How do we choose where to build new microfinance branches when data about different regions is so difficult to obtain?
Finding the best location to set up a microfinance branch is a more complex question that it seems. For example, while both Tamil Nadu and Kerala are situated in the southern part of India and may seem similar linguistically and culturally, one is easily aware of a huge difference in their socioeconomic, political, literacy and demographic stature.
In another case, there seems to be surface-level similarities between Maharashtra and Madhya Pradesh. However, the northern and western part of Maharashtra are very dry with records draught almost yearly and the south eastern part of Madhya Pradesh exhibits some of the heaviest rainfall.
Beyond cultural and linguistic similarities, these elements of variation between places must be accounted for to identity the most optimal area and markets in which to open new branches.
Previously field scouts chose new branch locations based on their own experience or personal judgement of that place. Validation came in the form of assessing the population in terms of household statistics and census data. Mixed in this data set would be information from competitors and reports from MFIN. These data points would be followed up with outcomes data derived from feasibility exercises on the ground. But using these methods is unreliable as it is purely based upon an individual’s understanding of the market in conjunction with limited secondary data.
New tools like Scisphere enable us to use more extensive analytical data to choose the best place to expand. It has helped Madura to look at the entire state across multiple dimensions to identify the following:
- Whether selected location is surrounded by over 300 villages within 30 km
- Distance from the National or State highway
- Competitors operating in that particular market and their portfolios
- Overdue percentage and number of active MFI clients in that particular region
- Number of bank branches
- Decadal migration over the time
- Type and scale of economic activity and the drivers for agricultural and industrial growth
After shortlisting, we can even create an area of interest around a potential branch location and look at economic and demographic metrics within that. Based on this we consider the best five locations and perform an active due diligence to find out the major economic activity of that place, condition of roads/public transport, broadband connectivity, and whether is it feasible to open a new branch in that particular area. This is currently how we make strategic decisions about new branch locations.