chapter 4 Product

Product

Today's financial institutions have provided financial services such as savings, mortgages, consumer credit, insurance, loans to finance business expansion and transfer uang.Dengan the impact of globalization of financial institutions continue to innovate coupled with the rapid development of technology to fulfill their client or consumer demand.

This condition has been going on in the industry, where the transfer of money across continents instead of an advanced problem again and all forms of insurance has been offered as to whether the condition ni pasar.Namun will also take place in developing countries? And whether low-income people will also enjoy the facilities of existing industry in the country?. Here microfinance institutions began to take its own role in addressing the situation has moved tersebut.LKM help the middle class in terms of finance such as credit, savings and loans and other facilities which are being applied to the country's industry.Untuk together let us discuss products offered by microfinance institutions.

A. Loan

The success of many MFIs can be identified in their ability to successfully combine the practice of informal sector (money lenders) into formal institutions.

 These include flexibility, rapid access to funds, clear and easy conditions. Remarkable success of microcredit originating from its ability to replicate some features of the loan sharks to finance more formal.Lembaga lower interest rates applied. These interest rates are still much higher than traditional banks because of higher administrative costs of managing small loans rather than loans less with a larger amount.

But the important thing is to provide access to credit for people who would otherwise be excluded from the formal financial system with lower interest juah adopted by competitors, but the micro finance institutions should perform a valuable service application for their clients.

- Instant access, which is a fast credit approval and rapid thawing is very important for the client and often the main reason why many people are dealing with a lender even at very high interest rates.

- Clearly, easy and flexible, ie It is important to provide credit on favorable conditions for the client. Transaction costs, which include transportation costs (to pay the installments or the money) or time to go to work, the entire life of the loan must be kept low. Credit also should not be strictly linked to specific goals. MFIs should monitor the flow of revenue from their clients but with a certain degree of tolerance as limiting the possible use of the funds will not allow micro-business to have the necessary flexibility in the use of money received and thus interfere with the development of micro.

- Fixed the service, service credit must be given on an ongoing basis, not only for a limited period of time. Lack of these requirements is a major drawback of many of the projects although their effectiveness has not the purpose of providing financial services in a sustainable and continuous.

- Alternative replacement warranty and grace, that poor people often lack traditional collateral. To overcome this obstacle many MFIs to use other types of collateral, known as alternative collateral and collateral substitutes. Assurance Group is a first example, while personal property such as equipment or jewelry are examples of alternatives that are not accepted as collateral by collateral in the traditional banking sector.

2. Savings

MFIs typically offer two types of savings: voluntary and force.voluntary

replicate savings savings services provided by traditional commercial banks as savings are forced to serve as collateral for the loan.

 This account does not always provide a return on deposits and deposited with the institution until the loan balance was paid. Loans to establish micro-businesses that are useful only for people who have entrepreneurial skills and economic opportunities while more and more people to save rather than to keep risky assets or hiding cash at home.

Microfinance institutions must provide a complete set of short, medium and long term deposit account, in addition to the more liquid accounts.

This is to meet the diverse needs of liquidity and rate of return of the client.

Savings will also attract more clients than the loan itself and is an important source of funding for the institute. It also should be cheaper than traditional commercial loans to MFIs are mostly not a huge additional cost. This is due to the infrastructure already available is needed to accumulate savings.

Procredit Network is an example of a network of sustainable and profitable financial institution that provides a wide range of financial products. In addition to credit and savings, Procredit Bank around the world also provides insurance and money transfer services.

If the deposit services are successfully implemented, the provision of such services will also help MFIs to achieve sustainability finance introduce saving facilities will better serve the needs of the client, reducing capital costs and allows

MFIs to raise resources for expansion. The main challenge for MFIs dalammembangun this service is the transformation of their corporate culture and government jugaketerlibatan as important in the regulation and institution control take the savings from the public. Umumnyadilarang NGOs mobilize savings and all other MFIs that do not hold a special license. It is  need for each type of financial institutions to protect depositors in case institution default and this is especially important for poor people who can not afford to lose their money. To overcome this problem and address the needs of many special license MFIs offering savings services not directly but in partnership with the licensed deposit-taking institutions, usually banks.

3. Microinsurance

Low-income entrepreneurs, just like everyone else, are vulnerable to risks, such deseas, injury, theft, death, accidents and floods.

This is why financial products to reduce the impact of such risks is a valuable financial service mereka.Asuransi some MFIs began to increase their portfolios in response to this need of protection.

 Providing savings and credit insurance services in addition to making financial services a complete MFI microfinance institutions provide.

Ie the full set of financial services to provide direct income people rendah.Untuk LKM requires a special license and insurance requirements for such a license granted by the government is usually very tight.

Control of insurance companies for the same reason why they control the financial health of deposit taking institutions, protection of client and system stability. As the majority of MFIs do not meet these conditions, there is an alternative to direct provision of insurance and the most common is an existing partnership with insurance companies. Insurance companies may not offer their products directly to poor people because they do not have experience in the market segments: MFI can fill this gap and worked as an intermediary between insurance companies and klien.Asuransi product for the target group of microfinance institutions must be designed according to specific needs and protect their specific risks: they may include health insurance, livestock insurance and crop insurance. In the MFI offers some insurance but as they start to enter the industry is growing among the set of products offered.

4. Money transfer

Money transfer service is an important financial services: money transmission business.

that emigrants send money home to relatives, who grew up with strong and often managed by informal arrangement with the high cost and high risk.

Depending on local regulations and the cost of these services can be delivered directly or in partnership with money transfer companies. MFIs have a competitive advantage relationships with their clients and the service can also be connected with other products or can be taken into account when calculating the repayment capacity of each client.