How To Do Area Selection in Microfinance?

Selecting Area of Operations is one of the many first steps if you want to engage in microfinancing.

Yes, of course, as an entrepreneur, you can say: “I want to have business in these places, I’ll take the risks.” But, again, calculated risks are better than risks.

I know, you know what I mean. I am just giving you caution if, at this point, you are very eager to involve yourself in microfinance.

Your Area of Operations can make or break your business.  Scout your prospective area. Do it by yourself or, if you could afford, hire someone to do it for you.

The goal is to have a focus area that is economically viable for your micro-lending operations.

Here are the activities:

  • First thing first: Prepare your Company’s Profile and your Personal Profile
  • Get a copy of a Map of the Prospective Areas
  • Go to your village/community office or Local Government Unit
  • Secure a copy of community profile that includes the following:
    • Demographic Profiles
    • List of Businesses
    • List of Schools
    • List of Banks
    • List of Lending Institutions
    • List of Non-Government Organizations/Associations
    • List of Communication Facilities
    • List of Other Financial Intermediaries
    • List of Community Leaders
  • Do ocular inspections – know where the public market is and observe
  • Do a simple random-verbal survey –  just ask naturally from some individuals who are qualified to be your clients (but remember answers as many as you can)
  • While doing the above two activities, observe and note different informal lenders and how they are doing their business
  • Go back to your office and jot notes as many as you can
  • After a day, meet some community leaders and introduce your programs to test the leaders’ acceptance level
  • Ride on Public Utility Vehicles to know the cost of transportation
  • Be aware of some placards, announcements, streamers in the area
  • Observe the peace and order situations or ask from the police station’s desk officer  for any incidence
  • Go to some banks and ask how much interest they are giving to deposits

After you did all of these, you have now a clear picture of the area, percentage of prospective clients/partners, vis-a-vis, the population, population density, competitors and partners, peace and order situation, transportation expenses, rates of interest on deposits and of course, rates on interest on loans.

These are simplified activities that can help you decide for your area of operations. And the best part is that you have now (I hope you already established some contacts) prospective contacts.

As always, these are my experiences and I am also willing to learn from you. Put your comments and suggestions below.

Are these activities helpful or unnecessary at all?

So long,



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