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Balancing flexibility and discipline in microfinance: Innovative financial products that benefit clients and service providers

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Author Info

  • Michael Hamp
  • Carolina Laureti

Abstract

Product 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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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/98728/1/wp11044.pdf
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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 11-044.

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Length: 34 p.
Date of creation: Oct 2011
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/98728

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Related research

Keywords: product flexibility; discipline; commitments; microfinance;

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References

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  1. Dean Karlan & Margaret McConnell & Sendhil Mullainathan & Jonathan Zinman, 2010. "Getting to the Top of Mind: How Reminders Increase Saving," Working Papers 988, Economic Growth Center, Yale University.
  2. Nava Ashaf & Dean Karlan & Wesley Yin, 2004. "Tying odysseus to the mast: Evidence from a commitment savings product in the philippines," Natural Field Experiments 00206, The Field Experiments Website.
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  4. Manuel Amador & George-Marios Angeletos & Ivan Werning, 2004. "Commitment vs. Flexibility," 2004 Meeting Papers 87, Society for Economic Dynamics.
  5. Jessica Schicks, 2010. "Microfinance Over-Indebtedness: Understanding its drivers and challenging the common myths," Working Papers CEB 10-048, ULB -- Universite Libre de Bruxelles.
  6. Bauer, Michal & Chytilová, Julie & Morduch, Jonathan, 2010. "Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India," IZA Discussion Papers 4901, Institute for the Study of Labor (IZA).
  7. Masahiro Shoji, 2010. "Does Contingent Repayment in Microfinance Help the Poor During Natural Disasters?," Journal of Development Studies, Taylor & Francis Journals, vol. 46(2), pages 191-210.
  8. Marc Labie, 2009. "Microfinance : évolutions du secteur, diversification de produits et gouvernance," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(3), pages 5-6.
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Cited by:
  1. Jessica Schicks, 2012. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," Working Papers CEB 12-017, ULB -- Universite Libre de Bruxelles.
  2. Jessica Schicks, 2011. "From a supply gap to a demand gap? The risk and consequences of over-indebting the underbanked," Working Papers CEB 11-046, ULB -- Universite Libre de Bruxelles.

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