PRODUCT DEVELOPMENT

FOR
MICROFINANCE INSTITUTIONS


2009 Consultative Group to Assist the Poor/The World Bank. All rights reserved.
Consultative Group to Assist the Poor
1818 H Street, N.W.
Washington, DC 20433
Internet: http://www.cgap.org
Email: cgap@worldbank.org
Telephone: +1.202.473.9594

iii
Table of Contents
Acknowledgments........................................................................................................................... iv
Introduction..................................................................................................................................... v
Overview of the Course .................................................................................................................. vii
References for the Course............................................................................................................... ix
Course Materials
Session 1: Welcome and Introduction.........................................................................................PD-1
Handouts...................................................................................................................................PD-21
Session 2: What is Product Development?..................................................................................PD-27
Handouts...................................................................................................................................PD-39
Session 3: Product Development An Overview.......................................................................PD-43
Handouts...................................................................................................................................PD-51
Session 4: Market Research .........................................................................................................PD-69
Handouts...................................................................................................................................PD-97
Session 5: Product Concept and Design......................................................................................PD-117
Handouts...................................................................................................................................PD-127
Session 6: Costing..........................................................................................................................PD-137
Handouts...................................................................................................................................PD-153
Session 7: Pricing ..........................................................................................................................PD-177
Handouts...................................................................................................................................PD-187
Session 8: Pilot Testing and Rollout ............................................................................................PD-197
Handouts...................................................................................................................................PD-209
Session 9: Case Study Epilogue and Summary ..........................................................................PD-217
Session 10: Action Plan, Evaluation, and Closure .....................................................................PD-219
Handouts...................................................................................................................................PD-221
Case Study: The UNIbank Chronicles ........................................................................................PD-231

iv
Acknowledgments
CGAP would like to thank those who were instrumental in the development and design of the Product
Development for Microfinance course: Janis Sabetta, Brigit Helms, Monica Brand, Kim Craig,
Monique Cohen, Javier Fernandez, Lorna Grace, Imran Matin, Mike McCord, Benedito Murambire,
Zan Northrip, Elma Valenzuela, Niraj Vermat, Graham Wright, Nicola Young, Jennifer Isern, Leslie
Barcus, and all CGAP training hubs and partners.

v
Introduction
BACKGROUND OF THE CGAP SKILLS FOR MICROFINANCE MANAGERS COURSE SERIES
In 1997, Jennifer Isern and Brigit Helms of CGAP launched a pilot program in Africa to provide
financial management courses to microfinance institutions (MFIs), based on industry-wide observation
that the greatest constraint to the development of microfinance in the region was the lack of
management capacity. The Pilot initiative had two complementary long-term objectives: 1) to improve
the institutional viability of MFIs in Africa and 2) to enhance the human resource base in microfinance
in Africa through sustainable training programs that would help develop stronger MFIs and increase the
market for local training services. By 1999, the Africa Pilot program had become the MFI Training
Program, with new partners in South and South-East Asia, Central Europe, and the Newly Independent
States (NIS). In addition, CGAP launched AFCAP, an East/Southern Africa program focusing on 12
countries and CAPAF, the Francophone Africa program focusing on 19 countries, to build the capacity
of national training service providers to offer training and consulting services. During the early years,
Jennifer Isern and Brigit Helms served as overall coordinators of the MFI Training Program and
regional programs with colleagues Tiphaine Crenn, Nathalie DAmbrosio-Vitale, Mike Goldberg, and
Joyita Mukherjee, and primary consultants Janis Sabetta, Ruth Goodwin, and Kim Craig.
Through this initiative, CGAP developed seven courses for MFI managers conceived to be globally
relevant, short and practical, and incorporating adult training design. These courses are collectively
called the Skills for Microfinance Managers series. Based on feedback from trainers and participants
from hundreds of courses, the courses were revised and improved over several years. As the program
matured, Jennifer Isern, Leslie Barcus, and Tiphaine Crenn managed the Global MFI Training
Program. By the time CGAP transferred its training activities to the Microfinance Management
Institute in January 2007, CGAPs 39 training partners had trained more than 12,000 people in 52
countries.
1
In 20072008, Tiphaine Crenn coordinated revisions and overall editing of the MFI courses
to reflect changes in microfinance standards, especially in financial statements and ratios.
In line with CGAPs role as a global resource center on microfinance, the full trainer materials for the
seven courses developed under the MFI Training Program are now being made publicly available.
NOTICE ABOUT USING THE CGAP SKILLS FOR MICROFINANCE MANAGERS COURSE MATERIALS
In parallel to developing course materials, the program aimed to identify qualified national and regional
training institutions and help build their capacity to deliver high-quality courses, expand their training
markets, and offer courses on a cost-recovery basis. Hundreds of training of trainer (ToT) sessions
were organized for the seven courses throughout the world. In some regions, CGAP also developed a
certification process, and certified trainers were given broad access to the training materials. Certified
training partners invested heavily in building their reputation for offering high-quality, useful courses
and building up their businesses.
Although the CGAP Skills for Microfinance Managers course materials are now publicly available,
CGAP recognizes only those partners and trainers who went through the certification process as CGAP
training partners. Others who offer a course using materials from one of the CGAP Skills for
Microfinance Managers course should not refer to themselves as CGAP trainers or CGAP-certified.
CGAP also requests that all those who offer the Product Development course use the following text
in their marketing materials and course descriptions: The Product Development course is based on the
materials developed by CGAP which are publicly available on http://www.cgap.org. CGAP is a leading

