Microfinance: Importance of PEST Analysis

Micro-lending is now a fast growing global industry

Though mostly of the pioneering Microfinance Institutions started out with visions and missions — usually coming from the emotions of their founders —  of helping the poor through simple provisions of small financial services or by just giving financial access to the marginalized sectors of our society, micro-lending has become a fast growing global industry.

And, if you want to involve yourself with it or if you want to improve your microfinancing businesses, you have to grasp some technical aspects of management and marketing.

My previous three posts, microfinance trends in the Philippines, Simple Area Selection Processes and Market Segmentation, dealt with marketing, i.e., positioning your company’s future, mapping out possible market place and having data for market analysis. These are simple but equally radical and important activities that will secure your future in micro-lending.

I know, you are now creating your products as I urged you to do in my Market Segmentation article. That will be good but do not package them yet as finished products. Do first the PEST Analysis before letting your products conquer the market.


What is PEST Analysis and Its Importance to Microfinance?

PEST Analysis is a simple, useful and widely-used tool that helps you understand the “Bigger Picture” of your Political, Economic, Socio-Cultural and Technological environment. Business leaders used it worldwide to build their vision of the future. So, don’t be left out.

As more organizations engage in micro-credit, the harder the competition for the market. PEST Analysis could help you:

  1. Position your MFI to Competitive Marketplace
  2. Create your Brand that will propel your products and services ahead
  3. Know Potential Investment Areas
  4. Have Strategic Options such as entering a new market or launching New MFI Products or Services
  5. Build Strategic Plans of Actions

While PEST Analysis is a simple but broad tool and encompasses broad spectrum like Political, Economic, Socio-Cultural and Technological, it is not a complete tool. You have to do SWOT Analysis and Market Analysis or Competitors Analysis, if you want to go into specifics.

But, SWOT Analysis could be done later during your Review Stage.

PEST Analysis is important for these reasons:

  1. By making effective use of PEST Analysis, you ensure that what you are doing is aligned positively with the powerful forces of change that are affecting our world. By taking advantage of change, you are much more likely to be successful than if your activities oppose it;
  2. PEST Analysis helps you avoid taking action that is doomed to failure from the beginning, for reasons beyond your control; and
  3. PEST helps you break free of unconscious assumptions, and helps you quickly adapt to the realities of the new environment.

That’s it for now. My next post will be: How To Do PEST Analysis in Microfinance?

So long…



12 thoughts on “Microfinance: Importance of PEST Analysis”

  1. I like how you merge traditional management tools with microfinance, since proper governance is still an issue in some informal MFIs. I hope someday this information is well-distributed among MFIs.

    1. Thank you, Fehmeen. I hope it is okay with you if I call you that name. I just don’t know if it’s he or she, lol.

      I am just putting in here, online, what we are doing with our program. As I said in my site’s homepage, my experiences may not be the best but I hope you’ll understand and can be of help to those who need them.

      I am not saying that MFIs should do some rigid business strategies but since, this is becoming an industry, I think, putting some traditional tools on it could be of big help.

      I will be posting about that MBAs soon but I just don’t want to disrupt the series I started on my blog. I beg for your patience.

  2. Sure, you can call me that. It’s actually, Miss. You are correct in stating microfinance has the makings of an industry. I did a post about that a few days ago. Besides that, investors and regulatory bodies are also pushing for better management structures in MFIs. Please go ahead and take your time with the post.

    1. lol. To be honest, I was not expecting you to be ‘miss’. That’s shame on me. It seems I don’t know the phrase ‘gender equality’. And, you pulled me down under that microfinancing is used to be and still is, the domain of women. Paradoxically, Yunus is a man but that’s no big deal.

      I missed to greet you: Happy Women’s Day!

      1. It’s OK. And thanks for the greeting! True, microfinance is about women, but there is a hidden agenda behind that too. Women are more prone to social pressures in case they don’t keep up their repayments.

  3. Hi, Charles,

    I appreciate very much if this post clarified something that may help you in your endeavors. I will try my best to present ideas in simple ways. Glad to hear from you soon…

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