Examining the Implications of Innovative Microfinance Products: A Systematic Literature Review

Niels Hermes, Marek Hudon and Masaood Moahid
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Masaood Moahid: University of Groningen

No 2024011-EEF, Research Report from University of Groningen, FEB Research Institute (FEBRI)

Abstract: In recent years, there has been a notable shift towards embracing innovative microfinance products. Yet, what do we know about the impact of these innovations on clients, MFIs, and their associated challenges? This systematic literature review (SLR) analyzes 105 articles to analyze the effects of so-called disruptive and incremental innovation in microfinance products. The findings reveal that these innovations elicit diverse outcomes for clients and MFIs, albeit through different pathways. Although the results are mixed, this SLR emphasizes the potential of these innovations to deepen the effects of microfinance. The study highlights a symmetry between the two types of innovations. Disruptive innovations prioritize the financial empowerment of clients, whereas incremental innovations focus more on socioeconomic development. Moreover,implementing innovative products enhances the financial and social performance of MFIs.Intriguingly, incremental innovation may reintroduce information asymmetry problems. Disruptive innovation raises concerns about client protection and exclusion of the most unprivileged, among other aspects. The analysis emphasizes that MFIs may use these innovations to maximize benefits for their clients while maintaining sustainable financial returns.

Date: 2024
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