Beyond Basic Credit and Savings:
Developing New Financial Service Products for the Poor

3. Design And Pilot Testing

A. Design, Cost-Out And Price New Products.

On the basis of the results of identification of needs and opportunities activities outlined above, the organisation should be in a position to design new products. The key is to introduce new products on an incremental basis - one, or a very few, at a time - so that the organisation's staff and clients can manage, monitor and understand them properly. Careful attention must be given to the interactions between different financial service products being offered by the MFI - from both organisational and financial perspectives.

"The common denominator underlying savings programs of Bank Dagang Bali, BRI's local banking system, and BancoSol is that the programs were designed specifically to meet local demand for security, convenience of location, and a choice of savings instruments offering different mixes of liquidity and returns. These programs were all designed with extensive knowledge of local markets; moreover BRI learned from BDB, while BancoSol learned from both. Financial institutions from developing countries all over the world are now learning from all three" (Robinson, 1995).

A Small Selection of International Net-working Addresses (there are many more)

ACCION International, 120 Beracon Street, Sommerville, MA 02143, USA or 733 15th Street NW, Suite 700, Washington DC 20005, USA. Tel. 1 617 492 4930 or 1 202 393 5113 Fax. 1 202 393 5115 or 1 617 876 9509 Email.

Agricultural Cooperative Development International, 50 F Street, NW, Suite 900, Washington DC 20001, USA. Tel. 1 202 879 0224 Fax. 1 202 626 8726

Association pour leDroit a l'Initiative Economique (AIDE), 111 Rue Saint Maur, 75011 Paris, France. Tel. 33 1 4355 9894 Fax. 33 1 4355 9883

Centre International de Developpement et de Recherche (CIDR), B.P. 1, 60350 Autreches, France. Tel. 33 44 42 1106/1112 Fax. 33 44 42 9452 Email.

Calmeadow, 120 Dunvegan Road, Toronto, ON M4V 2R3, Canada. Tel. 1 416 467 1097 Fax. 1 416 467 4690 Email.

CASHPOR, 4/1 Jalan Permata 4, Taman Permata, 70200 Seremban, Negeri Sembilan, Malaysia. Tel. 606 764 5116 Fax. 606 764 2307 Email.

Consultative Group to Assist the Poorest 1818 H Street, NW, Room G4-115, Washington DC 20043, USA. Tel. 1 202 473 9594 Fax. 1 202 522 3744 Email

Development Finance Network, The Ohio State University, Dept. of Agricultural Economics, 2120 Fyffe Road, Columbus OH 43210 1099, USA. Fax. 1 614 292 7362 Email.

Foundation for International Community Assistance (FINCA), 1101 14th Street NW, 11th Floor, Washington DC 20005, USA. Tel. 1 202 682 1510 Fax. 1 202 682 1535 Email.

Foundation for Development Cooperation, PO Box 10445, 232 Adelaide Street, Brisbane, Queensland 4000, Australia. Tel. 61 7 3236 4633 Fax. 61 7 236 4696 Email.

Freedom From Hunger, 1644 Da Vinci Ct., Davis, California 95617, USA. Tel. 1 916 758 6200 Fax. 1 916 758 6241 Email:;

Grameen Trust, Grameen Bank Bhaban, Mirpur 2, Dhaka 1216, Bangladesh Tel. 880 2 9005348 Fax. 880-2-806319 Email.

MicroFinance Network 733 15th Street NW, Suite 700, Washington DC 20005, USA. Tel. 1 202 347 2953 Fax. 1 202 347 2959/393 5115 Email.

Opportunity International, 1111 North 19th Street, Suite 501, Arlington, VA, USA. Tel. 1 703 522 8155 Fax. 1 703 522 8049

SEEP Network c/o PACT, 777 United Nations Plaza, New York, NY 10017, USA. Tel. 1 212 808 0084 Fax 1 212 682 2949 or 1 212 692 9748 Email.

World Women's Banking/International Coalition of Women and Credit, 8 West 40th Street, 10th Floor, New York, New York, NY 10018, USA. Tel. 1 212 768 8513 Fax. 1 212 768 8519 Email. wwb@igc.apc

World Council of Credit Unions (WOCCU), 5710 Mineral Point Road, Madison, Wisconsin 53705, USA or 805 15th Street, NW, Suite 900, Washington DC 20001, USA. Tel. 1 608 231 7130 or 1 202 879 0224 Fax. 1 608 238 8020 or 1 202 626 8726 Email.

