Flexible Products in Microfinance: Overcoming the Demand-Supply Mismatch
This paper highlights the need for flexible financial products by the poor to improve their day-to-day money management and cope with adverse shocks. It discusses how MFIs could design flexible products efficiently. The paper states that the success of microfinance rests upon product simplicity, standardization, and the capacity to stimulate client discipline. Financial flexibility represents the ability of a firm to access and restructure its financing at a low cost. The paper draws on the few successful examples of flexible products already implemented by MFIs worldwide. Different sections of the paper together:
- Clarify the concept of financial flexibility;
- Summarize the state of knowledge on the trade-off between flexibility and client discipline;
- Weigh the advantages and disadvantages of the few flexible products already implemented by MFIs worldwide;
- Discuss the effects of flexibility on products.