Why FINCA? Insights debrief March 2012

Contents 1The internal FINCA staff view 2The external view from:  clients  stakeholders, investors & donors 3Conclusions drawn

The internal view on differentiation Based on regional workshops and interviews

Eurasia Management  FINCA’s competitors are using price and often effective marketing techniques to capture the market  FINCA is different from most of the competition because of its stronger orientation towards the social mission  High turnover of personnel is of concern as it means lower efficiency and a weaker relationship with clients.  Good customer service is essential to be able to compete with other players in the market  FINCA needs a brand identity that helps market more effectively, but also enables staff to understand the core values.  There is a strong desire in the region to differentiate around the idea of a ‘Global Network’

Africa Management  The key differentiating factors in the market are price and service  The lack of adequate middle management is of concern as it impacts the delivery of service and limits the growth of FINCA  There’s a push to share resources within the region, as countries can learn from each other – ‘using the network’  There is increasing competition in the market and there is a desire internally to embrace technology and improve service to help FINCA retain clients and grow new relationships.

Latin America Management  There is a question regarding whether FINCA continues to serve the most in need sectors of society  Competitors are very active, visible and offering price driven deals  High turn over of FINCA staff in the region – how do we attract and retain the best people  Strong desire to make FINCA more personal

In summary, management identified numerous potential differentiators  Being part of a global network and therefore potentially more secure  FINCA people and the level of service  FINCA’s Corporate Governance does not tolerate corruption or bribes  The speed to market of loan disbursements is necessary, but not always present

The external view Insight from 18 client focus groups in 9 markets

Client needs are similar across markets “I would like loans for construction and home improvements” - Guatemala “It would be good to have 2 sorts of housing loans, one for renovation and one for building on new land” - Tanzania “Borrowing many sorts of loans would be better” - Azerbaijan 1

Client needs are similar across markets  Access to flexible finance that helps them achieve their life goals – build a business, invest in agriculture, improve their living conditions or investing in education for children.  Rewards for good credit behaviour and loyalty to FINCA.  Support that helps them make the best of their money, for e.g. training in business or finance management. Loan officers should be very patient because it’s their job to explain and guide the people of the loan group - Guatemala They should understand me and my business well, otherwise they will not know how credit-worthy I am - Russia 1

Client needs are similar across markets  A fair rate of interest on the loans they are issued.  A simplified process to apply for loans and withdraw funds.  High quality customer service that is respectful and supportive, and acknowledges that every individual has different circumstances.  Access to different products and services, to help improve other areas of their lives Business training should be available to all those who take loans on business management to help grow the business - Tanzania They should have lower interest rates for those who have paid their loan on time. Those who have been with FINCA for a long time, should get gifts. - Georgia 1

Your brand awareness is low  Although we didn’t include any non clients in the research, existing clients did comment on not being aware of FINCA like they were other MFIs in the market.  Your brand awareness is being driven currently by word of mouth “I hadn’t heard of FINCA until a friend told me about them. You don’t see adverts for them, like other banks” - Tanzania 2

Once clients form a relationship with FINCA, they have positive associations with the brand  You offer quick and flexible loan disbursements to people who find it hard to secure finance from anywhere else.  You are seen as a corruption free zone who keeps their promises.  The insurance provided to clients is valued and adds to FINCA’s appeal.  The group network provides support and encouragement to your clients and is a valued part of the experience.  Clients value the informal advice they receive from loan officers that helps them better manage their money and business.  FINCA staff treat clients with respect and make them feel welcome at the branches 2

Some views of FINCA I have set up my business because of FINCA. I can now dream about rebuilding my house because of them. - Zambia I found out about FINCA through friends. I got very good information on what type of loan would be right for me and was very happy with the experience. - Uganda When you enter their office, you feel that they are friendly and ready to help. You feel valued. It’s different in other banks - Georgia For older women, it is very difficult to find a salaried job. But with FINCA, I could set up my own business. It has given me independence. - Guatemala 2

There is little differentiation between competitors Clients do not tend to differentiate between brands and products in the market. However, for some clients, there is a strong word-of-mouth factor that drives perceptions of your competitors based on:  Interest rate offered  Speed of loan application process and the documentation required  Repayment terms, and flexibility of the loan  Staff attitude and conduct  Infrastructure, availability of an ATM network and credit cards 3

Some views of your competition It is possible to pay more ahead of the schedule so you can reduce the interest on the loan. - Russia Parabank gives you a Goldcard, which makes it easier to take a loan the next time. - Azerbaijan They have a low interest rate, and a national brand and ATM network. They also advertise a lot in all kinds of media. - Tanzania They give you a loan within 3 hours if you have been a client before. They also reduce the interest after your first loan. But the requirements to apply for the loan are too many. - Honduras 3

Loan Officers shape a positive perception of FINCA Loan Officers (LOs) are the first port of call for most of your clients.  Empathic and supportive LOs create a positive view of FINCA from the word “go”  The more active your staff are in helping clients with the application process, or providing information at various stages, the more reassured and confident your clients feel. The LO was very warm and friendly and knowledgeable. He guided me through the application process. - Uganda The LO was very direct and honest, and provided a lot of moral support through the application process. - Honduras 4

