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Flexible Products in Microfinance: Overcoming the Demand-Supply Mismatch

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  • Marc Labie
  • Carolina Laureti
  • Ariane Szafarz

Abstract

The success of microfinance rests upon product simplicity, standardization, and the capacity to stimulate client discipline. However, poor people desperately need flexible financial products to improve their day-to-day money management and cope with shocks. This paper discusses how microfinance institutions could design flexible products efficiently. First, we clarify the concept of financial flexibility. Second, based on literature in microfinance, banking, and behavioral economics, we summarize the state of knowledge on the trade-off between flexibility and client discipline. Last, we weigh the advantages and disadvantages of the few flexible products already implemented by microfinance institutions worldwide.

Suggested Citation

  • Marc Labie & Carolina Laureti & Ariane Szafarz, 2013. "Flexible Products in Microfinance: Overcoming the Demand-Supply Mismatch," Working Papers CEB 13-044, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/152597
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    Cited by:

    1. Supriya Garikipati & Isabelle Agier & Isabelle Guérin & Ariane Szafarz, 2017. "The Cost of Empowerment: Multiple Sources of Women’s Debt in Rural India," Journal of Development Studies, Taylor & Francis Journals, vol. 53(5), pages 700-722, May.

    More about this item

    Keywords

    microfinance; flexible product; commitment; discipline devices; incentive problem;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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