Beyond Basic Credit and Savings:
Developing New Financial Service Products for the Poor
4. Revision And Scaled-Up Implementation
A. Make Necessary Amendments
As a result of the monitoring and evaluation steps outlined above, the MFI will be in a position to amend the product design, pricing and marketing, or implementation systems (book-keeping, training etc.) in order to optimise it. These amendments will involve revising not only the design, delivery, marketing and accounting systems wherever necessary, but also reviewing the cost-analysis and thus the pricing of the product in the light of the experience and data gathered during the pilot testing. By this stage, the MFI should be in a much better position to prepare these analyses and to finalise the pricing and marketing of the product.
"The design of trade marks for savings products at BCS, BAAC and BRI has proven to attract depositors. These three institutions promote savings products that have self explanatory names (BAAC's Save to Increase your Chances, BCS's Grow Every Day and BRI's Savings of the Rural Community accounts) and showy trade marks. While special product labels make it easier for customers to understand the particular design of each savings product, they also help to distinguish the products from those offered by competing financial institutions.
Except for RBP, market studies have been relied upon as important tools to develop and introduce new savings products. Analysis of market potential, field pilot testing of new savings products and re-testing of the revised products on a larger scale are common practices. BRI and BAAC have undertaken extensive field testing, taking between one and two years, before launching each of their new savings products nationally. BCS and RBP constantly observe the savings conditions and marketing strategies of their competitors. " (GTZ, 1997d).
B. Scaled-up Implementation
Once the process of reviewing the pilot testing experience and data, and making the necessary amendments has been completed, the MFI is almost ready to implement the new product throughout the organisation. Before doing so, the MFI should ensure that the accounting systems for the new product are fully integrated into the organisation's management information system, while also being available for separate analysis and tracking. The scaled-up implementation of the new product will require extensive training and distribution of revised book-keeping and marketing systems, and may therefore best be done in a phased manner if the MFI is a large and wide-spread organisation.
C. And Beyond ...
"When the instruments, pricing, logistics, information systems, and staff training are completed, the program is ready to be gradually expanded throughout the branches of the institution.
When the institution has successfully expanded its instruments and services to all branches, and such new branches as may be opened, the emphasis should switch from the logistics of expansion to the techniques of market penetration. The former is necessary, but not sufficient, condition for massive deposit mobilisation. When well-run institutions offer appropriate deposit facilities and services, they can quickly gain the accounts of people living or working nearby the bank offices; this is known as the "easy money". Market penetration of the wider service area, however, requires other methods. These include: development of a systematic approach to identification of potential depositors; implementation of a staff incentive system based on performance (so that the staff will seek out the potential depositors, rather than waiting for them to come to the bank); development of effective methods for intra-bank communication; more extensive market research; a major overhaul of public relations; and massive staff training" (Robinson, 1995).
Introducing a range of high quality financial services will respond to Wood's (1997) concerns, "It seems important to have a more disaggregated understanding of the poor, and to recognise the diversity of their capacities, social position, family circumstances and livelihood options. They are not an homogeneous, undifferentiated mass, to be offered an undifferentiated, single, universal package of financial services." Furthermore, as Berenbach and Guzman (1994) remind us, "Market responsiveness is another element of success. Programs that want to attract and maintain a large client base must adopt a package of services and a means for service delivery that satisfy client preferences. "
The development of the variety, flexibility and quality of financial services to meet the wide diversity of needs of the poor is the challenge for forward thinking and successful MicroFinance Institutions.
Operations Research: Philosophy and Methods
BURO, Tangail is unique in Bangladesh since (unlike the other better known NGOs) it has always offered its members access to all of their hard-earned savings. BURO, Tangail is committed to further enhance and improve the flexibility and responsiveness of its savings and credit facilities to meet the needs of its members.
BURO, Tangail has developed a programme of operations research to improve the flexibility of the financial services offered by the organisation, and to ensure that these are responsive to the members' needs. The operations research agenda is guided by:
- the results of the organisation's attempts to improve the members' participation in its organisational and financial services development, including the Customers' Consultative Groups, PRA-based monitoring and evaluation techniques, and workshops with members and staff - i.e. client-based or demand-driven market research;
- the reviews of external consultants; and
- examination of successful products offered by other informal and semi-formal financial services providers.
