“MicroN”-FINANCE

Prepared by
Group DAGS

K.B.M.G.K.B. Senavirathne Reg.No:D101S41-2

S.D.D.S Rajapaksha Reg.No:D101R15-2
D.A Sanath Reg.No:D101S44-2
A. Kodithuwakku Reg.No:PDM/D08/K012

Integrated Assignment

June 2010 Examination

Certificate in marketing

SRI LANKA INSTITUTE OF MARKETING

Acknowledgement

We wish to extend heart-felt gratitude to our all lecturers for their advice and
guidance given to us during this assignment and in making this success.

We wish to extend our sincere gratitude to all our colleagues for their encouraging
support extend towards us. And we would like to thank SLIM staff members for
their maximum support to success.

1
Table of Contents
Acknowledgement..............................................................................................................1
1. Executive summary.....................................................................................................3
2. Introduction.................................................................................................................4
3. Micro finance in Sri Lanka........................................................................................5
4. Task-1...........................................................................................................................6
4.1. Business sectors for MicroN...............................................................................6
4.2. STP for paddy, small garments, and handy craft industry...........................10
5. Task-2.........................................................................................................................11
5.1. Marketing plan for micron...............................................................................11
5.2. Current status of micron...................................................................................12
5.3 “MicroN” Objectives.........................................................................................14
5.4 Strategies............................................................................................................14
5.5 Marketing activity plan.....................................................................................18
5.6 Marketing implementation and controlling process......................................19
6. Task -3........................................................................................................................20
6.1. Recovery process................................................................................................20
6.2. Recovery process for total outstanding...........................................................20
6.3. Recovery process for newly disburse loans.....................................................21
6.4. For a better implementation and for better controlling process...................22
7. Task -4........................................................................................................................24
7.1. Communication plan for MicroN.....................................................................24
7.2. Communication audit........................................................................................25
7.3. Communication goals and objectives...............................................................26
7.4. Communication strategies................................................................................27
7.5. Communication activity plan...........................................................................28
8. List of References......................................................................................................29

2
1. Executive summary

MicroN is a small finance institute which provides microfinance facility for various
business entities. They have been in operation for seven years in the market and MicroN
has ten branches island wide. Credit, recoveries are their main operations and so far their
lending amount up to 60 millions.

As institutional inefficiencies, poor repayment, poor regulations of the company,

internal communication problems MicronN currently in a financially unstable situation.
We are going to re orient the MicroN to a sustainable growth.

The MicroN focus new booming business sectors, which are paddy cultivation, handy
craft manufacturing, and small garment producing industries. By introducing deposits and
savings as “DIRIYA SUREKUM” and lending as “DIRIYA SAHANA” MicroN is going
to step in to the market in a new way. And also systematic recovery process and a much
better communication methodology introduced.

Micro finance is a very potent instrument of poverty alleviation especially in country

like Sri Lanka. And also the demand for microfinance is increasing. So the micro finance
industry should be up lifted and the quality of the service should be improved. Sound
regulatory and supervisory frame work, broad and innovative product range, and strong
customer protection safe guards’ helps to the sustainability of the microfinance industry.

3
2. Introduction

“MicroN” is a finance company which is providing micro finance facility for various
business entities. They have been engage in their operations in the micro finance market
for 7 years, covering small areas in Rathnapura, Avissawella, Panadura, Kaluthara,
Ambalangoda, Galle, Monaragala, Ambilipitiya, Maharagama, and Mahiyangana.

“MicroN” branch situated in Panadura also running as their head office and the other
branches headed by the branch managers. Each branch consists of two sales officers, one
recovery officer, cashier and an office assistant. All the branches fully equipped and
linked to the head office.” MicroN” is registered under the monitory board of central
bank. So that at present they are maintaining deposits & savings, and lending as their
operations.

As poor regulations and supervising, institutional inefficiencies, poor repayment of the

customers, unfavorable economic environment, currently the “McroN” is in a financially
unstable situation. So we are going to reorient the micron towards a sustainable growth by
applying marketing theories in to the “MicroN”.

