Paper
New Product Development for Microfinance
What is the ideal development process that a microfinance product should go through?
11 pages
This technical note discusses why and how new products are developed for microfinance. It argues that increasing competition, client dropout rates and a more sophisticated clientele have forced the microfinance market to be more client and demand-driven.
The note describes how MFIs have developed new products to expand their outreach into rural areas. Defining a product as anything that satisfies a customer's need, it states that:
- An MFI should consider developing new products depending on:
- Its stage of development;
- The level of competition in the market in which it operates;
- The needs of its clientele.
- The development of a new product goes through four phases:
- Identification and preparation;
- Design and development;
- Pilot testing;
- Product launch.
The note concludes by listing important lessons for successful product development:
- Get client feedback continually throughout the process, in order to reform the product if necessary;
- Expect problems to rise along the way;
- Test the product in actual market settings and expand slowly;
- Prepare realistic cost revenue projections;
- Make sure systems have enough capacity and flexibility to manage and track new products;
- Provide incentives and training to staff to ensure effective product implementation;
- Cancel the product if conditions are not conducive;
- Create a client-centered institution.
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