The Demand for Flexible Microfinance Products: Lessons from Bangladesh

Using evidence from MFIs in Bangladesh, the paper analyses the unmet demand in the areas of exclusion and non-participation, dropouts, delinquencies, overlap, and use of informal finance stating that the phase of horizontal expansion of microfinance is drawing to a close in Bangladesh. It argues that dropouts, overlapping and delinquency appear to be rising while many of the poor refuse to use MFI products and informal sources of finance continue to be important for poor households. The paper looks at ways in which MFIs respond to client demands and preferences. It analyzes:

• Challenges in meeting client demands;
• Impediments to change, especially in the dimension product transformation.

The paper concludes that:

• There is the need for re-engineering of most MFIs based on market research and pilot testing;
• Trade-off between product flexibility and client satisfaction and costs and risk for MFIs must be recognized and managed.