4
3. Micro finance in Sri Lanka

Micro finance is the provision of financial services to low income clients, including
consumers and the self employed, household based entrepreneurs who traditionally lack
access to banking and related services. Micro finance has a long history in Sri Lanka.
State owned development banks, credit unions and other financial cooperative societies,
cooperative rural banks, regional development banks, commercial banks that specialize in
microfinance and as well as most of the NGOs and most of the finance companies offer
micro finance facilities in Sri Lanka.

Microfinance is a very potent instrument of poverty alleviation. Good microfinance

system offer a wide range of products including, products specially tailored for the needs
of poor. These products are saving, loan, payment services, insurance, leasing. These
products should be offered at cost which is low as possible but still allows the financial
institution remaining profitable and substantial.

Good financial sector is one where access to financial services is available to all
segment of the society not only to certain groups such as wealthy and big businesses. But
here in Sri Lanka most micro finance institutions are facing some problems at present.
The core problem is the poor quality of the microfinance services offered, indicated by
insufficient outreach, low repayment, low cost efficiency and financial products which
are not client driven. And also poor regulations and supervision of deposit takings,
limited management capacities, and institutional inefficiencies seriously threatens the
sustainability of the offered financial services and their outreach to poorer households,
micro and small enterprises.

So, there must be many conditions to develop a good micro financial service. These
include sound regulatory and supervisory frame work, broad and innovative product
range, and strong customer protection safe guards.

5
 4. Task-1
4.1. Business sectors for MicroN
According to the current situation of micron, we selected following business sectors to
be focused by micron using existing resources.
 Paddy cultivation
 Small scale garment producers
 Handy craft producers

To analyze the above three business sectors we use SWOT analysis tool and
segmentation, targeting, positioning strategy tool.

The SWOT analysis is an extremely useful tool for understanding & decision-making
for all sorts of situation in business and organizations SWOT is an acronym for strengths,
weakness, opportunities, threats use SWOT analysis for business planning, strategic
planning, competitor evaluation, marketing business and product development and
research reports.

A SWOT Analysis is a specific type of situation analysis designed to gauge the

competitiveness of a company given its limitations. The strengths and weaknesses are
usually thought of as internal to the company and the opportunities and threats are usually
thought of as external to the company.

6
a. SWOT analysis for paddy cultivation
Strength Weaknesses
 High consumption of rice as a main  Low educational background
meal  Traditional attitudes
 Developing market  Importing of rice
 Demand
 climatic condition
 Resources
 Food habits
 Seasonal demand
 Easy process
 High growing rate

Opportunities Threats
 High consumption  Substitute
 Developing market for rice and rice  Natural disasters
related products  Climatic condition
 Easily accessible  Cultural believes
 Existing resources  Increasing of prices in
 Unemployment chemicals, fertilizers
 Knowledge
 Government
involvement(fertilizer subsidy, govi
samithi, )
 Private sector involvement(CIC,
BAURS)

7
b. SWOT analysis for small garment producing industry

Strength Weaknesses
 Basic need  Unskilled labors
 Huge market  Using of poor technology
 Low cost materials  Low quality production
 International reputation
 Seasonally high sales
 Easy selling process
 In-house concept
 High profit margins

Opportunities Threats
 Potential market  Government taxes
 Arrivals of new fashion  High competition
 Unemployment  Fashion change
 High demand  Price changes
 Business can be started with
limited resources
 Low investment needed for
start the business
 Need low man power

8
 c. SWOT analysis for handy craft

Strengths Weaknesses
 Highly profitable  Need of special ability
 Self employment  Less reputation
 Availability of resources (e.g.-  More number of intermediaries
wood, brass )
 Traditional techniques
 Demand for traditional item

Opportunities Threats
 Development of tourism industry  Handy craft importers
 International recognition for Sri  Large scale handy craft
Lankan handy craft manufacturers
 Government support  Expenses for raw materials
 Easy entrance
 Trend for handy craft

9
 4.2. STP for paddy, small garments, and handy craft industry

Segmentation is the process of subdividing the total market in cluster of customers/

consumers with similar needs and wants. Segment is the most valuable part for a product.
Because without identify the segment we cannot get profit through the new product.

Market targeting is where a market will chose one or many segments to identified,
Anticipated and satisfies the requirements of customers’ profitability. In order a market
will have to evaluate each at the segments that were identified for their potential.

