What kind the include to products of microfinance? let's share..
This trend is also helped by
technological innovations that are reducing costs for almost all kinds of
financial products, allowing more and more people to use them and the industry
to meet every time in a better way the demand of their clients. Transferring
money between different continents has become easy and fast, different kinds of
insurances such as life, cattle or weather risk are widely available in
industrialized countries. This is the situation in these countries but is it
true also in developing countries? Can low income people access these financial
services?
A.
Loans
1.
Fast access
Rapid loan approval and fast disbursement is crucial for clients and it is often the main reason why many people deal with moneylenders even at very high interest rates.
2. Clear, easy and flexible conditions
It is important to provide the credit service at convenient conditions for the clients. Transaction costs, which include transportation costs (to pay the instalments or get the money) or time away of work, throughout the life of the loan must be kept low.
3. Permanent services
Credit services must be provided on an ongoing basis, not only for a limited period of time.
4. Alternative collaterals and collateral substitutes
Poor people often lack traditional collateral. To overcome this obstacle many MFIs use other kinds of collaterals known as collateral substitutes and alternative collaterals.
Rapid loan approval and fast disbursement is crucial for clients and it is often the main reason why many people deal with moneylenders even at very high interest rates.
2. Clear, easy and flexible conditions
It is important to provide the credit service at convenient conditions for the clients. Transaction costs, which include transportation costs (to pay the instalments or get the money) or time away of work, throughout the life of the loan must be kept low.
3. Permanent services
Credit services must be provided on an ongoing basis, not only for a limited period of time.
4. Alternative collaterals and collateral substitutes
Poor people often lack traditional collateral. To overcome this obstacle many MFIs use other kinds of collaterals known as collateral substitutes and alternative collaterals.
B. Savings
Liquid accounts are flexible saving products often with no
or small minimum balance but they usually do not provide or pay very little interests. Time
deposit accounts, on the other hand, usually offer higher interest rate but clients
have to leave their money in the account for a specified period of time.
Savings
will also attract more clients than loans alone and constitute an important source of funds for the institution. Furthermore it should also be a less
expensive source compared to traditional commercial loans as for most MFIs it does not represent a big additional cost. This is due to the already available
infrastructure required to collect savings (branches, trained staff, clients relationships).
C. Microinsurance
C. Microinsurance
Insurance
is a financial service that some MFIs are starting to add to their portfolio to respond to this need of protection. Providing savings and insurance services
besides credit make the MFI a full service financial institution delivering
microfinance, i.e. a full set of financial services to low income people.
D. Money Transfer
Money transfer service is another critical financial service: the business of remittances, i.e. the money that emigrants send home to relatives, is growing strongly and is often managed by informal arrangements with high charges and high risks.A study by Manuel Orozco showed that in 2002 the average fee to send between US$150 and US$300 from the United States to Central America was on average 7.35 percent the value of the amount sent, to which must be added average additional costs of about 2.3 percent. The total average percentage paid on a transaction of US$150 was about 18 percent. These high charges are primarily due to a low competition in the market and this is why MFIs started to provide, together with the other traditional financial products, this valuable service for their clients.
D. Money Transfer
Money transfer service is another critical financial service: the business of remittances, i.e. the money that emigrants send home to relatives, is growing strongly and is often managed by informal arrangements with high charges and high risks.A study by Manuel Orozco showed that in 2002 the average fee to send between US$150 and US$300 from the United States to Central America was on average 7.35 percent the value of the amount sent, to which must be added average additional costs of about 2.3 percent. The total average percentage paid on a transaction of US$150 was about 18 percent. These high charges are primarily due to a low competition in the market and this is why MFIs started to provide, together with the other traditional financial products, this valuable service for their clients.
