Innovative flexible products in microfinance

Abstract

The paper describes innovative microfinance products that combine flexibility features with financial discipline. Those are microsavings, microcredit and microinsurance products and they come from microfinance institutions worldwide. This review shows that service providers are introducing various types of flexibility into financial contracts and that flexibility can be combined with a variety of disciplining mechanisms, such as direct screening and monitoring of clients, financial collateral, reputational incentives, and also psychological pressure. We notice, however, that product flexibility may raise the operational costs for the institutions and have a limited outreach.