Discussion: Research-based Peer Alternative Response to 4.3 Peer Topic : The U.S based Micro Loan Provider Please review previous submissions and the alternate response should be new not similar to pr

Industry Name: The USA based Micro Loan Provider

Executive Summary

Organizations need funding to start the run the business, there are various types of funding organizations to run the business, there are as banks, private investors, venture capitalists, and many other modes of financing. People put their money in the business or within the family investment, and they use various available options based on their requirements and available mode of finance. All these are good when the business is planned for big and with all the planning and implementation process. If a home-based business or small-scale business, or agricultural-related business within their firm, then it requires less investment. The big banks will not lend for this type of business, even the private investors will not show interest in this business, as the interest they earn from this investment will be less. We bring in Microfinance to fulfill this gap in the financial sector. There is a various Microfinance institution in the nation and even there are many Microfinance institutions across the globe, and even this institution has competition in the market, and it requires proper promotion and marking to reach to the public and to at the end of the day to make the profit form the business. (Bernanke. 2007).

Pricing, Promotion, and Distribution Channels

There are several Microfinance institutions in the USA, the topmost of them are Kiva Microfunds, Grameen America Inc., BRAC USA, CDC Small Business Finance Corp, Pacific Community Ventures. JGJ Inc. needs to adopt the best industry practices and some of the unique features, which should stand out of these top organizations to get the market share and to create the name of the organization. Before we do any of these, it requires doing the proper analysis of current pricing models, promotional models, distribution models used in the market. Using this analysis, we need to come out with the recommended strategy for pricing, promotion, and distribution for JGJ inc. (Haqqi. 2021).

Current Pricing Models in the Market

            Pricing is the most challenge for the microfinance institutions, as the price of processing will be the same irrespective of the amount they borrow, if the borrower wants $10,000 or $1000 the amount the organization spend on the processing and documentation will be the same and based on this the interest charges will be applied, also the interest will vary based on the tenure of the loan. These institutions cannot make billions of dollars from this business, nor the billion-dollar transaction every year, this will be based on a few million dollars of business, and within this, they need to generate the profit to run the business. Currently, the interest rate ranges from 6% to 18% based on these parameters. (Okagaki, A. & Klein, J. 2018).

Current Promotional Models in the Market

            Microfinance is used by small scale business units, that to be people who are below the federal poverty line, and most importantly the female population use microfinance to support the family and to run the home-based business which can get them decent profit after all the expenses, that includes the EMI on the microfinance. There is a various commercial mode of promotions are available, whereas the microfinance institutions will not be able to use this approach, as their income is less, they use the word-of-mouth promotion, and group promotion and possible traditional promotional modes, where the expense is nil or less. (Becerra, Q. 2019).

Current Distribution Models in the Market

Distribution channels need to be strong for a microfinance institution, as most of the time it is used by people who are interior in the nation, or in the rural sector, to reach them and distribute the funds and collection is a challenge, with the evaluation of the internet, these issues pretty much solved, but still need great improvement. (Okagaki, A. & Klein, J. 2018).

Pricing Strategy for JGJ Inc.

We as a JGJ organization need to adopt a different approach in the pricing strategy to stand out from these traditional microfinance institutions. As we know the price to process small amount or the bigger amount the process and expenses are same, here they can bring innovative approach like, we can ask the borrower to get more number of borrowers from the same locality, in a specified time, this will make easy for the organization to process all the application at the same time, and collection of documentation and number of verification visits will save a good amount of money, using this option, the organization can lend at a lower rate of interest. Similarly, an organization can come out with a new approach to reduce the interest and same from other places.

Promotional Strategy for JGJ Inc.

Promotion is the most important aspect of any business, and JGJ inc can use the traditional mode of promotion like every other organization uses. With that, they can use the promotion based on the interest rates and they can come up with a new approach, like providing training and support for a specific business. As there is a various non-profit organization who provide support and training for the needy, they can collaborate with these institutions and promote their product with the training, this creates brand and will get the free promotion and the customers as well.

Distribution Strategy for JGJ Inc.

Distribution is the most challenging aspect of any business. As the microfinance business is used and run in a rural part of the nation, it will be a challenge for the organization to set up distribution centers or collection centers in these sectors, also appointing people to run the business in these places will cost more as the number of employees needed will more, instead they can come up with the approach like using the existing provision stores, gas stations, or nearby big stores, as their partners to collect and distribute the money, with the use of technology, to safeguard the organization they can take the deposit form these shops to protect the interest of both the parties, and with this they can run the business with number distribution centers, without much investment, but it requires a good amount of effort to convince the people to accept the business module.

References

Bernanke, B. (2007). Microfinance in the United States. https://www.federalreserve.gov/newsevents/speech/bernanke20071106a.htm

Haqqi, T. (2021). 5 Biggest Microfinance Companies in the United States. https://www.insidermonkey.com/blog/5-biggest-microfinance-companies-in-the-united-states-917195/

Okagaki, A. & Klein, J. (2018). How Scale-Focused Microlenders are Pricing for Growth? https://www.aspeninstitute.org/wp-content/uploads/2018/03/The-Price-of-Access-How-Scale-Focused-Microlenders-are-Pricing-for-Growth.pdf

Becerra, Q. (2019). Microfinance in the United States. https://www.mdrc.org/publication/microfinance-united-states