IDEAS home Printed from https://ideas.repec.org/a/taf/oxdevs/v45y2017i3p321-337.html
   My bibliography  Save this article

Discipline and flexibility: a behavioural perspective on microfinance product design

Author

Listed:
  • Marc Labie
  • Carolina Laureti
  • Ariane Szafarz

Abstract

The success of both microcredit and micro-savings products rests upon simplicity and standardization in order to stimulate client discipline. However, these products lack flexibility. This paper attempts to make sense of behavioural product design in microfinance. We focus on the potential trade-offs between discipline and flexibility. While discipline devices encourage clients to make payments on time, microfinance product flexibility improves clients’ day-to-day money management and helps them cope with shocks. Our contribution is twofold. Firstly, we highlight the evidence-based advantages and disadvantages of flexible products in microfinance. Secondly, we present best-practice examples of flexible products offered by microfinance institutions worldwide.

Suggested Citation

  • Marc Labie & Carolina Laureti & Ariane Szafarz, 2017. "Discipline and flexibility: a behavioural perspective on microfinance product design," Oxford Development Studies, Taylor & Francis Journals, vol. 45(3), pages 321-337, July.
  • Handle: RePEc:taf:oxdevs:v:45:y:2017:i:3:p:321-337
    DOI: 10.1080/13600818.2016.1239701
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13600818.2016.1239701
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mark Dean & Anja Sautmann, 2014. "Credit Constraints and the Measurement of Time Preferences," Working Papers 2014-1, Brown University, Department of Economics.
    2. Jeremy Burke & Jill E. Luoto & Francisco Perez-Arce, 2014. "Soft versus Hard Commitments A Test on Savings Behaviors," Working Papers WR-1055, RAND Corporation.
    3. Jeremy Burke & Jill Luoto & Francisco Perez-Arce, 2014. "Soft versus Hard Commitments A Test on Savings Behaviors," Working Papers 1055, RAND Corporation.
    4. Fischer, Greg & Ghatak, Maitreesh, 2010. "Repayment frequency in microfinance contracts with present-biased borrowers," LSE Research Online Documents on Economics 58184, London School of Economics and Political Science, LSE Library.
    5. Czura, Kristina, 2015. "Do flexible repayment schedules improve the impact of microcredit?," Discussion Papers in Economics 26608, University of Munich, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carolina Laureti & Ariane Szafarz, 2017. "Behavioral Banking: A Theory of the Banking Firm with Time-Inconsistent Depositors," Working Papers CEB 17-028, ULB -- Universite Libre de Bruxelles.
    2. Cozarenco, Anastasia & Szafarz, Ariane, 2020. "The regulation of prosocial lending: Are loan ceilings effective?," Journal of Banking & Finance, Elsevier, vol. 121(C).
    3. Jann Goedecke & Isabelle Guérin & Bert D'Espallier & Govindan Venkatasubramanian, 2018. "Why do financial inclusion policies fail in mobilizing savings from the poor? Lessons from rural south India," Development Policy Review, Overseas Development Institute, vol. 36(S1), pages 201-219, March.
    4. Kristina Czura & Anett John & Lisa Spantig, 2020. "Flexible Microcredit: Effects on Loan Repayment and Social Pressure," CESifo Working Paper Series 8322, CESifo.
    5. Anastasia Cozarenco & Valentina Hartarska & Ariane Szafarz, 2019. "Too Many Cooks Spoil the Broth: The Conflicting Impacts of Subsidies and Deposits on the Cost-Efficiency of Microfinance Institutions," Working Papers CEB 19-001, ULB -- Universite Libre de Bruxelles.
    6. Carolina Laureti & Alain De Janvry & Elisabeth Sadoulet, 2017. "Flexible Microfinance Products for Financial Management by the Poor: Evidence from SafeSave," Working Papers CEB 17-036, ULB -- Universite Libre de Bruxelles.
    7. Antonia Grohmann & Steffen Herbold & Friederike Lenel, 2020. "Repayment under Flexible Loan Contracts: Evidence from Tanzania," Discussion Papers of DIW Berlin 1884, DIW Berlin, German Institute for Economic Research.
    8. Hossain, Shahadat & Galbreath, Jeremy & Hasan, Mostafa Monzur & Randøy, Trond, 2020. "Does competition enhance the double-bottom-line performance of microfinance institutions?," Journal of Banking & Finance, Elsevier, vol. 113(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John Beshears & James J. Choi & Christopher Harris & David Laibson & Brigitte C. Madrian & Jung Sakong, 2015. "Self Control and Commitment: Can Decreasing the Liquidity of a Savings Account Increase Deposits?," NBER Working Papers 21474, National Bureau of Economic Research, Inc.