You play a positive role in clients’ lives My kids can go to school because of FINCA. They also offer a free insurance to clients to protect your spouse and children. - Tanzania FINCA brings light into the country. If you have troubles, you should go to FINCA. - Azerbaijan 5

And this influences how they view the brand FINCA helped my family prosper and helped my business grow. - Honduras I was like a dry and dying tree., now I’m strong as an oak tree. - Georgia 6

However, there are some concerns about the experience  The current loan size is not big enough for all customer needs and the interest rate charged is seen as high  Loyalty and good credit behaviour are not rewarded  Some policies (such as insurance or bonus) are seen as inconsistent  There is not enough explanation provided if the amount sanctioned is less than applied for  Some feel that the high-turnover of FINCA staff results in lower individual attention to clients 7

The external view Insight from investors, donors and stakeholders

FINCA has a good track record and reputation  You are seen as someone who operates at the local level which ensures sustainability  You have a proven track record across many countries  You inspire confidence through your transparent and personalised operations The people at FINCA are good and professional. They also know their clients very well - Investor FINCA is one of the top MFIs in the country, and they have a proper network. - Stakeholder

FINCA are seen as an international leader in MF  Stakeholders see you as an MFI that operates in situations and countries without enough financial institutions.  You are seen as a strong partner who is reliable and someone your stakeholders can grow with.  Your clients are reassured by your global presence Our aim is to grow financial inclusion for the world’s poorest people. Given FINCA’s presence, they represent a good partner for us. - Donor They are building an international network out of what are historically local units. - Stakeholder

There is a good balance of commercial acumen and social mission  You are seen as an organisation with capable professionals which assures stakeholders that you are well managed  Your social mission is realised in that lending has a positive impact on clients  However, some stakeholders are unaware of your social mission and think that you are in the business of small loans Social mission is important because it’s what sets apart an MFI. - Donor Professional values combined with a good social mission means greater efficiency and that social goals are met. - Stakeholder

Stakeholders welcome the move to professionalise  Professionalising FINCA would ensure that your brand is able to survive in an increasingly competitive market.  It is an opportunity to grow and offer new types of products such as savings, insurance, financial education etc Credit only does not drive complete financial inclusion. Offering people access to savings, the opportunity to build assets and to educate people on financial management is an even more powerful proposition - Donor Brand of the future should be based around the idea of increasing people’s well being and fairness - Stakeholder

There is concern FINCA is not adapting fast enough  Improving how you use technology is integral to being competitive in the market  Being responsive to the different markets by empowering staff to make decisions is important.  Your brand is seen as being a bit behind the times and needs a renewed focus Big corporations like us like to align themselves with future focused businesses. We like to partner with people who are thought leaders and who are shaping the future of financial inclusion. - Donor All the decisions have to pass through the CEO which is time consuming. Should delegate to staff to make it more efficient - Stakeholder

Conclusions drawn

Under today’s brand, one unique differentiator did not rise to the surface. We did however, get a clear idea about FINCA’s relative strengths and weaknesses, and what attributes could naturally form the basis of a differentiator and what would require a bigger shift We did not find ONE unique differentiator

There are attributes FINCA does not currently have to differentiate around...

FINCA is not the quickest to grant loans in the market While your loan disbursement is relatively quick compared to competitors, the loan application process itself can be arduous, especially on subsequent loan cycles. Clients described this as frustrating, especially when they feel they proved their reliability to FINCA by repaying earlier loans on time. The impact of having to wait for loans can prove costly for clients “I could lose my business if I don’t receive my loan in time” Client Tanzania

FINCA does not offer the cheapest rates Clients recognize you are not the cheapest player in the market, nor commercially is it possible to be. Therefore differentiating around price is not a viable option for FINCA. “The interest rate FINCA charges is too high” Client Zambia “FINCA should reduce its interest rate” Client Uganda

FINCA is not now a product innovator FINCA has a one size fits all approach to loans. It has one product to cater to the differing needs of all its clients. There was a strong desire for FINCA to diversify its product portfolio and to create different types of loans that serve client needs better “I would like loans for construction and home improvements” -Guatemala “It would be good to have 2 sorts of housing loans, one for renovation and one for building on new land” -Tanzania

FINCA does have attributes that can be built on to differentiate in the future…

FINCA is seen as more helpful and friendly Clients talked about FINCA staff being friendlier than most other MFI’s or banks. They appreciate the warm welcome they get when they enter a branch and that loan officers come to visit. There is however a word of caution on this. Your ‘friendliness’ is being jeopardized by internal policies, such as loan officer rotation. Although the policy is in place to minimize loan officer corruption, from a client perspective, they build a relationship with a loan officer and then out of the blue someone new turns up without any prior warning, damaging the relationship. “Nice and friendly people work at FINCA” -Georgia “When the loan officers enter the office, you feel that they are friendly and ready to help. It’s different in other banks” -Georgia

