Product Features of Individual Lending (1/2)
MicroSave's Briefing Note No. 86 highlights key features of individual loans that an MFI must focus on before offering individual loan products to clients.
Many MFIs have recently introduced individual loans as one of their product offerings. They see individual lending (IL) as a good business opportunity and as an effective mechanism to help clients in business activities. Individual loans help MFIs reach the slightly better-off segment of the population. The most common product features of IL include:
- Loan size;
- Loan term;
- Repayment frequency;
- Moratorium or grace period;
- Prepayment option;
- Purpose of loan;
- Collateral or back-up;
- Choice between an MIS-led or market-led product.
MFIs keen to venture into IL need to start the product development process with market research to understand the clients’ needs and preferences. The basic product features listed above need to be designed after carefully considering the research results and the MFI’s capabilities.