1
By December 2008, the number of people trained was closer to 14,000, given the ongoing training activities of
CAPAFs 19 training partners in Francophone Africa.

vi
independent resource for objective information, expert opinion, and innovative solutions for
microfinance. CGAP works with the financial industry, governments, and investors to effectively
expand access to financial services for poor people around the world.
HOW TO WORK WITH THE COURSE MATERIALS
The CGAP Skills for Microfinance Managers course materials are all organized in the same manner,
with eight to twelve sessions in each course. Each session generally consists of the following sections:
1. Trainer Instructions give step-by-step instructions to trainers on how to lead the session, including
when to show which PowerPoint slide, distribute handouts, organize participant activities, discuss
during short lectures or general discussions, etc. The instructions include suggested timing, although
this should be adapted according to the context. The first page (Session Summary) of the Trainer
Instructions section in each session lists all the supplies, technical materials, overheads, handouts,
and case study sections that will be required for that specific session. Optional overheads and
handouts, which are included in the course material for use at the discretion of the trainer, are
clearly identified within shaded boxes in the Session Summary. If there are additional technical
materials in the session, the Trainer Instructions include a section called Trainer Materials, marked
M in the right-hand top corner. Trainer Instructions are not intended for participants. If technical
explanations are included in the Trainer Instructions, they are also generally provided in the
handouts for the participants.
2. Overheads introduce topics, underscore key messages, and summarize issues. Overheads are
clearly marked O in the right-hand top corner. (For example, PD3-O2 means that this is the second
overhead of the third session in the Product Development course.) Optional overheads are
identified by black (as opposed to white) reference numbers. The overheads are in PowerPoint
format but can be printed out on transparencies and shown using an overhead projector. Overheads
are not meant to be distributed to participants since the handouts in the same session will cover the
same points, generally in greater detail.
3. Handouts are marked H in the top right-hand corner, in the same manner as the overheads. Handouts
include exercises, instructions, and financial statements, as well as additional reading and in-depth
information on the topic. Some handouts give instructions to the trainers about a publication to
distribute, and these publications may need to be ordered or downloaded separately.
4. Case studies are used in most of the CGAP courses. Files for the case study are sometimes kept
separate from the other handouts. The instructions in the Trainer Notes explain the section of the
case study at each point in the session. Printing case studies on colored paper (and using different
colors for different sections of the case) makes it easier for participants to organize their materials.
5. Reference materials and additional reading are listed for each course. Excerpts or the entire
document are often included in the handouts. On the Web site, each course home page contains a
box on the right-hand side with links to download the documents, if they are available publicly, or
information on how to purchase them.
Please note that the overheads in PowerPoint format need to be downloaded separately. The course file
contains the trainer instructions, the trainer technical materials, the overview of the overheads, the
handouts, and the case study. The pages are formatted to be printed double-sided and blank pages are
included as necessary.

