heated argument with a fellow microfinance practitioner about the government’s role in promoting competition. (I argued that in a free market the role of the government isn’t to create competition, and more frequently well-meaning governments hinder it.)

But what my colleague was really debating me on wasn’t about promoting competition, it was about the government ensuring that MFIs don’t compete – e.g. by “motivating” MFIs not to provide overlapping services in the same areas.

To this I say, “stuff and nonsense!” Competition is good for clients, driving prices down and forcing MFIs to provide better products and services.

Still, it’s easy to spout theory. When you’re an MFI manager battling it out with a competitor in a hotly contested market… Well, one can be forgiven for wanting the government to banish the other MFI to a far off region of the country.

Short of that delightful if misguided fantasy, how can MFI managers deal with competition? It’s a bit of a touchy subject, because as institutions with “social” missions it’s not politically correct to talk about “beating” anyone, much less one’s competitor. But take heart – competition really is for the good of the client, and aiding the client is your end-goal. Right?

So, step 1: Know your competitor. Whenever I hired a new loan officer, one of their first jobs was to show up at a competitor’s office and masquerade as a potential client, then report back to the credit manager on the experience. This had two benefits: it taught the loan officer how competing loan officers worked, and it also gave us some valuable intelligence.

I also diligently gathered marketing materials and press clippings from our competitors, and reviewed the financial statements they publicized. There’s a lot of public information on-line, and in industry newsletters and donor reports. All you need to do is collect it.

To really know your competitor, you should not only have on hand information on their products and terms, but also know their market strengths and weaknesses. Is your competitor undercapitalized? Then now might be the time for you to push harder to expand your market share. Is your competitor slow in disbursing loans? Can you beat their time?

Step 2: Know yourself. Next, assess how your MFI stacks up against the competitors. The idea here is to play to your strengths and minimize your weaknesses vis a vis your competition, while maintaining your mission and strategy.

The sample spreadsheet embedded below can give you an example of what key elements to look at. (Sorry – I couldn't figure out how to include this as an Excel download, but if you’d like a copy, I’ll be happy to send you one).


  1. Hi

    I work for an Indian Microfinance Institution. I am keen in finding out the details of the spreadsheet that you have attached above. If you could send me the file, that would be a big help. My id is


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  3. Hi!!! I am a student dealing with a thesis in competition in Microfinance. I build my own speadsheet and I would like to compare it with yours. Could you please sent it to my email address I would really appreciate.
    Many thanks

  4. Hi
    I am working for a microfinance institution and I am interested to have the excel sheet at my email