Commercial Approaches to New Product Development in Microfinance: Case Studies of Banco Solidario de Ecuador and Cajas Municipales de Arequipa, Peru
Brand, M.
Publication Date: Aug 1999
Published by: USAID - Microenterprise Best Practices (MBP) Project
Document Type: Case Study
How can microfinance institutions develop effective products?
Examines the characteristics of specific products developed by two microfinance institutions, Banco Solidario de Ecuador (BSE) and Cajas Municipales de Arequipa (CMA) in Peru.
Analyses: - internal and external conditions that gave rise to the development of new products
- product characteristics that reflect the needs of the market segment targeted
- success of these institutions in designing effective products
The specific products chosen fall into three categories: - standardized, high-margin products: pawn loans (BSE and CMA)
- loans targeted to preferential or premier clients: home equity loans (BSE) and parallel loans (CMA)
- loans targeted at specific market niches: supplier-vendor loans (BSE) and agricultural loans (CMA)
These products are labelled as "new" to the extent that they were developed to meet the needs of microentrepreneurs beyond traditional supply-driven, fixed-term, working capital financing.
Finds that these products have common features that account for their success, such as: - taking a target-market approach to product design
- developing risk management techniques to preserve asset quality
- offering a diversified portfolio of products to penetrate more deeply into the target market
- establishing a culture of innovation to develop new product opportunities
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