    2. Barboni, Giorgia, 2017. "Repayment flexibility in microfinance contracts: Theory and experimental evidence on take up and selection," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 425-450.
    3. Marc Labie & Carolina Laureti & Ariane Szafarz, 2016. "Discipline and Flexibility: A Behavioral Perspective on Product Design in Microfinance," Working Papers CEB 15-020, ULB -- Universite Libre de Bruxelles.
    4. Geng, Xin & Janssens, Wendy & Kramer, Berber, 2018. "Liquid milk: Cash Constraints and Recurring Savings among Dairy Farmers in Kenya," 2018 Annual Meeting, August 5-7, Washington, D.C. 273823, Agricultural and Applied Economics Association.
    5. Beaman, Lori & Karlan, Dean S. & Thuysbaert, Bram, 2014. "Saving for a (not so) Rainy Day: A Randomized Evaluation of Savings Groups in Mali," Center Discussion Papers 187189, Yale University, Economic Growth Center.
    6. Anett John, 2020. "When Commitment Fails: Evidence from a Field Experiment," Management Science, INFORMS, vol. 66(2), pages 503-529, February.
    7. Jonathan Chapman & Erik Snowberg & Stephanie Wang & Colin Camerer, 2018. "Loss Attitudes in the U.S. Population: Evidence from Dynamically Optimized Sequential Experimentation (DOSE)," NBER Working Papers 25072, National Bureau of Economic Research, Inc.
    8. Alexander K. Koch & Julia Nafziger, 2019. "Correlates of Narrow Bracketing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(4), pages 1441-1472, October.
    9. Dasgupta, Utteeyo & Gangadharan, Lata & Maitra, Pushkar & Mani, Subha, 2017. "Searching for preference stability in a state dependent world," Journal of Economic Psychology, Elsevier, vol. 62(C), pages 17-32.
    10. Carvalho, Leandro S. & Prina, Silvia & Sydnor, Justin, 2016. "The effect of saving on risk attitudes and intertemporal choices," Journal of Development Economics, Elsevier, vol. 120(C), pages 41-52.
    11. Dasgupta, Utteeyo & Gangadharan, Lata & Maitra, Pushkar & Mani, Subha, 2014. "De Gustibus Non Est Disputandum: An Experimental Investigation," MPRA Paper 58010, University Library of Munich, Germany.
    12. Uttara Balakrishnan & Johannes Haushofer & Pamela Jakiela, 2020. "How soon is now? Evidence of present bias from convex time budget experiments," Experimental Economics, Springer;Economic Science Association, vol. 23(2), pages 294-321, June.
    13. Kramer, Berber & Kunst, David, 2017. "Intertemporal choice and income regularity: Non-fungibility in a lab-in-the-field experiment," IFPRI discussion papers 1646, International Food Policy Research Institute (IFPRI).
    14. Chowdhury, Shyamal & Chowdhury, Prabal Roy & Sengupta, Kunal, 2014. "Sequential lending with dynamic joint liability in micro-finance," Journal of Development Economics, Elsevier, vol. 111(C), pages 167-180.
    15. Guha, Brishti & Chowdhury, Prabal Roy, 2013. "Micro-finance competition: Motivated micro-lenders, double-dipping and default," Journal of Development Economics, Elsevier, vol. 105(C), pages 86-102.
    16. de Quidt, Jonathan & Fetzer, Thiemo & Ghatak, Maitreesh, 2016. "Group lending without joint liability," Journal of Development Economics, Elsevier, vol. 121(C), pages 217-236.
    17. Shapiro, D.A., 2015. "Microfinance and dynamic incentives," Journal of Development Economics, Elsevier, vol. 115(C), pages 73-84.
    18. Thomas Epper & Ernst Fehr & Helga Fehr-Duda & Claus Thustrup Kreiner & David Dreyer Lassen & Søren Leth-Petersen & Gregers Nytoft Rasmussen, 2020. "Time Discounting and Wealth Inequality," American Economic Review, American Economic Association, vol. 110(4), pages 1177-1205, April.
    19. Yongseok Shin & Joseph P. Kaboski & Francisco J. Buera, 2011. "Macroeconomics of Microfinance," 2011 Meeting Papers 545, Society for Economic Dynamics.
    20. Melanie Lührmann & Marta Serra-Garcia & Joachim Winter, 2018. "The Impact of Financial Education on Adolescents' Intertemporal Choices," American Economic Journal: Economic Policy, American Economic Association, vol. 10(3), pages 309-332, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:oxdevs:v:45:y:2017:i:3:p:321-337. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/CODS20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.