New Product Development for Microfinance

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.