This note discusses the role of proactive risk management as an essential element to the long-term sustainability of a microfinance institution, which helps in early warning system for potential problems, efficient use of capital, and successful new product development and rollout.

The conventional banks rarely provide banking services to the low income segment due to high costs associated with it. However, technology has resulted in lowering down the costs per transaction, and thus impacted the banks to consider the options of servicing the low income segment.

This note lays emphasis on market orientation among MFIs to scale up their operations. It argues that MFIs lack market orientation, which often results in client dropout (and also because of MFIs possessing product orientation). It further explores three stages in research on market orientation conducted by various academics.

This briefing note proposes to focus on clients’ needs rather than on institutions or products. It discusses various sources of information, which play an important role in assessing the needs of the clients such as local government & network, MIS and competition analysis, frontline staff, clients’ responses, and primary market research methods.