Positioning is an art that places the product in the minds of customers to give a unique
mental picture for the product.

Geographically we segment the areas of paddy cultivation. Ambilipitiya, Rathnapura,

Monaragala, Mahiyangana, Avissawella. At present we are having branches in these
areas. We also segment the paddy cultivation by using the demographic segmentation.
Low income level people are mostly doing the paddy cultivation. Also small garments
and handy craft industry we segmented by using geographical segmentations.
Geographically we segment the areas of small garment producers.mainly
Maharagama,Rathnapura,Ambilipitiya,Galle,Kaluthara,PanaduraandAvissawella.
Demographhically low income level clients.
We segment the areas for Handy craft Geographically as Galle, Ambalangoda,
Kaluthara,Ambilipitiya,Monaragala and Rathnapura for low income level clients.

10
5. Task-2
5.1. Marketing plan for micron
Planning is an important aspect in business management. Behind the corporate
objectives, which in themselves offer the main context for the marketing plan, will lie the
"corporate mission," which in turn provides the context for these corporate objectives. In
a sales-oriented organization, the marketing planning function designs incentive pay plans
to not only motivate and reward frontline staff fairly but also to align marketing activities
with corporate mission.
Expectation of marketing plan
 Setting objective for growth and for future
 Identification of potential and new market
 To avoid and prepare for competitor attack
 To achieve competitive advantages
 To have an understanding about the changing environment
 To face the future challenges
 To survive in a challenging market
 Build brand image

11
 5.2. Current status of micron
a. Internal audit
Strength Weaknesses
 10 branches  Poor recovery
 Trained staff  Lethargic staff
 Existing customer base  Internal communication problems
 7 years in operation  Bad reputation
 Awareness among the people  Financial instability
 Registered under the monitory  Insufficient outreach
board  Poor attitude among the staff
 Poor management
 Institutional inefficiencies

Opportunities Threats
 High profit margins  Competitors
 Easy to develop the customers  Competitors promotions
 Simple process  Recovery problems
 Simple evaluation  Low repayments
 

b. PESTEEL analysis
Political
 Gemi diriya concept
Samurdi concept
Sanasa
 Privatization
 Country stability
 NGO operation

12
Economical
 Income distribution
10% to 20% population has 60% to 70% of the wealth
 Saving habits
Is not in a position
 Inflation
High inflation rate in Sri Lanka
 Better policies in Sri Lanka
 Interest rates in Sri Lanka
Should be low and stable. If interest rates are low, more investments will be there
 Tax policies
 Growing of GDP

Social and cultural

 Attitudes towards the credit
Low attitudes towards the credit is a disadvantage for microfinance
 Attitude towards the working women

Technological
 Industry specific technology
 Use of simple technology

Ecological
 We can use wastage as resources
 Environmental friendly
 Health concern products
 Organic food

Legal
 Comparatively there are less legal influence
 Legal stability of the company

13
  There should be a systemic legal procedure

5.3 “MicroN” Objectives

 100 million deposits/savings within 3 years

o 1st year 20 millions
o 2nd year 35 millions
o 3rd year 45 millions
 100 million lending within 3years
o 1st year 20 millions
o 2nd year 35 millions
o 3rd year 45 millions
 100% recoveries within 3 years
o 1st year 50% recoveries
o 2ndyear 30% recoveries
o 3rdyear 20% recoveries

 Building the brand image and opening another 3 branches within 3 years

5.4 Strategies

In here we are going to use overall marketing strategy. We have decided to describe the
strategies by means of Ansoff’s concept in order to achieving high growth of market
share.
5.4.1 Ansoff matrix

According to the Ansoff theory we are going to introduce a current available product to
the current market as illustrated by the following diagram as to how the growth of a
current market takes place. Introducing current product to the current market we get
opportunity to introduce our new steps and build a good perception among them

