Why Bother with Product Development?...And Where to Get Help!

This briefing note emphasizes the importance of product development in microfinance. It suggests that microfinance should move from being "product-driven" to being "market-driven" and should recognize the value of retaining existing customers. It points that:

• Retained customers usually have extensive credit history and access larger, higher value loans;
• New customers require induction training and often weaken the solidarity of groups;
• Client drop-outs usually occur due to inappropriately designed products that fail to meet the needs of the microfinance institutions' (MFIs) clients.

Further, the note suggests that market research helps in understanding the operating environment of MFIs and in identifying clients' needs. It achieves this by:

• Improving current marketing, promotion, outreach activities;
• Refining existing products;
• Developing new products;
• Re-engineering delivery systems.

Finally, the note provides information on the availability of market research resource material on the MicroSave website. These are:

• Toolkits including those on market research for microfinance, product costing, strategic marketing, corporate branding and customer servicing;
• A database of trainers certified to teach the MicroSave toolkits "Market Research for Microfinance" course;
• Studies on the product development process, potential for new products, informal sector financial systems, how and why poor people save, impact assessment, etc.