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Marketing Lessons Learned From Micro-Finance In India

by Paul Barsch  |  
October 15, 2009

Besides Wall Street bankers, the poor of the world need access to financial liquidity too. But loaning money to individuals lacking credit history and formal employment can be a dicey proposition. Indeed, pitching financial services to people in the rural hinterlands takes effort, patience, and a tolerance for risk. It also takes marketing–but perhaps not in the way you might think.

In the dusty and dry northern Indian state of Uttar Pradesh, farmers pray for rain. Ample rain means the difference between a bountiful harvest allowing farmers to sell excess crops and starvation. This year (2009) has been a particularly harsh year for drought, as the monsoon season has been "meager" with roughly 20% less rainfall than usual.

With sporadic rainfall, farmers must find a way to even out their cash flows and this usually means borrowing. However, the Reserve Bank of India cites, "more than half (of farmers) do not access credit from either institutional or non-institutional sources."

Into the gap come micro-lending institutions; companies or entrepreneurs offering small loans to the poor. Loans traditionally range from $50 to $300 (USD) and sometimes more. While interest rates are usually quite high, the economics of risk management and defaults requires these loans to price in a premium.

Micro-lending can be quite profitable–with an average return on assets of 5%, yet the poor still must be educated as to concepts, value propositions, and contractual terms of these financial services. This is where marketing plays a role.

A WSJ article, "What Works and What Doesn't Work in Rural Finance," describes trials and tribulations of an Indian company attempting to set up the infrastructure to make micro-finance possible. Banking in remote regions like Uttar Pradesh isn't as easy as setting up a branch with tellers and an ATM. In some places, electricity is scarce and dirt roads can be challenging to navigate. So the Indian micro-finance company had to take an alternative approach.

First, the micro finance company decided to build franchisees via a partner network. This was probably a very smart decision, especially since some of the risk of failure (and success) would be born by others.

Second, the micro-finance company had to overcome trust issues as only 59% of the adult population of India utilizes a bank account. Many of India's poor would likely be very suspicious of anyone offering to loan them money. To counter this, the micro-finance company hired local individuals with the realization they would likely be better received into the community than new settlers to the region.

In so far as mistakes, the micro-finance company set up franchises with new kiosks and slick neon signs to create attention and attract visitors. However the neon signs intimidated the villagers and actually drove traffic away. The micro-finance company learned its lesson, dismantled the neon signs and instead created signage that used "traditional painting techniques used in village homes."

Another mistake was to bring out slick marketing materials filled with financial jargon that most Western consumers expect. "We realized that (this approach) doesn't cut ice with villagers," one of the micro finance entrepreneurs noted. So the company provided the franchises with less flashy marketing materials that simplified the message.

As marketers, we can look at the successes and failures of this micro-lending roll out and chastise the entrepreneurs for not understanding the value of localization. But to be fair, how many of us (in the Western world) would have made similar mistakes?

It seems counter-intuitive, but as our flat world becomes more globalized and inter-connected, localization strategies will actually take on added importance. Marketers, as we push forward into new markets and emerging economies, we should leverage what we can in best practices and processes, but we should also realize one size will not fit all. In most cases, niche marketing–while time consuming and potentially costly (in the short term)–will drive higher returns on marketing spend.


  • India has 192 official languages, a very diverse geography, strong religious faiths, a caste system and two dominant opposing political parties. Is better segmentation and targeting the recipe for marketing success in India?

  • Many of India's poor don't have access to credit, insurance, or savings. Do you see a potentially huge opportunity for financial services–not only in India but in other countries?

  • Micro-lending has a goal to "improve people's lives." What lessons learned can Western Financial companies take away from this mission statement?

