What is Microinsurance

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 Managing a Diverse Microfinance Product Menu

• Microfinance Centre
• 10th Annual Conference
• Sofia, Bulgaria
• Craig Churchill
• International Labour Organization

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Presentation Outline

• What is a Diverse Product Menu
• Motivations for developing a diverse product menu
• Key challenges
• General recommendations

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1) What is a Diverse Product Menu?

• A set of financial (and perhaps non-financial)
  services that complement and reinforce each
  other
• that respond to the varied financial service
  needs and preferences of the low-income market
• that can be delivered in a coordinated and
  cost-effective manner.

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A diverse product menu is not static

• It must be adapted and modified as the market
  changes
• as current products reach maturity and need to
  be refreshed or replaced
• in response to, or ahead of, adjustments made by
  competitors.

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A diverse menu should be

• Built to leverage off core products
• Structured or packaged around specific market
  segments

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2) Why Develop a Diverse Product Menu?

• Meet the needs of the customers better
• Increase and/or deepen outreach
• Improve profitability
• Increase market share
• Reduce institutional risks
• Diversify income sources
• Bolster customer loyalty

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Operational Signals to Adjust the Product Menu
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Operational Signals to Adjust the Product Menu
(cont.)
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Some MFIs have other motivations to adjust their
product menu

• There is donor money available
• Everyone seems to be developing new products
• The more products we have, the better we will
  look to donors, government, investors...

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3) Key Challenges

• Front office staffing Who offers what products?
  Does the MFI employ generalists or specialists,
  or a combination?
• Reporting lines Geographic, functional or
  matrix?
• Overcoming regulatory obstacles Are there
  services that the market wants, but MFIs cannot
  offer?
• Branding and marketing How to present the menu
  to the market to maximize sales and minimize
  confusion?

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The Product Mix of MiBanco (Peru)
Credit for construction of a market stand or shop
Credit for equipment or machinery for a business
 Credit for general capital infusions for
businesses
Personal loans for unexpected or emergency
situations
Credit for the construction or improvement of a
home
Savings accounts for either domestic currency or
US dollars, with no fixed term.
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3) Key Challenges

• Front office staffing Who offers what products?
  Does the MFI employ generalists or specialists,
  or a combination?
• Reporting lines Geographic, functional or
  matrix?
• Overcoming regulatory obstacles Are there
  services that the market wants, but MFIs cannot
  offer?
• Branding and marketing How to present the menu
  to the market to maximize sales and minimize
  confusion?
• Products for whom? Are you trying to maximize
  cross-selling opportunities or expand the market?
• Capacity Does the MFI have the capacity to
  manage client and product information (MIS),
  retrain staff (HR), and monitor product
  profitability?
• Resistance to change Are staff prepared for
  continuous improvement to the product menu?
• Managing Risks

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Adapting the Product MenuA Risk Management
Checklist
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Adapting the Product Menu A Risk Management
Checklist (cont.)
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4) General Recommendations Top Ten List

• Pilot test before roll out
• Avoid changing too many things at once
• Avoid product proliferation
• Have a long-term plan for developing a coherent
  product menu
• Take stock of the effect of new products on
  clients and staff before moving forward with the
  next set of changes
• Make sound decisions based on good information
  product performance tracking, realistic
  projections
• Monitor cross utilization by customers
• Consider partnerships
• Provide staff training, and then provide some
  more
• Communicate, communicate, communicate

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Thank you!

• Craig Churchill
• churchill_at_ilo.org
• Tel [phone]