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Microfinance Markets, Products and Services > MMPS: Module 2 > Flashcards

MMPS: Module 2 Flashcards

1
Q

Typically, new product development focuses on what is referred to
as the actual product—in other words, the specific terms such as
interest rate, term length, type of guarantee, and so forth. But the
reason a client buys a product is about satisfying ______________.

A

needs and wants

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2
Q

It is augmented by its packaging and delivery method
(that is, does the arrangement have a bow, arrive in a vase, come via overnight delivery, or arrive with a card?).

A

Product

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3
Q

True or False

Offering financial services to poor people in developing countries
is expensive business.

A

TRUE

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4
Q

The ____ is one of the biggest reasons why
traditional banks don´t make small loans, the resources required for a
P2500 loan is the same as for a P50000 loan.

A

cost

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5
Q

MFIs have big ________ and _________costs. Field staff
managers must perform village surveys before entering a village,
conduct interviews with potential borrowers, educate the borrowers in credit discipline, travel to the villages every week to collect interest and distribute loans and control that the loans are being used for the given purpose.

A

personnel and administration

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6
Q

The ____________ cycles are usually shorter than traditional
commercial loans with terms from typically six months to a year with
payments plus interest, paid weekly.

A

microcredit loan

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7
Q

____________ and _____________ help the borrowers stay current and not become surprised by large payments.

A

Shorter loan cycles and weekly payments

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8
Q

True or False

Clearly the transaction-intense nature of weekly payment collections, often in rural areas, is more expensive than
running a bank branch that provides large loans to economically secure borrowers in a metropolitan area. As a result, MFIs must charge
interest rates that might sound high.

A

TRUE

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9
Q

True or False

In order to be able to lend out money, the microfinance institutions must in addition borrow from the traditional finance sector with commercial perspective.

A

TRUE

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10
Q

There´s always about ___% loss on loans due to people not paying back.

A

1-2%

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11
Q

To be able to expand business the MFIs must also make some ____, at least 1-2%.

A

profit

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12
Q

For a financial institution to scale and remain sustainable, at a
bare minimum it has to cover its costs. A large bank can charge lower rates in order to recoup its costs. Because of smaller loan size and more transactions, the MFI has to charge _______________.

A

higher minimum rates.

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13
Q

True or False

Data from the MicroBanking Bulletin reports that 63 of the
world’s top MFIs had an average rate of return, after adjusting for
inflation and after taking out subsidies programs, of about 2.5% of total assets. This lends to the hope that microfinance can be sufficiently attractive for investors, as well as the mainstream in the retail banking sector.

A

TRUE

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14
Q

Income
Generation
Loan (IGL): Purpose, Terms and Interest Rate

A

Purpose: Income generation, asset
development

Terms: 50 weeks loan
paid weekly

Interest Rate: 12.5% (flat) 24%
(effective)

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15
Q

Mid-Term
Loan (MTL): Purpose, Terms and Interest Rate

A

Purpose: Same as IGL, available at
middle (week 25) of IGL

Terms: 50 weeks loan
paid weekly

Interest Rate: 12.5% (flat) 24%
(effective)

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16
Q

Emergency
Loan (EL): Purpose, Terms and Interest Rate

A

Purpose: All emergencies such as health, funerals, hospitalization

Terms: 20 weeks loan

Interest Rate: 0% Interest free

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17
Q

Individual
Loan (IL): Purpose, Terms and Interest Rate

A

Purpose: Income generation, asset development

Terms: 1-2 years loan repaid monthly

Interest Rate: 11% (flat) 23
(effective)

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18
Q

The __________________ is used for a variety of activities that
generate income for their families. Clients submit a loan application
and based on approval receive the loan after one week. Loans are paid in 50 equal, weekly installments. After completion of a loan cycle, the client can submit a loan application for a future loan. The approach with smaller short-term loan is to avoid long-term economic problems with bigger loans.