The design of the new products should reflect as closely as is feasible the needs expressed by the clients and the opportunities offered by the market while still ensuring that they also meet the MFI's organisational and financial requirements. . Thus, for example, if there is a demand for contractual savings facilities , the periods on offer (both for regularity of savings deposits and the time period of the CSA) should be driven by a combination of:

  1. the clients' needs: what are the most convenient regular deposit periods (weekly, bi-weekly or monthly) ? what are the typical uses for the facility (education, marriage ceremonies etc.) ?;
  2. the MFI's needs: how often can staff collect and account for these regular deposits ? how will these interface with the staff's existing duties and routines ? what is the organisation's need for capital ? does it have the management information systems and fund/liquidity management systems to manage the resultant fund flows effectively ?; and
  3. the market in which the MFI is operating: the market will not only provide the competition, but also dictate the level of product recognition: if the new product is a better priced or delivered version of an existing facility already known and accepted in the community, it will probably be easier to "sell" than a brand new product which has to be explained at length to potential clients.

These latter, organisational issues, together with cost analysis will be the basis on which the product must be initially priced before comparing that price to the market. The cost of delivering and administering the product must be carefully analysed, for later comparison with the earnings that are expected to be derived from the product. Thus, for example, if a new 3 month providential loan product (repayable in weekly amounts) is under consideration, the MFI would examine how staff would collect and account for these regular repayments ? how will these interface with the staff's existing duties and routines, and thus what would be the marginal or incremental costs ? what additional book-keeping and portfolio tracking systems would be required ? what would be the expected level of take up of the new product, and thus what are the implications for the above issues and the organisation's liquidity and capital funds ? what level of risk is involved, and therefore what level of bad debts are expected ? Given the commitment of most MFIs to institutional sustainability, the above cost analysis will provide an indication of the minimum price at which the new product can realistically be delivered. Similarly, unless the MFI is delivering an entirely new or significantly improved product, the competition will give an indication of the maximum price that clients are willing to pay for a similar service. Between the two is where the MFI should price its financial service product c at least for the pilot testing phase.

B. Implement the New Products on a Pilot Basis

It is important to implement the new products in a limited number of easily accessible branches so that the results and issues can be monitored easily and any necessary corrective action be taken promptly. If several products are to be pilot tested, they should be initially introduced in separate branches so that the marginal effects on operations and financial results can be monitored.

"It is difficult to estimate accurately for each instrument - in advance of the savings mobilization effort - what the labour costs will be, what the demand will be, and what interest rates will serve to make the instrument attractive and profitable. Therefore, pilot projects are needed to set appropriate interest rates for savings instruments, and to establish suitable spread. c" (Robinson, 1995).

When introducing the new products, the MFI will have to amend book-keeping systems to ensure that the financial flows and receivables/payables arising from the product can be properly and promptly tracked and controlled. Thereafter the MFI must conduct the training necessary to ensure that outreach staff can promote the product and record the transactions that go with it, and that the branch level staff can effectively account for it using the new systems. Finally, when these steps have been completed the MFI and its staff can then undertake the marketing exercises to promote the product.

Senior staff of the MFI should regularly visit the branches where the new services is being delivered to review how the services is being sold and implemented in the field, how the services are being received by the clients, and the effect of the new services on the organisational and financial management systems. These visits will allow for rapid corrective action where necessary, and provide first hand knowledge of these issues that will prove invaluable when it comes to evaluating the results of the pilot test.

BURO, Tangail's piloting of Contractual Savings Agreements is being pilot tested in only two branches: the two experimental branches were given a target of opening only 12 CSA accounts each per month. This demonstrates the conservative, limited scope and care taken by BURO, Tangail to pilot test and constantly review the dynamics of the new scheme's implementation. The actual performance is given below (taken from Rutherford and Hossain, 1997).

Contractual Savings Agreement Scheme size
Pathorail branch
Silimpur branch
7 months to December '96 11 months to April '97 7 months to December '96 11 months to April '97
Taka 5
Taka 10
Taka 15
Taka 20
Taka 25
Taka 50
Branch Total
Total Taka (Taka 40=1US$) 67,586 47,130


Hari Srinivas -
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