Detailed design, costing and pricing of new products is undertaken by the Finance Director and his staff in collaboration with the Programme Implementation staff prior to the start of pilot testing. Pilot testing of new financial service products is conducted in well-established branches close to the head office in order to facilitate effective training, intervention and monitoring. Staff from these branches are trained in the new products and the accounting systems necessary to track them and the pilot testing begins.
Senior staff from the Programme Implementation and Finance sections of head office then make regular visits to review the progress of pilot testing in the field. They examine staff, implementation, accounting and organisational issues and make any necessary recommendations on product design. The Customers' Consultative Groups are designed to allow clients to provide feedback on product design. Once the pilot has been running for a while, staff in the pilot branches work with senior staff from the Finance section to examine profitability and liquidity issues, and to revisit the costing analysis and thus pricing of the product.
This process is further strengthened by an operations research review team of MicroFinance experts (researchers, practitioners and accountants) drawn from outside BURO, Tangail which conducts periodic reviews of the progress of the operations research programme, implementation issues, and clients' perceptions of the financial service products being offered, as well as ideas and options for further research.
Once pilot testing is completed (the period required to complete pilot testing of different products has varied with the complexity of the product, the success of the pilot test, the need for revisions to the design and pricing of the product etc.), successful financial service products are extended out to other branches as quickly as possible in a phased approach.
Operations Research Programme
Until 1996, BURO, Tangail offered limited deposit (maximum Taka 50 per week) and limited withdrawals savings products (under which clients could only access their savings if they did not have a loan outstanding). The organisation also offered a traditional Grameen Bank-inspired loan programme, offering loans repayable in non-negotiable 50 weekly instalments. As part of its commitment to innovation and to offering the best possible services to its clients, BURO, Tangail is now developing and implementing new financial service products. New components of the programme proposed for testing and implementation include:
- Open Savings Deposits - offering unlimited savings deposit opportunities (now introduced in all 40 branches).
- Open Savings Withdrawals System - allowing open access to members' savings subject to maintaining 15% of the value of any loan outstanding (now introduced in all 40 branches).
- Total Open Savings Withdrawals System - allowing open access to members' savings irrespective of whether they have a loan outstanding or not (currently being pilot tested in 1 branch).
- Fixed Term Deposit Scheme - offering higher rates of interest for longer term (2, 5 and 10 years) contractual savings agreements (currently being pilot tested in 2 branches).
- Supplementary Loan System - offering additional loans to maintain members' working capital (currently being pilot tested in 1 branch).
- Simple Prepayment Facilities - allowing prepayment of loans when members have excess liquidity (now introduced in all 40 branches).
- Line of Credit System - offering an overdraft facility (thus overcoming the problems of rigid repayment schedules that are so unresponsive to many members' business cycles) (currently being pilot tested in 2 branches).
- Business Loans - larger loans of Tk. 20,000 - 75,000 for the more successful entrepreneurs among BURO, Tangail's members (currently being pilot tested in 3 branches).
- Leasing Loans - larger loans of Tk. 20,000 - 75,000 to finance the acquisition of fixed assets (currently being pilot tested in 3 branches).
- Flexible Loan Repayment System - offering longer repayment terms for repayment of the business and leasing loans and to assist with poorer members repay their normal "general" loans (currently being pilot tested in 2 branches).
- Short-term Providential "Hand" Loans - offering 3 month loans for emergency needs (currently being pilot tested in 2 branches).
BURO, Tangail believes in the open exchange of information to further the development process. It seeks to disseminate the results and findings of the programme and operations research to other NGOs (through the Credit Development Forum an umbrella organisation of 230 savings and credit NGOs in Bangladesh), and to donors and other interested parties (through the BURO, Tangail donor support group and CGAP) and regular publication of annual reports and working papers.
Contact BURO, Tangail at:
18/Ka Pisciculture Housing Society, Ring Road, Shymoli,
Dhaka 1207, Bangladesh
Tel. 880-2-815815 Fax. 880-2-9125492 E-mail. email@example.com
Hari Srinivas - firstname.lastname@example.org
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