14
 Market

Existing New
Market
P Existing Penetration
r
o
d
u
c
New
t
s

5.4.2 Our products

Micron is there in the market for 7years.At present micron operations are not in a
systematical path. But they are maintaining deposits, lending, and recoveries. As the
lending and deposits are main parts in micro finance, we also need to concentrate more on
these areas. To do that we rename our existing products to attract more clients. Here we
renamed savings & deposits as”DIRIYA SUREKUM” and, lending as “DIRIYA
SAHANA”

a) “DIRIYA SUREKUM”
o Savings account
o Higher interest rates compare with the other microfinance institutes
o Depositor must be a group member to open a savings account

b) “DIRIYA SAHANA”
For all 3 business sectors lending goes as “DIRIYA SAHANA”

“DIRIYA SAHANA” for paddy cultivation

15
 o Loan duration- 6 months
o Maximum loan amount per acre- Rs 20,000.00
o Maximum loan amount per person – Rs 100,000.00
o Loan repayment- we take the interest of 1st installment before issuing
The loan and balance interest installment on every fortnights.
o Capital of the loan must be paid after harvesting.
o Entitlement for applying loan- customer should be member of the
group and maintain savings account at least 3 months.

“DIRIYA SAHANA” for small garment producers and handy craft industry

o Loan duration -6 months

o Maximum loan amount per person –rs 25,000.00
o Loan repayment- installment should be paid
fortnights(interest+capital)
o Entitlement for applying loan- customer should be member of the
group and maintain savings account at least 3 months.

5.4.3 Price

Though there are products to be sold there should be a price. In here price is the interest
rates that we are taking from lending and our interest rates on deposits. As there are so
many competitors in this sector such as “samurdi, sanasa, sarwodaya, NGOs and banks”
we select the customer oriented pricing strategy. There we use penetrating strategy. By
setting penetrating strategy we will be able to develop the market share as well.

5.4.4 Distribution

We are having only 10 branches covering limited areas. So we select selective

distribution by using our own sales staff.

5.4.5 Promotion

16
 This area is also plays a vital role to attract more customers. Here we target our
customers by carrying out advertising door to door promotion. We use book lets, leaflets,
banners, radio commercials, group awareness programs etc. and we convey a strong
message to the public.
5.4.6 People and physical evidence

These elements are also most important factors. People play a major role in service
market. We must select the right person to right place. And they should be well trained.
Also we should make friendly environment to attract more customers within the office
area.

5.4.7 Process

As we deal with poor, low income people our process should be simple, neat and a not
complex one. Otherwise this poor people will get in to more trouble.

For taking deposits from the clients, we are going to implement group deposit taking
method. Firstly we form small groups in the area. A group consists of maximum 5 people.

For lending we are going to implement same group lending process. It is more
convenient for us and also to the customers. Less documentation is using. Micron staff
assist the customers to overcome the problems arises when applying for loans. Our sales
staff visits the areas and taking deposits. And for recoveries, recovery officers will be
appointed. He is responsible for recovering. Cashier, loan officer and sales staff should
assist the recovery officer.

All the above activities will help to overcome the problems facing micron at this
moment. And there past recoveries also can be done at the same time.

17
5.5 Marketing activity plan

Feb

July

Sep
April

June

Dec
Jan

March

May

Aug

Nov
Oct
Activity Responsible
person

Preparing Marketing
budget manager
Area Marketing
demacation manager
For field
staff
Sales reviwe Marketing
meetings manager
Revising Marketing
budget manager
Monitoring Branch
field staff manager
activities
Promotional Marketing
programs manager
Developing Marketing
new manager
customers
Monitoring Marketing
Competitor manager
Activities

18
5.6 Marketing implementation and controlling process

a) Lending and recovery process

o Sales officer visit the areas and select business sectors to lend money
o Small group formation according to the business sectors and areas(max 5
person in a group)
o Meet village head man and ask his assistant to form groups
o Select a chairperson and a treasurer within the small group
o Lend money to individuals in the group under the supervision of
chairperson and village head man
o Loan officer supervising the activities of clients
o Loan officer help the clients to overcome the problems
o Arrange fortnight meetings to conduct repayments
o Closely associate with clients. This will help for higher collection rate.
o Linking expert organization with the clients to improve the product
quality, (e.g.-CIC, Agriculture dept., Baurs)
o Involves organizing trade fairs to market the products manufactured by the
clients
o Organize training for business and handling cash for clients
o Introducing insurance scheme for clients

19
6. Task -3
6.1. Recovery process
Micron has been there in the market for 7 years and up to now their lending amount is
about 60 million. As poor regulation and supervising, institutional inefficiencies, low
repayment of the customers, micron is not in a good position to recover their outstanding
amount. In this task we are going to discuss how they should act as a team and a proper
process to recovering that outstanding amount.
 Micron objective is recovering 100% of the outstanding within 3 years.
o 1st year 50% recoveries
o 2nd year 30% recoveries
o 3rd year 20% recoveries

6.2. Recovery process for total outstanding

For the last 7 years micron has given 60 millions as micro loans. And our main
objective is recovering all the outstanding. There should be a proper process to recover
them. This process involves following steps.

