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

Michael Hamp and Carolina Laureti ()

No 11-044, Working Papers CEB from ULB -- Universite Libre de Bruxelles

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.

Keywords: product flexibility; discipline; commitments; microfinance (search for similar items in EconPapers)
JEL-codes: D30 D82 G21 O12 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2011-10
New Economics Papers: this item is included in nep-ban, nep-hme and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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