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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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  4. Beatriz Armendariz & Ariane Szafarz, 2011. "On Mission Drift in Microfinance Institutions," ULB Institutional Repository 2013/97387, ULB -- Universite Libre de Bruxelles.
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Citations

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Cited by:
  1. Schicks, Jessica, 2014. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," World Development, Elsevier, vol. 54(C), pages 301-324.
  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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