Clients trust FINCA as they are treated with respect FINCA doesn’t hound clients on loan repayment day, unlike competitors. You send them a reminder via text and trust that they will pay. Other MFI’s will ring every hour until the loan is repaid. Clients appreciate this and see it as a sign of respect. Creating a trusted brand positioning is a huge opportunity area. Given the markets you operate in, where corruption and exploitation are rife, having a financial partner you can trust is enormously appealing to clients. “I had an account with Barclay’s, but I shut it down. Every time I went into a bank they had the pen chained to the desk, if they won’t trust me with a pen, why should I trust them with my money?” -Tanzania “When you go into a branch they don’t look down at you, they treat you with respect” -Mexico

FINCA lends responsibly Clients as well as stakeholder appreciate the professional and responsible attitude FINCA takes towards lending. It allows them to feel like they are in ‘safe hands.’ and they won’t get into financial difficulty by taking a loan they can’t afford. Clients also take pride in being associated with a professional financial organization- there is merit around differentiating around being a professional financial organization “You’ll not be cheated at FINCA as you’ll get detailed information about loan terms and conditions, it’s not the same in other banks” -Georgia

But there are dilemmas in deciding on a differentiated positioning

The biggest market need is for technology solutions Clients want more technology focused innovations to enable them safer and more convenient access to finance. Depositing or transferring funds often means a long journey & poses security risks for clients. However, FINCA is currently behind the market on technology innovations across the network. As other players enter the sector, technology will become a need to play factor and you can’t afford to get left behind. “Branches are far away, I fear carrying money out of the branch” -Honduras “It’s a race in Uganda to get mobile banking implemented, whoever wins will own the market” Management Interview, Africa

Clients want greater flexibility and personalisation They desire a more flexible repayment schedule, particularly those clients whose businesses do not see an immediate ROI Clients also talked about wanting more products and services, such as access to education, housing, agricultural loans and personal savings accounts Currently FINCA are not delivering on this and clients are becoming educated that increasingly competitors are delivering “FINCA’s competitor is training women in candle making, soap making and basic business skills, I have a loan with them too” -Guatemala

The role of the social mission is n0t consistent There is a disconnect between the brand at a global level and how it is delivered on the ground. At a global level, the mission is at the centre of communications and the brand promise, however at a local level, the brand is focused on its commercial and professional attributes. This is demonstrated by the fact loan officers are incentivised on their financial performance, rather than their social performance. “There is not really a social mission, FINCA has just determined a special corner of the market.” Stakeholder, Africa

Thank you! Promise Corporation Limited 75 Wells Street London W1T 3QH telephone: +44 (0) fax: +44 (0) web:

Appendix Global competitor analysis

Key Competitors to Consider for Positioning Access Holdings Equity Bank Opportunity International ProCredit Holdings Vision Fund WOCCU Member Credit Unions

Competitor Considerations Some occupy strongly commercial banking spaces, while others favor the non-profit poverty reduction territories No competitor is in all FINCA markets Most FINCA markets have unique competitive landscapes While a single global differentiation strategy will work for FINCA, it will need to be implemented at the individual country level to ensure success.

Access Holdings Established by investors, both public and private Commercial banking model Centrally controlled network Professionalism, customer service and commercial returns VISION: To foster, in a profitable way, sustained access of the poor to adequate financial services. MISSION: to become a leading strategic investor in commercial microfinance, build-up a global network of microfinance institutions, and to be a recognised promoter of the commercialisation of the global microfinance industry.

Equity Bank Covering the broadest positioning territory: 1.Purpose: We exist to transform the lives and livelihoods of our people socially and economically by availing them modern, inclusive financial services that maximize their opportunities 2.Vision: To be the champion of the socio-economic prosperity of the people of Africa 3.Mission: Offer inclusive, customer focused financial services that socially and economically empower our clients and other stakeholders. 4.Positioning: “Equity provides Inclusive Financial Services that transform livelihoods, give dignity and expand opportunities” 5.Tagline: “Your Listening, Caring Partner” 6.Motto: “Growing Together in Trust”

Opportunity International Serving the poor in 7 FINCA countries Unique faith based approach Also utilizing third party equity and debt VISION: A world in which all people have the opportunity to provide for their families and build a fulfilling life. MISSION: To empower people to work their way out of poverty, transforming their lives, their children’s futures and their communities.

ProCredit Holdings Operating in 9 FINCA markets Mix of private and public sector investors, although, “The private owners are the company's driving force.” Utilizing regulated, commercial approach Focusing on small and medium enterprise borrowers Transparency and professionalism are core values

Vision Fund Working in 14 FINCA countries Focused on poor children New strategy is to concentrate on Asia & Africa By 2014 planning to have 50% of funding from individuals, corporations and grant funders

WOCCU Member Credit Unions Not a network as other competitors Grass-roots focused institutions Not-for-profit, member-owned financial cooperatives Occupy a unique, often legally protected segment of the marketplace