Understanding the Dynamics of Product Diversification on Microfinance Performance Outcomes: A Case Study in Barbados

This paper explores effects of combined microfinance (CMF) on the social and economic performance of MFIs.

The paper examines qualitative data from a case study of various stakeholders in City of Bridgetown (COB), a credit union in Barbados. It highlights the presence and characteristics of CMF in Barbados. Findings indicate that:

• Most MFIs in Barbados actively apply CMF;
• Cooperative sector is most active in providing credit, savings and, to a limited extent, insurance services;
• CMF allows a number of economies of scope which may enhance efficiency and productivity;
• Low-cost use of deposits for lending can enhance cost-efficiency of operations;
• It is difficult to attribute elements of CMF to the financial performance or the portfolio quality of COB;
• Savings services have transaction cost elements which can reduce profitability;
• Possible effects of insurance and savings on portfolio quality remain relatively marginal and difficult to measure in the case of COB.

Study findings also offer insights on the process dynamics of how a cooperative union and its clients are influenced by multiple financial products.