vii
Overview of the Course
The Product Development for Microfinance Institutions course is one of the four courses in the
Operational Management Curriculum, along with Business Planning, Information Systems, and
Operational Risk Management. The need to develop increasingly flexible and responsive financial
products constitutes perhaps the most compelling challenge facing the microfinance industry today. In
response to this growing need, a number of donors, practitioner networks, and projects are in the
process of developing operational tools that practitioners can use to design demand-responsive
microfinance products. This four- to six-day course covers both the process of developing a new
product (market definition, market research, product prototype, costing and pricing, pilot testing,
rollout, marketing, lifecycle management, and so forth) as well as the impact of introducing new
products on the MFI (human resources, corporate culture, operations and systems, financial results,
operating results, and the like).
INTENDED AUDIENCE
This course is recommended for Executive Directors, Finance Managers, Credit Managers, Operations
Managers, Branch Managers and Board Members from Microfinance NGOs, credit unions, banks and
other financial institutions.
COURSE OUTLINE
Session 1: Welcome and Introduction
Session 2: What is Product Development?
The characteristics of a microfinance product
The difference between a new and refined product
Definition of a process of product development
Session 3: Product Development An Overview
The importance of product development to an organizations strategy
The steps involved in a systematic product development process
Implications of the steps on human resources, risk management, organizational structure,
institutional culture, vision, and so on
Identification of the optimum product development team
Session 4: Market Research
Market research and its importance to product development
The advantages and disadvantages of different market research approaches
Developing a research problem
Designing focus group sessions
When and how to use Participatory Rapid Appraisal
Analysis of research findings
Session 5: Product Concept and Design
Using market research results to design product prototypes
Institutional issues in product design
Ongoing solicitation of client comments
Session 6: Costing
The difference between cost allocation and activity based costing
Basic procedures and benefits of ABC
The implications of new products on an MFIs systems

viii
Estimating the total cost of a new or refined product
Session 7: Pricing
The main factors that influence pricing
Introduction to different pricing strategies
Determining the price for a new product
Using a focus group to get feedback on pricing
Session 8: Pilot Testing and Rollout
The importance of pilot testing in product development
The ten steps of a pilot test
Identifying and sequencing the key variables in product roll out
Session 9: Case Study Epilogue and Summary
Session 10: Action Plan, Evaluation, and Closure
Date of last substantive update: 2002

