New product development in selected microfinance Institutions in Kenya: a case study of Nairobi based Institutions

Abstract

The Microfinance industry is a sector that is increasingly getting attention due to the role it plays in poverty alleviation. This study focused on a key aspect in the operations of Microfinance institutions: New product development. The objectives of the study were as follows: to determine the methods MFls are using in new product development, to identify the motivating factors in new product development and to find out the problems they encounter when developing new products. This was a census where 37 institutions operating in Nairobi were targeted. Out of this number, 21 institutions representing 56% of the population responded to the questionnaire used in the study. The limitation experienced during this study included the inability to reach as many Chief Executive Officers as possible. These executives are known to have a deeper understanding of their organizations and could have given more accurate information. This led to the replacement of the respondents with other managers in the same institution. Time constraints did not only lead to the inability to carry out the research in the entire country but also made it impossible for the researcher to spare more time for the respondents who had not responded within the period allocated for the exercise. The main findings u" the study were that MFls in Nairobi use the parallel approach more in new product development than the sequential method. it also emerged that MFls are motivated by various factors in developing new products. These factors included: demand, growth and expansion, utilization of excess resources, competition, poverty. alleviation, and change of strategy. The problems MFls encounter in product development were found to be varied. Some of the problems identified were: financial difficulties, marketing problems, poor economy and lack of a legal framework. The study recommends that the Microfinance Bill pending in parliament be passed at the earliest opportunity to provide guidance in the sector and that Microfinace institutions consider joining AMFI and also invest in a marketing department in their organization structures. The need for a similar research to be conducted among institutions outside Nairobi is therefore proposed to enable a complete understanding of the sector in Kenya