A

Income Generating Loan

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19
Q

The ___________ is available to clients after 25 weeks of repaying their IGL loan. A client is eligible for this loan if the client has not taken the maximum amount of the IGL. The residual amount can be taken as this loan. The terms and conditions of this are otherwise
exactly the same as IGL.

A

Mid Term Loan

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20
Q

The _____________ is available to all clients over the course of a
fiscal year. The loan is interest free and the amount and repayment
terms are agreed upon by the MFI and the client on a case by case basis. The amount is small compared to the income generating products and is only given in times of dire need to meet expenses such as funerals,
hospital admissions, prenatal care and other crisis situations.

A

Emergency Loan

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21
Q

The _____________ is designed for clients and non clients that
have specific needs beyond the group lending model. Loans are given to an individual outside of the group lending process. Amounts are typically higher than that of the income generating loan and
repayments are less frequent. Applicants must complete a strict
business appraisal process and have both collateral and a guarantor.

A

Individual Loan

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22
Q

True or False

Microfinance is not panacea from all troubles, this also means
that not any poor person can obtain the loan.

A

TRUE

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23
Q

True or False

Representatives of very poor population, lacking stable income, living by means of chance earnings, and particularly having debts (in relation to
community facilities, relatives, friends, etc…) cannot be clients of
microfinance, since in case of microcredit non-repayment they will have more debts, becoming poorer. For such people special programs of social assistance are needed, which are able to support main needs of people living in the poorest dwellings, lacking garments and food.

A

TRUE

24
Q

Usually micro credits can´t be used for the purposes like:

A

Payments of other loans or other debts;

Production of tobacco and liquor;

Forming turnover capital of trade and intermediary business;

Organization or purchasing products for gambling or
entertainment services for the population;

Establishing trading points;

Purchase of property that´s not used for business.

25
Q

Microfinance institutions are now _____________to help meet these needs, empowering the world’s poor to improve their own lives.

A

innovating new products

26
Q

A possibility to save money without no minimum balance. Allows people to retain money for future use or for unexpected costs. In SHGs the members save small amounts of money, as little as a few rupees a month in a group fund. Members may borrow from the group fund for a variety of purposes ranging from household emergencies to school fees. As SHGs prove capable of
managing their funds well, they may borrow from a local bank to
invest in small business or farm activities. Banks typically lend up to four rupees for every rupee in the group fund.

A

Micro savings

27
Q

Gives the entrepreneurs the chance to focus more on their core business which drastically reduces the risk affecting their property, health or working possibilities.

A

Micro insurance

28
Q

For entrepreneurs or small businesses who can´t afford buy at full cost they can instead lease equipment, agricultural machinery or vehicles. Often no limitations of
minimum cost of the leased object.

A

Micro leasing

29
Q

A service for transferring money, mainly overseas to family or friends. This is without opening current accounts are performed by a number of commercial banks through international money transfer systems such as Western
Union, Money Gram, and the like.

A

Money transfer

30
Q

True or False

On the surface they may seem
like small money transfers, but when one considers that such
transactions take place millions of times around the world each
week, the numbers start to become impressive. According to the World Bank, the annual global market for remittances – money
transferred home from migrant workers – is around 167 billion US
dollars. The estimated total is closer to 230 billion dollars if one
counts unregulated transactions. Remittances are also an
important source of income for many developing countries
including India, China and Mexico, all of which receive over 20
billion dollars each year in remittances from abroad.

A

TRUE

31
Q

A product new to the MFI that is marketing it.

A

New Product

32
Q

An improvement or revision to an existing product.

A

Refined Product

33
Q

The end results of refined and new product.

A

Products appear in some degree new and desirable to the consumer.

34
Q

Products of MFIs

A

Micro loans
Micro savings
Micro insurance
Micro leasing
Money transfer

35
Q

The institutional analysis should start with a review of the MFI’s
_____________ and the business plan to achieve it. The MFI should have a business plan that both includes and specifically allocates funds for product development. This requirement will necessitate the preparation/ integration of the product development process into the cash flow budget prepared with the business plan to clearly document the resources allocated to product development and the expected returns. These business plan components set out the institutional priority placed on product development as a controlled and integrated
part of the MFI’s overall strategy.

