Factors influencing new product development in microfinance institutions: a perspective from north Indian microfinance institutions

Indicators

CFTS

SONATA

MIMO

Drishtee

Promoters’ 

philosophy 

Promoter’s 

focus is 

on core 

business 

product 

which is 

working with 

poor on 

small income 

generation 

loan

Promoters’ focus 

is on customers’ 

need based 

product and 

sustainability of 

the company. 

Promoters feel 

that customers 

know the best 

to utilize the 

amount, so 

they are least 

bothered about 

the purpose. 

Promoters would 

like to introduce 

need/demand 

based product with 

a diverse range. 

Promoters believe 

that customers 

demand different 

types of products 

which suit their 

needs. Therefore, 

they have introduced 

different kinds of 

products and are 

working on two other 

products. 

Promoters’ focus 

is more on use of 

technology to provide 

various kinds of 

services to people 

especially through use 

of its base network 

of Kiosks across the 

country. Therefore there 

expansion is rapid. 

Role of the 

board

Board is 

not much 

involved in 

product 

designing

Board is not 

much involved 

in product 

designing. 

Board is actively 

involved in discussing 

new products. It 

was shared that 

the board meeting 

minutes had a 

separate agenda 

item for this. 

Board is actively involved 

in product designing. 

There are experienced 

staffs appointed for 

designing new products.  

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Factors influencing new product development…

n° 11 – Journal of Innovation Economics – 2013/1 

95

Role of Governance 

Although the governing boards of all these organizations were strong with 

people from diverse backgrounds and experience, there were differences in 

the thought processes of the board members (Table 3). The board members 

of MIMO and Drishtee actively discussed new products in their meetings. 

While Drishtee appointed an experienced board member in designing a new 

product, MIMO board meeting had separate agenda to discuss the new prod-

uct development. In CFTS and Sonata, the boards didn’t participate actively 

in such matters but the chief executives and senior management remained at 

the forefront in designing and suggesting the new products. The Casebox 1 

presented here also substantiates the role played by senior management in 

taking decisions with regard to new product development in Cashpor.

Casebox 1 – New product development at Cashpor

Thinking of investing in milch buffalo was a far reaching dream with INR 2,000 the 

clients took loan from Cashpor and invested in poultry or in village grocery shop. 

This  was  despite  the  fact  that  people  were  aware  of  the  deadly  endemic  disease 

that could affect poultry in the area or high probability of losing working capital 

within six months in a grocery shop. In 1999, this resulted in defaults by some of the 

clients who experienced losses after entering in this activity. Clients also stopped 

attending the compulsory weekly centre meetings and even in many cases instal-

ments were stopped. Due to this, many clients also refused to share the collective 

responsibility of repaying the loans in several cases, while others dropped out of the 

programme eventually. However, the management team designed incentive scheme 

to re-establish credit discipline and offered cash rebate of 10% of the interest to the 

clients with poor repayments histories, in case if they showed perfect repayment in a 

quarter. This thus resulted in drop in portfolio at risk (PAR) level in a year’s time to 

less than 2%. During this entire incidence, the management as well as the staff felt 

a pressing need for providing a higher ticket size loan to those clients who were en-

gaged in animal husbandry. Therefore, in the year 2000, the loan size was increased 

to INR 8,000 (max) especially for the clients engaged in animal husbandry. 

Cashpor also experimented with other loan products such as emergency and mar-

riage loans with a view to provide relief to the clients for repayment of loans in case 

of any unforeseen event. However, these loan products did not perform well in the 

race. The field staff used this loan as additional amount to help the clients who were 

not able to repay the loan. It was around 2005-06, the company started thinking 

on the feedbacks of the staff for the clients’ needing higher loan amounts. Several 

meetings and discussions took place at all the levels and the senior management 

then decided to conduct a preliminary market survey to assess the clients’ demands. 

Also, a thinking backed by mature clients’ expectations and increase in dropout 

rates due to insufficient loan amounts led the management to focus on designing a 

new product.

Based on discussions with the CEO and other senior staff, Cashpor

Source : 

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Sanjeev KAPOOR and Gaurav SINHA

96 

Journal of Innovation Economics – 2013/1 – n° 11