Project Everest

[RESULTS] Social Consulting Fiji Jan 19 - Small Business Customer Segment Results

Experiment Post: https://projecteverest.crowdicity.com/post/828010

 

Lean Phase: Customer Segment/Problem

In our experiment, we explored the customer segment and problem phases for small business owners. Our experiment involved multiple assumptions based off research on small businesses and preferred loan structure, information of which has been consolidated in the following document:

https://docs.google.com/document/d/10UHJkKvExl93XCfVQ9Zz3tFtMIKShbtEtNoXw4Q8k5A/edit.

The original assumptions made were as follows;

The customer segment are small business owners with the following attributes:

  1. Been selling products/ offering services for at least 18 months.

  2. Running the business by themselves or with at most two other employees.

  3. Mainly in food, retail, & service industries (repairs, transport and hairdressing)

The problems faced by this customer segment are:

  1. Lack of access and/or awareness of financial advisory services.

  2. Lack of access to credit facilities and financing

  3. Lack of access to the capital required for expansion (no space to offer more products, lack of tools/training) and/or sufficient collateral

By conducting this experiment, SoCon should be able to identify the specific customer segment that would benefit from prospective microfinance solutions provided by Project Everest.

Results:

For this experiment we surveyed 60 small business from various villages (along Coral Coast) and within Sigatoka Town. Through the results we managed to extrapolate useful metrics which gave us an insight into the customer segment and problem sphere.

For the customer segment we found that:

  • 73.3% have been in business for more than 18 months
  • 90% run business with two or less employees
  • We also plan on splitting our customer segment into multiple archetypes, most likely following this break-down based on the results, however more research and info into each specific archetype should be carried out:

                 - 61.7% of respondents fell into the industries that we had assumed (food,                       retail and service).

                                 - 50% under the food category

                                 - 6.7% under the retail category

                                 - 5% under the service category

                                 - 30% under the handicrafts category

                                 - 13.3% want to start their own business

  • 75.6% of business <10+ years old are looking to expand

                     - 73.3% of non-food business wanted to expand or diversify in the future                            in some form or another, compared to 57.6% of food vendors want to                              expand

  • The small businesses defined their current business position as:

                     - 43.9% are just breaking even

                     - 38.6% are making at least some profits

For the solution space, we identified the following issues:

Of the people surveyed, 64.9% of small business owners said they had never tried to access financial services before.

  • The most common reasons for this were:

                  - Loans are too hard to pay back and expensive (75%). This was found                             because many businesses income is inconsistent and hard to predict,                             thus paying a rigid structure is difficult to pay back.

                   - Distrust of financial institutions (28.6%).

                   - High interest rates (21.4%)

Of the other 35.1% of people who had accessed financial services, the service that they accessed was a bank loan.

Those who had accessed bank loans, the following issues had arisen during their time with these services:

  • Concerns regarding repayments (61.5%). This was often qualitatively cited due to the fact that many businesses have inconsistent income, thus are worried about making rigid repayments.
  • High interest rates (50% of people rated this as an issue)
  • Lack of relevant documentation (19.2%).
  • Insufficient Collateral (15.4%). It was also qualitatively noted that many people don’t want to provide collateral for loans for the fear of losing their house or land.

When asked if they had interest in access to finance, 68.9% said yes.

The products and services that people wanted access to included: equipment and supplies, new inventory, and new land.

  • When asked how much they would need for this, the loan sizes ranged from $50-$1000, with most being below $500.
  • When asked if they had issues accessing capital such as this, 59.3% said they had issues accessing necessary capital.

Results may be a bit skewed due to the fact that a majority of the village surveys came from Komave village (around 30%). This can expand into further experiments by thinking about the density of business within certain villages, and how this may affect the business they receive throughout the week, and thus flow into whether or not they can make repayments on time.

VALIDATED LEARNING

Overall, the experiment results were able to validate some assumptions on our targeted segment. However, the problems we looked into need to be better delved into in order to understand and help our customer segment to the fullest.

What we found from this experiment is that many Fijians are aware of financial services because there is a very established microfinance system in Fiji. However, many people still do not access these services due to the issues listed above, and those who do access services such as bank loans, find them hard to pay back, hard to find collateral for the loan, and hard to provide the relevant documentation needed.

What this means from SoCon’s perspective is that there is a gap between the microfinance institution and the individual that is not being met by current solutions in the market. In other words, current FIs are not meeting the needs of Fijian small business owners, and this proves a promising market for SoCon to continue to look into in the future.

NEXT MOVE

SoCon’s next move in this space revolves around nailing down the pain points as to why there is a gap between the microfinance institution and the individual, and specifically what are the issues with current microfinance institutions that make finance inaccessible or undesirable to this segment.

To understand this further SoCon needs to validate:

  1. Why this gap exists e.g. rigid loan structures, individuals wanting smaller loans,  

  2. If small business owners have access to finance, what products would they want to finance and why? How much are these products? How often will they need these products to be financed?

By answering these questions, SoCon will have a greater understanding of what our Unique Value Proposition will be, and how we can best serve the needs of this customer segment.

 

Tagged users
No comments yet, be the first to post one!
Share