Why Donors Need to Understand Product Development

The paper informs on:

• The kinds of financial services used by poor people;
• The limitations of financial services currently available to the poor;
• The importance of product development to donors.

Further, the paper lists the several facets in product development and states that donors need to be aware of:

• Not dictating product development;
• Institutions following a systematic product development process;
• Not engaging in new product development if they have the option of repackaging and refining an existing product;
• The institutional capacity and commitment of the financial provider;
• Product proliferation;
• Making an assessment of product development through appropriate indicators, like:
  • A wider range of financial services used by more clients;
  • Increased stability and sustainability of financial institutions through portfolio diversification;
  • Greater client loyalty and retention;
  • Better fund mobilization.

Finally, the paper suggests donor role in supporting product development:

• Provide flexible innovation grants that enable a variety of institutions to design products based on client needs/preferences;
• Support organizational changes necessary for market-led product development;
• Offer technical assistance to institutions that are testing new products, particularly in challenging environments;
• Take a patient, long-term approach to funding that rewards institutional performance and outreach;
• Support information exchange and learning among practitioners and donors;
• Invest in regional or global projects and networks.