Balancing flexibility and discipline in microfinance: Innovative financial products that benefit clients and service providers
AbstractProduct innovation in microfinance is aimed at responding to the variety of poor clients’ needs, i.e. to develop and sustain the offer of a range of client-led products. The paper describes innovative market-oriented products that combine flexibility features with financial discipline. Those are microsavings, microcredit and microinsurance products and come from microfinance institutions worldwide. This review shows that service providers are introducing various types of flexibility into financial contracts; and that flexibility combined with appropriate enforcement mechanisms may enhance clients’ discipline. We notice, however, that flexibility may require information-intensive lending technologies, raising the MFIs’ costs of screening and monitoring clients, and have a limited outreach.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 11-044.
Length: 34 p.
Date of creation: Oct 2011
Date of revision:
Publication status: Published by:
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More information through EDIRC
product flexibility; discipline; commitments; microfinance;
Find related papers by JEL classification:
- D30 - Microeconomics - - Distribution - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-BAN-2011-10-15 (Banking)
- NEP-HME-2011-10-15 (Heterodox Microeconomics)
- NEP-MFD-2011-10-15 (Microfinance)
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