Discipline and flexibility: a behavioural perspective on microfinance product design |
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Authors: | Marc Labie Ariane Szafarz |
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Institution: | 1. Faculté Warocqué d’Economie et de Gestion, Université de Mons (UMONS), HumanOrg, and CERMi, Mons, Belgium;2. Solvay Brussels School of Economics and Management (SBS-EM), Université Libre de Bruxelles (ULB), CEB, and CERMi, Brussels, Belgium |
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Abstract: | The success of both microcredit and micro-savings products rests upon simplicity and standardization in order to stimulate client discipline. However, these products lack flexibility. This paper attempts to make sense of behavioural product design in microfinance. We focus on the potential trade-offs between discipline and flexibility. While discipline devices encourage clients to make payments on time, microfinance product flexibility improves clients’ day-to-day money management and helps them cope with shocks. Our contribution is twofold. Firstly, we highlight the evidence-based advantages and disadvantages of flexible products in microfinance. Secondly, we present best-practice examples of flexible products offered by microfinance institutions worldwide. |
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Keywords: | Microfinance discipline flexibility commitment incentive |
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