Related: 10 Questions for Muhammad Yunus

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Paul Barsch directs services marketing programs for Teradata, the world's largest data warehousing and analytics company. Previously, Paul was marketing director for HP Enterprise Services $1.3 billion healthcare industry and a senior marketing manager at global consultancy, BearingPoint. Paul is a senior contributor to MarketingProfs, a frequent columnist for MarketingProfs DailyFix, and has published over fifteen articles in marketing, management, technology and healthcare publications. Paul earned his Bachelors of Science in Business Administration from California Polytechnic State University, San Luis Obispo. He and his family reside in San Diego, CA.

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  • by Claire Ratushny Thu Oct 15, 2009 via blog

    Nice post, Paul. Micro lending like this is important in the third world. It affords poor people a real opportunity to feed their families and rise out of poverty. Mohammed Yunus has made it a point to loan money to poor women in Bangladesh, and they have worked hard to launch their cottage industries to make better lives for their families. They only need to be given the tools so that their hard work and initiative gives them a chance to succeed. It reminds me of the Chinese proverb: "Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime." Teaching people about credit and finances, and lending to them, even on a small scale, is vital to the future success of third world economies.

  • by Ted Mininni Thu Oct 15, 2009 via blog

    Your post points out, yet again, how important it is for businesses to truly understand the demographics and regions they want to do business in before trying to market to them. Since CPG is my specialty, rather than financial services, I can speak to that. Even large consumer product companies that have a global reach don't always get it right. Pepsi's "Come alive with the Pepsi Generation" translated into "Pepsi brings your ancestors back from the grave", in Chinese, for example. Coca-Cola in China was first read as "Ke-kou-ke-la", meaning "Bite the wax tadpole" or "female horse stuffed with wax", depending on the dialect. Coke then researched 40,000 characters to find a phonetic equivalent "ko-kou-ko-le", translating into "happiness in the mouth". China, like India, encompasses many regions with many dialects and traditions. So the same difficulty exists when marketing to such a diverse population. Whether marketers want to hone in on specific ones, or the general population, they'd better do their homework first. Otherwise, these kinds of gaffes will continue to occur.

  • by Paul Thu Oct 15, 2009 via blog

    Claire, thank you for commenting. I am reminded of a President of a company I once worked for who said, "Profit is not a dirty word." In the case of micro-finance, some complain the interest rates are high, but if the velocity (or turnover) of goods sold by vendors accepting a micro-finance loan is high enough, the lender can be compensated for the risk and make a profit, and the entrepreneur can profit as well. Really a win-win for both parties!

  • by Paul Barsch Thu Oct 15, 2009 via blog

    Ted, I appreciate you taking time to comment. You said, "Your post points out, yet again, how important it is for businesses to truly understand the demographics and regions they want to do business in before trying to market to them." Dare I say, that this is a great point for not only marketers venturing into emerging economies, but also a solid best practice for markets at home? It seems like common sense, but how many campaigns have you witnessed over your marketing career where the basics are forgotten or glossed over in an effort to get something out the door, or utilize a fancy new tool?

  • by Strategic Growth Advisors Thu Oct 15, 2009 via blog

    Informative, insightful and innovative post, Paul. Revolutionizing how people from third world countries view financing is a great start for development. I think this is a nice model for other struggling nations.

  • by Paul Barsch Thu Oct 15, 2009 via blog

    SGA, thank you for the kind words! Countries with diverse populations require innovative and diverse marketing messaging, products, campaigns, and promotions. This especially holds true for the next two goliaths (India and China). Thank you for commenting!

  • by Sonia Singh Fri Oct 16, 2009 via blog

    Paul, great post as always. I just would like to clarify that India does not have a caste system any longer; it was legally outlawed decades ago though it is still practiced, often in rural areas. You are right on target by saying the key is better segmentation. The country is simply too large with too many very distinct groups for spaghetti-against-the-wall marketing. I think in addition to language and religion, attention needs to be paid to rural and urban areas. Having been there multiple times, it is a very different experience being in a rural setting vs. urban. Urban areas especially have a burgeoning middle class - something relatively new for India. That's another layer to the segmentation that cannot be ignored.

