Differentiation strategies used by microfinance institutions in Kenya
Bett, Willy K
Microfinance Institutions are pillars to development of small business and growth of the
informal sector in Kenya. They are able to mitigate asymmetric information problems
between lenders and borrowers hence increasing access to financial services for people
with no traditional collateral hence leading to potential positive impacts on poverty
reduction. However, success of MFIs is threatened by reduction in donor support and
intense competition in the industry. Given the important role played by MFIs, they need
to come up with strategies to face competition by enhancing their competitive
advantages. Given that there IS no documented study on differentiation strategies
employed by MFIs, it was important to conduct a study to determine the differentiation
strategies. The objectives of the study were to determine the extent of use of
differentiation strategies by MFIs in Kenya and to establish challenges MFIs face III
differentiating their services.
The research design was a descriptive survey. The population of interest in this study
consisted of all the twenty-seven (27) MFIs in Kenya who were members of the
Association of Microfinance Institutions (AMFI). Thus a census was conducted. Primary
data was collected using a structured questionnaire, which was analysed using descriptive
statistics- the mean, standard deviation, frequencies and percentages.
From the study it was evident that MFIs have carried out augmented service, brand
image, product or service, channel and personnel differentiation strategies. Customer
orientation showed that the firms were found to understand the customers to a large
extent. The perception of the firms on delivering value scored quite low represented by a
very low or no extent. Responses indicated that firms were able to provide clients with
extensive branch network as well as penetrating the market as a differentiation strategy
only to some extent.
Augmented service was applied to a large extent together with brand imaging and
channel differentiation while for personnel differentiation firms applied to a large extent.
Indications further point to the fact that the applications of differentiation strategies
varied among the firms to a very large extent. Provision of quality service attracted
respondents but many firms were not keen on first tracking loan processing and carrying
out market research to understand customer needs. Most firms cited the cost of carrying
out research as the main constraint in understanding customer needs.
Further research is implied on the perception of other financial institutions and their
reactions towards practising market differentiation and differentiation strategies
especially those who are not members of AMFI.
University of Nairobi.
Type of publication|
Masters in Business Administration, University of Nairobi (2005)
Nairobi - University of Nairobi
Added to C-A: 2022-06-22;11:22:33|
© Connecting-Africa 2004-2022 | Last update: Tuesday, June 21, 2022 |