A

institutional strategy

36
Q

The MFI should also analyze its current and projected ________________, including capacity for managing liquidity, ensuring full product costing of current products, and attaining self sufficiency. A new product can seriously affect financial viability and proper financial management, and an MFI should manage and track these key performance areas prior to embarking on any product development.

A

financial viability

37
Q

For effective product development, an MFI needs an ______________________ that encompasses and encourages both a customer-service orientation and a culture of innovation. This structure will require effective and efficient internal communications among all levels. Good communication allows the MFI
to enforce conformity to standard procedures in branches (through the development and use of procedures manuals), with clear authority levels and successful delegation by management. In addition, the MFI will need a management culture of, and systems for, listening to its
frontline staff with a view to optimizing client service. Finally, the MFI’s Board must have the commitment to customer service and the will to follow the product development process in a systematic and structured manner.

A

organizational structure and philosophy

38
Q

The MFI will also need the __________________to conduct product development in terms of the availability and experience of appropriate staff. Product development requires training of existing staff and therefore a strong training department or other training options. Low staff turnover will make the product development process easier and the process of testing new or refined products more valuable and informative. Finally, the MFI will need to dedicate high - quality management resources to the product development team to oversee and implement the process.

A

human resources

39
Q

An MFI serious about client-responsive product development will need to focus on ___________ to track progress of existing products, formally assess competition on a regular basis, and understand the MFI’s strengths and weaknesses relative to that competition. The MFI should also track the results of marketing efforts on a regular basis to
assess their effectiveness.

Prior to initiating product development, the MFI should ensure that it has some marketing capacity available. The MFI should already possess skills in assessing client needs and satisfaction (including the institutional ability to perform qualitative research), tracking results of marketing and products, and evaluating its position within the market. This capacity can be in-house or (more rarely) can be contracted out to market research companies.

A

marketing

40
Q

The MFI should complete a thorough review of its existing ________ with a view to optimizing them in response to client needs and organizational efficiency goals prior to entering into product development. Current systems
form the basis of new product systems and so they should be capable, user friendly, accurate, timely, and comprehensive in reporting and tracking. These
features pertain to both electronic and manual systems. A process review of the systems assesses staff satisfaction with current systems, and analyzes the ability
of the systems to deliver accurate, timely, comprehensive data to users.

The system should encompass procedures for monitoring and auditing financial controls, including external audits, as well as a manual or electronic system able to track financial and nonfinancial data by product and branch.

Current systems will require the flexibility to accommodate new pro
ducts. Given that new products will create additional work for existing systems, these should have significant excess capacity available or the MFI should plan
to add this additional capacity. Finally, it is important to note that in many cases new products will not only require modifications to the information systems but may also necessitate completely different delivery systems.

A

systems

41
Q

True or False

When evaluating the diverse needs of clients, the MFI should recognize that it cannot design a product to respond to each and every individual specific need.

A

TRUE

42
Q

The following variables must be considered when evaluating the most common needs among an MFI’s clients:

A

Time scale/duration/maturity of the product – short-, medium-, or long-term

Nature of deposits/repayment – small regular, small irregular, or
single/few lump sums

Liquidity – the ease of access to savings/speed of disbursement of
loan

Access issue – branch proximity/opening hours and numbers of withdrawals/ concurrent loans

43
Q

True or False

One product can be marketed in many different ways to meet a
variety of clients’ needs. The MFI can market the same short term
emergency loan as an education loan to meet periodic school fees, a health loan to meet doctor’s fees and medication, or a loan to allow
client s to take advantage of an unexpected opportunity… to name but a few.

A

TRUE

44
Q

The Product Development Process

A
  1. Evaluation and Preparation
  2. Market Research
  3. Concept/Prototype Design
  4. Pilot Testing
  5. Product Launch and Rollout
45
Q

Which specific process of product development pertains to the details below?

Analyze the institutional capacity and “readiness” to undertake product development.

