Perturbed by this observation, Swisscontact East Africa conducted an action research in 2005 in Kenya involving Microenterprise Development Services Limited (MDSL) and 4 other leading Microfinance Institutions. The objective of the research was to enable participating MFIs to explore and select appropriate options for linking their microfinance services to BDS services.
A modular approach was used aimed at creating awareness and understanding of the paradigm shift and research tools to be used, undertaking the actual field work, making detailed presentations and discussions and deciding the way forward for each participating MFI.
Significant findings of the research were as follows:-
- BDS being a new concept was not well understood even by service providers,
- There was a high inadequacy of BDS providers,
- BDS markets had been previously distorted even by MFIs thus requiring re-orientation,
- There was substantial demand for BDS if tangible benefits were to be offered at affordable prices,
- Provision of BDS was a matter of trust, whereby clients must trust the provider,
- Most MFI"s had very limited capacity in providing BDS,
- Client to client services seemed a feasible model particularly in rural areas and,
- MFIs did not know much about the BDS providers.
Based on the research, the following conclusions were drawn:
- There was need to innovate ways to support the development of competent BDS Providers for the sector.
- The ideal providers must have an entrepreneurial mindset backed with the technical expertise in their respective fields,

- Institutionalization of BDS in the MFI would be key if BDS support and promotion was desired. Through making BDS part of the MFIs programmes, there would be buy-in from the management, staff and clients.
- Market distortion due to heavy subsidization by donors needed to be rectified through intensified support from MFIs. Some services could be provided free of charge and embedded in other services in order to attract customers and regain confidence in BDS provision.
- Sector orientation of customers had a direct impact on the types of BDS interventions and their attractiveness based on the benefits to the clients. The study noted that sector specific orientations would have higher attractiveness to the MFI clients unlike general BDS.
- It was critical for the MFI to decide on a suitable Business Model for the design and delivery of BDS to clients. Options available included the partnership model which stood out due to greater opportunities for specialization and innovation.
In conclusion, in order to embrace a financial services/BDS programme, an MFI would have to make fundamental decisions regarding to how the linkage would provide value to the clients as well as enrich the MFIs portfolio. From the clients" perspective, in the case of an MFI-BDS linkage, the MFI would be the guarantor and would be expected to remain in the loop in order to ensure that the BDS continually provides the promised benefits to the clients.
Lydia Njoroge, Operations Manager MDSL – Sunlink.