  • by Paul Barsch Fri Oct 16, 2009 via blog

    Sonia, thank you for commenting. Correct, about the caste system, but I believe that an informal caste system still remains, especially as you note, in the rural areas of India. And while I wrote a column a few months back about an emerging middle class in China, you are right to say that India's middle class of 200-300m should not be ignored!

  • by true religion jeans Mon Oct 19, 2009 via blog

    I must say this is a great article i enjoyed reading it keep the good work.

  • by BKMAHAPATRO Tue Oct 20, 2009 via blog

    Great to read you on the Socio-economic Institution of 'microfinancing'a whole new concept (developing in this part of the Word), on a commercial scale. India being a huge country, eventhough many people or groups are woking on similar projects in different regions, and in different names,the results are are yet to be pooled for creating a knowledge bank on the subject.Only then an approach for "marketing" may be feasible .In any case, segmentation will be a must, and may have to be region based, as the very purpose of finanacing,basically, has to address the un-defined product-market segment which varies from locality to locality. Innovative indulgence of Ace marketeres in this are may open up a huge new arena. And one more thing Paul, it comesto my mind, that the whole approach is based on the strong desire for "how to give" (the money,the skill, the enterprenuership, creation of market,etc) to the rural poor(economically) rather than "how to get" (profit!), whether it is in India or Bangla desh,( iIdont no much about China, but againChina being a huge up comming market, the same may be true) This being the core issue , I am affraid, whether the standard (or the well-understood) B-school maketing technology will work?? ref prof Yunus clarifying the concept "return the moey when you make profit".( ABUNDENT TRUST, HIGH TOLERENCE FOR RISK, NO IDEA OF GESTATION, NO "ROI") So I feel, at the moment "marketing" of microfinancing is verry challanging, innovative, risky and of long gestation. But it is happening,happening in various names and forms.(self help group, NGO,etc,etc and in many states like UP, Andhra pradesh, may be Gujrat etc) and is bound to catchup for reasons you have rightly picked up. Yes, all aspects may have to be factored in, as it is true for all counties including India (as you mentioned some) like cast, creed, region and religion, as it has to be marketed on a tailor made basis to a locality. The abve is my view on your question one and three. Reg your Q-2: it is YES, YES &YES- a big potential exists. Great opportunity interacting you Mr Paul. Thanks and regards. "HAPPY DEEWALI" (even President Obama has celebrated Deewali in WhiteHouse, it was reported, IT IS FESTIVAL OF LIGHTS AND PRAYERS TO THE GODESS OF WEALTH. LAKSHMI- (celebrated in india on 17th/ 18th Oct 2009) - Show quoted text - On Thu, Oct 15, 2009 at 8:05 PM, Paul Barsch wrote: Hi BK, as one of my contacts in India, I thought you might like to see my first marketing column on India. -- BKM

  • by Paul Barsch Tue Oct 20, 2009 via blog

    Hi BK, thank you for taking time from your day to comment. One of the aspects I love about micro finance is that both parties can win from the exchange. And I believe this is something that Western financial services companies can and should learn. Yes, profit is 100% necessary, but community, altruism and reputation are also important.

  • by Neil Anuskiewicz Tue Oct 20, 2009 via blog

    Great post, Paul. Give the local entrepreneurs access to capital and the multiplier effect will lift the community without swamping it.

  • by Promotional Products Sat Oct 24, 2009 via blog

    Good stuff Paul, I bet this was an interesting experience for you. I think that there are many opportunities to get people access to certain benefits that can improve their sense of well being. I think other countries that have a productive economy, but their citizens don't have as many liberties and opportunities should be looked at.

  • by Exclusive Leads Thu Oct 29, 2009 via blog

    Thanks for the post I really need to know this. It's very informative and very helpful. AVIDADS

  • by BigManWalking Fri Dec 4, 2009 via blog

    Thanks for messaging via Twitter! I'll mention at 550 Plus 50.

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