Breaking the Barriers: Market Expansion through Individual Lending
MicroSave's Briefing Note No. 88 discusses the benefits of individual lending (IL), its target clientele and challenges MFIs need to consider in developing an IL product.
IL is often an important step towards delivering more market-led microcredit. In most cases, MFIs implement IL as a strategy to retain mature customers who do not wish to continue accessing group loans. MFIs introducing IL cite the following benefits:
- Retention of mature group clients;
- Market expansion;
- Targeting new customer segments;
- Diversification of services;
- Improved growth and profitability;
- Reduced risk.
Although the target client for IL differs from the typical group lending client, MFIs usually test the waters by first targeting their top-end group clients for a new IL product. However, such clients need to be carefully managed as IL can have negative consequences on groups. MFIs also face other challenges while offering IL such as allegations of mission drift and liquidity problems because banks are wary of the risks associated with IL.