 Caring out a research to identify the reasons for bad repayment

o Searching past recovery schedule and evaluate.
o Getting information from the office staff.
o Selecting the random sample within the outstanding customers and call
them.
o Random visits for outstanding customers.

 All staff members should be motivated for the recovery process. Even the cashier,
peon.
 Prepare a proper database for existing outstanding.
 Held one day workshop for all staff members.

20
  Arrange weekly meetings to staff members for recovery purpose.
 Sending reminders to outstanding clients.
 A recovery officer should be appointed for each branch. We suggest recruiting a
recovery officer from the responding area.
Recovery schedule
Customer Loan Outstanding No of rentals Last paid remarks
Name & disbursed amount In areas date
loan amount date
Sanjeewa 25/02/2005 17,000.00 20 20/04/2005 bad
20,000.00

 Then we categorize the client according to the outstanding amount/frequency of

settlement/past performance.
 Prepare itinerary/monthly target for recovery officer. According to the itinerary
recovery officer should visit the client and push the to repay.
 Arrange recovery centers in the corresponding area and meetings every fortnight.
 Arrange legal action process for bad customers. e.g.- samatha mandala, court.

6.3. Recovery process for newly disburse loans

For newly disburse loan, micron has to implement a better recovery process. Firstly
they should follow up loans. They should closely monitor the clients, what are they
doing and, on what purpose they spend their money. Follow up on loan involves several
steps.

 Continuous follow up the small groups by loan officer.

 Weekly follow up the clusters consist of small groups by loan officer.
 Monthly by the recovery officer through financial information of micron.
 Clarify to group members about overdue loan repayment and their disadvantage.
 Follow up properly to maintain a loan recovery rate at 100% by micron

a. Recovering loans

21
Loan recoveries can be done as follows.
 By installments.
 At the end of the harvesting in the agricultural sector.

b. Loan recoveries by installments.

 Loan installment can be collected weekly, monthly, quarterly, by the recovery
officer according to the agreement made by clients and micron when they giving
the loan. To achieve higher collection rate micron can conduct fortnight meetings
with the clients in the corresponding areas. Loan officer and the recovery officer
should participate for this event.

c. Loan recoveries at the end of the harvest

 Agricultural loan could be paid back at the end of the harvest. Normally in paddy
cultivation the grace period is 6 months. At the end of grace period full loan
amount should be paid back. But interest amount for the loan should be paid every
month.

6.4. For a better implementation and for better controlling process

 Group formation

This takes place after a meeting with the Village Headman who is consulted before
we start working in an area.  Not only is his permission sought but he also helps select
the members who will form the group.  In each group, a chairman, and treasurer,
appointed.

 Training for business and handling cash

A total of 6 training sessions that usually takes 6 weeks to complete prepares the
group for running a business day to day.  During this time, each member will decide
on a business area and formulate a business plan.

22
 Loans disbursed

When the loan officer is satisfied that the group is ready; each member of the group
receives an individual loan.  They are collectively responsible for paying back the
loan in fortnightly installments.  It is also a requirement that a certain percentage goes
into their savings account which they can withdraw as they wish. The rest of the
money is profit to reinvest in their business or to spend on their homes and families.

 Businesses are started by group members

The typical businesses that we support include selling household provisions,

clothes, food and drink, running grocery stores and small restaurants.  Some clients
have diversified their business because of the wet/dry season affecting supplies of
certain goods
 
 Fortnightly meetings to conduct repayments

The chairperson opens the meeting, usually with a prayer, and the treasurer is
responsible for collecting and counting the money from the group. Treasurer and one
other group member will then make a trip to the bank to pay in the money, depositing
the receipt at their local Micro Loan Foundation branch office. 
The loan officer is there to supervise, offer advice and verify the amount that is being
repaid although he/she does not conduct the meeting.  When business is not going
well or members fall behind with repayments for other reasons, it is the loan officer’s
responsibility to help get things back on track.