Assemble the multi-disciplinary product development team, including a “product champion”.

A

Evaluation and Preparation

46
Q

Which specific process of product development pertains to the details below?

Define the research objective or issue

Extract and analyze secondary market data

Analyze institution-based information, financial information/client results from consultative groups, feed
back from frontline staff, competition analysis, etc.

Plan and undertake primary market research

A

Market Research

47
Q

Which specific process of product development pertains to the details below?

Define initial product concept.

Map out operational logistics and processes (including MIS and personnel functions)

Undertake cost analysis and revenue projections to complete initial financial analysis of product

Verify legal and regulatory compliance

On the basis of the above plus client feedback sessions,
refine the product concept into a product prototype in clear, concise, client language

Finalize prototype for final quantitative prototype testing
or pilot testing, according to the risk/cost nature of the product

A

Concept/Prototype Design

48
Q

Which specific process of product development pertains to the details below?

Define objectives to be measured and monitored during pilot test, primarily based on financial projections

Establish parameters of pilot test through the pilot test protocol, including sample size, location, duration, periodic evaluation dates, etc.

Prepare for pilot test, install and test systems, draft procedures manuals, develop marketing materials, train staff, etc.

Monitor and evaluate pilot test results

Complete recommendation letter documenting the results of the pilot test, comparison with projections,
lessons learned, finalized systems/procedures manuals,
etc. and the initial plans for the roll out

A

Pilot Testing

49
Q

Which specific process of product development pertains to the details below?

Manage transfer of product prototype into mainstream operations

Define objectives to be measured and monitored during roll out based on financial projections

Establish parameters of rollout through the rollout protocol
including schedule, location, tracking, budget, process

Prepare for rollout, install and test systems, finalize procedures manuals, develop marketing materials, train staff etc.

Monitor and evaluate rollout process and results

A

Product Launch and Rollout

50
Q

Product Development Success Factors

A
  1. Unique, superior product
  2. Customer-focused, market-driven
  3. Homework
  4. Sharp, clear, early product definition
  5. Quality of execution
  6. Correct organizational structure and climate
  7. Focused project selection decisions
  8. Planning and resourcing the launch
  9. Role of top management
  10. Speed—but not at the expense of quality
51
Q

Why Product Development is Important?

A

Product development, is the life-blood of companies and societies.
The product could be a physical product such as an automobile,
smartphone, or coffee maker. It could also be services such as new IT solution, new manufacturing process, or a new real estate marketing concept.

52
Q

All successful product development actions provide the following:

A

> New value for customers
Improved society
Continued existence of the company

53
Q

The first and most important reason for any new development is to provide new value to the customer. Without this, there is no reason for them to trade their money for the new device. However, if the product or service offers overwhelming value, then customers will flock to it.

This new and increasing value is what keeps companies growing.
If there is no new value to offer customers, the firm wilts and eventually dies. If the value offered is not increasing, then the company is losing ground in the market as its competitors increase their value in the
market.

A

New Value for Customers

54
Q

Many new products are simply an incremental improvement over
the previous version with only some new features or slight faster
performance. These products may sustain the company by offering
enough new value to generate additional revenue, but they are hardly a boon to society.

There are certain instances where new products will improve society beyond just the immediate gratification of the consumer.
Example of these are innovative new drugs to treat debilitating diseases and automotive safety devices that save hundreds of lives per year. Neither of these may offer the consumer swift satisfaction, but they save
lives and therefore improve society.

A

Improved Society

55
Q

New products and services are the lifeblood of any company. Without them, the firm withers on the vine and either dies or is absorbed by another firm. Society is well-served by the continuance of these companies from the employment of the individuals who work there (who are also consumers), and the support for society at-large in
the form of taxation and charitable giving.

Companies (and civilizations) have little choice but grow and improve if they want to move from survival to thriving. The new products and services created and provided by companies of all sizes provide the mechanism for this growth and improvement. What are you and your firm doing to improve?

A

Continued Existence and Growth of the Company

Microfinance Markets, Products and Services (2 decks)

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