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

  • Michael Hamp
  • Carolina Laureti

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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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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  1. Marc Labie, 2009. "Microfinance:évolutions du secteur, diversification de produits et gouvernance," ULB Institutional Repository 2013/190766, ULB -- Universite Libre de Bruxelles.
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  12. Marek Hudon & Anaïs Périlleux, 2010. "What Explains Microfinance Distribution Surplus? A Stakeholder-oriented Approach," Working Papers CEB 10-045, ULB -- Universite Libre de Bruxelles.
  13. Copestake, James, 2007. "Mainstreaming Microfinance: Social Performance Management or Mission Drift?," World Development, Elsevier, vol. 35(10), pages 1721-1738, October.
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  17. Jessica Schicks, 2010. "Microfinance Over-Indebtedness: Understanding its drivers and challenging the common myths," Working Papers CEB 10-048, ULB -- Universite Libre de Bruxelles.
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