 Clients can apply for larger loans to help their businesses grow

The loan cycle ends when the total amount has been repaid by the group, normally

23
 after six months.  Many clients start to employ others to help run their business
including their husbands who in our experience are very willing to become involved.
Over time, businesses grow, profits increase and the poverty cycle is broken.

7. Task -4
7.1. Communication plan for MicroN

Marketing communication
Marketing communication (or marcom) consists of the massages and related media
used to communicate with a market.

Communication model
Responsive hierarchy models attempts to predict the sequence of mental stages. That a
consumer passes through on the way to a purchase. These models are useful in the sense
that they attempt to prioritize the communication objectives in various stages of the
buying process.

 AIDA model
Gaining the customer (Awareness)
Generating the customer (Interest)
Stimulating the customer (Desire)
Causing the customer to take (Action)

Image analysis of MicroN

High awareness

Sanasa,
sarwodaya

Less trustworthiness
High
trustworthiness

MicroN

24

Low awareness
 7.2. Communication audit

SWOT analysis
Strength Weaknesses
 Existing for 7 years  Internal communication problem
 Existing customer base  Lethargic staff
 Well developed system network  Less public relations
among the branches  Less usage of communication
 Advance communication facilities facilities
(telephone, fax,)  Less knowledge about the MicroN
 Poor communication among the
staff
 Negative image about the company

Opportunities Threats
 Possibility of low cost promotion  Strong competitor promotions
 Word of mouth  Low financial strength
 Development of Microfinance  Less availability of communication
industry channels

25
 7.3. Communication goals and objectives
a. MicroN vision & Mission
Be the best service provider in microfinance.

b. MicroN mission

Develop the financial stability of low income people by protecting the Sri Lankan
culture.

c. MicroN objectives

 Create a brand awareness about the MicroN

 Introduce and develop a CSR program to MicroN within 3 years
 Develop internal communication program to enhance the quality of the staff by 1
year

d. Positioning statement of MicroN

“BEST HELPING HAND MICRON”

e. Key message
“High quality financial service with trustworthiness to your door step on time”

f. Key audiences
 Low income clients who do not access to formal institutions
 All MicroN staff members

26
 7.4. Communication strategies

We use marketing mix strategy.

Promotional tools using for communication

a. Advertising
 ATL-
o Radio & Paper advertisements
 BTL
o Broachers, booklets, banners, outdoor promotions
Using advertising we can create awareness about the new products and their features.

b. Sales promotions
 Door to door promotions- create awareness among the customers about our
product features (e.g –interest rates)

c. Public relation and publicity

 Seminars and events with the involvement of expertise (e.g-CIC…)
 Develop corporate social responsibility program.
 Sponsorships and donations.
e.g –donations for village temple, sponsorships for village volley ball team

d. Personal selling
 Most powerful tool for communication.
 Sales presentations for individuals or groups.
 Sales meeting
 Campaign at fairs & and at social events

e. Direct marketing

27
  Massage reaches the specific customer not to the public.
 Massage can be direct mailing to the existing customers
 Make awareness about the new products.

7.5. Communication activity plan

(Rs.) Budget

June
Jan

Feb

May

July

Aug

Sep

Nov
April

Oct

Dec
March
Activity Responsi
ble
person
Marketing

500,000

Radio
Advertisi
ng
Marketing

500,000

News
Paper
Advertisi
Marketing

400,000

Leaflets
ng
&
Broacher
Marketing

400,000

Banners
Printing
&
Outdoor
Marketing

250,000

Sponsorsh
Promotio
ips
Marketing

150,000

Awarenes
s
Programs
manager

100,000
Marketing

Other
Activities

8. List of References

28
 Kotler Phillip & Keller Kevin Lane, “Marketing Management”, 11 th Edition,
Prentice Hall of India(2003)
 National Business Research Institute website.
 SLIM Text Books and Lecturer Notes

29