Discipline and Flexibility: A Behavioral Perspective on Product Design in Microfinance

36 Pages Posted: 1 Oct 2012 Last revised: 31 Aug 2017

See all articles by Marc Labie

Marc Labie

Université de Mons-Hainaut

Carolina Laureti

Faculty of Economics and Business, University of Groningen

Ariane Szafarz

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi

Date Written: June 3, 2016

Abstract

The success of both microcredit and micro-savings products rests upon simplicity and standardization in order to stimulate client discipline. Meanwhile, these products lack flexibility. This paper attempts to make sense of behavioral product design in microfinance. We focus on the potential trade-offs between discipline and flexibility. While discipline devices encourage clients make payments duly on time, flexibility improves clients’ day-to-day money management and helps them cope with shocks. Our contribution is twofold. First, we highlight the evidence-based advantages and disadvantages of flexible products in microfinance. Second, we present best- practice examples of flexible products offered by microfinance institutions worldwide.

Keywords: microfinance, flexibility, commitment, discipline, incentive

JEL Classification: D03, D82, D91, G21, O12

Suggested Citation

Labie, Marc and Laureti, Carolina and Szafarz, Ariane, Discipline and Flexibility: A Behavioral Perspective on Product Design in Microfinance (June 3, 2016). Forthcoming in Oxford Development Studies, Available at SSRN: https://ssrn.com/abstract=2155327 or http://dx.doi.org/10.2139/ssrn.2155327

Marc Labie

Université de Mons-Hainaut ( email )

20 Place du Parc
B - 7000 - Mons, B7000
Belgium

Carolina Laureti (Contact Author)

Faculty of Economics and Business, University of Groningen ( email )

Nettelbosje 2
Groningen, 9747 AE
Netherlands
+31 050 363 48 06 (Phone)

HOME PAGE: http://https://www.rug.nl/staff/c.laureti/

Ariane Szafarz

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi ( email )

50 Avenue Roosevelt
Brussels 1050
Belgium

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