Market Expansion viaProduct Diversification

Training on Expansion Strategies

September 13, 2011RBAP Bldg, Intramuros

What Should We Do?

MF Growth Strategy

2011 – 2014

MF Growth Strategy

2011 – 2014

Introduce new loan products to existing clients?

Introduce new loan products to existing clients?

Exploit new distribution channels?

Exploit new distribution channels?

Form strategic alliance with other institutions & cos.?

Form strategic alliance with other institutions & cos.?

Introduce new loan products to new markets

segments?

Introduce new loan products to new markets

segments?

Growth

Objectives

Move upmarket to target bigger customers?

Move upmarket to target bigger customers?

Expand branch network to new region?

Expand branch network to new region?

1. What’s my strategic growth objective?

2. How do I assess competing opportunities?

STRATEGIZING – OPTIONS! OPTIONS!

3

9 Ways to Build Demand: Mix and Match

P R O D U C T SExisting Modified New

MA

R

K

E

T

Existing Sell more of existing products to our existing types of customers(Market Penetration)

Modify current products and sell more of them to our existing customers (Product Modification)

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

Geographical Enter and sell our products in other geographic areas (Geographic expansion)

Offer and sell modified products to new geographical markets

Design new products for prospects in new geographic areas

New Sell our existing products to new types of customers (Segment Invasion)

Offer and sell modified products to new types of customers

Design new products to sell to new customers (Diversification)

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

• Increase efficiency?• Improve distribution?• Improve cost-effectiveness?• Expand markets?• Reach more unbanked areas?• Improve income?

Why Should We Do It?

Why This Technology? Why

This Channel?(Ex.: ATM; MP

Banking; MBOs)

Why This Technology? Why

This Channel?(Ex.: ATM; MP

Banking; MBOs)

Why This Product Innovation? (Ex.: New

microloan prods; savings prods;

microinsurance)

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?

Think

Through

Analysis

Regulations provide opportunities to diversify MF products

…microfinance principles and methodologies

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

*/CGAP

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.

Micro Agri LoanMicro Agri Loan

Small loans up to P150kSmall loans up to P150k

Short term: up to 12 months

Short term: up to 12 months

• BSP guideline allows up to 15 years to pay a loan for new housing or purchase of lot

• Bank can set lower maximum term.

10

Better Credit HistoryImproved Asset, Shelter &

Home-based EnterpriseStronger

Community & Economy

OUTPUTS

Progressive Housing Outputs

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 farmer’s 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

ABACA VEGETABLE

COPRA POULTRY

SMALL FARM TOOLS and EQUIPMENT

FRUITS

MARINE PRODUCTS

RICE

FARM ANIMAL