ix
References for the Course
(updated in 2008)
KEY DOCUMENTS
Product Development
ACCIN Network. 2004. Pro-Poor Consumer Pledge. Boston: ACCIN Network.
Helms, Brigit and Lorna Grace. 2004. Microfinance Product Costing Tool. Washington, D.C.: CGAP.
http://www.cgap.org/p/site/c/template.rc/1.9.3005
McCord, Michael J., Graham A.N. Wright, and David Cracknell. 2001. It Can Work: A Toolkit for
Planning, Conducting, and Monitoring Pilot Tests for MFIsLoan Products. Nairobi, Kenya:
MicroSave-Africa. http://www.microsave.org
MicroSave. Institutional and Product Risk Management Toolkit. http://www.microsave.org
Pikholz, Lynn, et al. 2005. Institutional and Product Development Risk Analysis Toolkit. Nairobi,
Kenya: MicroSave. http://www.microsave.org
Porteous, David, and Brigit Helms. 2005. Protecting Microfinance Borrowers. Focus Note 27.
Washington, D.C.: CGAP. http://www.cgap.org/p/site/c/template.rc/1.9.2571/
Rhyne, Elisabeth. 2003.Taking Stock of Consumer Protection in MicrofinanceA Non-Regulatory
Approach. Boston: ACCIN Network. http://www.microfinancegateway.org
SEEP Network. 2003. Trust through Transparency: Applicability of Consumer Protection Self-
Regulation to Microfinance. Washington, D.C.: SEEP Network. http://www.seepnetwork.org
Stevens, Robert, Wrenn, Ruddick, and Sherwood, 1997. The Marketing Research Guide. Birmingham,
N.Y.: Haworth Press.
Wright, Graham, Monica Brand, Zan Northrip, Monique Cohen, Michael McCord, and Brigit Helms.
Looking before You Leap: Key Questions That Should Precede Starting New Product Development.
2001. http://www.microfinancegateway.org/p/site/m//template.rc/1.9.28773
Wright, Graham, Shanaz Ahmed, and Leonard Mutesasira, with Stuart Rutherford. Focus Group
Discussions and a Participatory Rapid Appraisal for MicroFinanceA Toolkit/Course. [Kampala,
Uganda: MicroSave-Africa, 1999]
Savings
CGAP. 2005. Microfinance Consensus Guidelines: Developing Deposit Services for the Poor.
Washington, D.C.: CGAP. http://www.cgap.org/p/site/c/template.rc/1.9.2786/
Other financial products
Churchill, Craig, Dominic Liber, Michael McCord, and James Roth. 2003. Making Insurance Work for
Microfinance Institutions: A Technical Guide to Developing and Delivering Microinsurance. Geneva:
ILO.
Fletcher, Matthew, Rachel Freeman, Murat Sulatnov, and Umedjan Umarov. 2005. Leasing in
Development: Lessons from Emerging Economies. Washington, D.C.: International Finance
Corporation.

x
Isern, Jennifer, Rani Deshpande, and Judith van Doorn. 2005. Crafting a Money Transfers Strategy:
Guidance for Pro-Poor Financial Services Providers. Occasional Paper 10. Washington, D.C.: CGAP.
http://www.cgap.org/docs/Occasional Paper_10.pdf
Isern, Jennifer, William Donges, and Jeremy Smith, 2006. Making Money Transfers Work for
Microfinance Institutions: A Technical Guide to Developing and Delivering Money Transfers.
Washington, D.C.: CGAP.
ITCLD. Leasing: Exploring Micro-Leasing Services for Poor Peoples Enterprises. http://www.itcltd.
com/microleasing/
. Leasing in Development: Lessons from Emerging Economies. http://www.ifc.org. See also
http://www.itcltd.com/microleasing/.
Westley, Glenn. 2003. Equipment Leasing and Lending: A Guide for Microfinance. Washington, D.C.:
Inter-American Development Bank. http://www.iadb.org/sds/publication/publication_3402_e.htm
OTHER DOCUMENTS
Isern, Jennifer and Julie Abrams with Matthew Brown. 2008. Appraisal Guide for Microfinance
Institutions. Resource Manual. Washington, D.C.: CGAP, March. http://www.cgap.org/p/site/c/
template.rc/1.9.2972
Isern, Jennifer and Julie Abrams with Matthew Brown. 2008. Appraisal Guide for Microfinance
Institutions. Revision of 1999Appraisal Handbook. Washington, D.C.: CGAP, March. http://www.cgap.
org/p/site/c/template.rc/1.9.4394
Isern, Jennifer, Julie Abrams and Kim Craig with Matthew Brown. 2007. Appraise.xls: Spreadsheet for
Appraisal Guide for Microfinance Institutions. Washington, D.C.: CGAP, March. http://www.cgap.org/
p/site/c/template.rc/1.9.2968
Rosenberg, Richard. Microcredit Interest Rates. CGAP Occasional Paper No. 1. Washington, D.C.:
CGAP, revised November 2002. http://www.cgap.org/p/site/c/template.rc/1.9.2696/
WEB SITES
MicroSave. Toolkits: http://www.microsave.org
CGAP Microfinance Gateway Hot Topic on Savings. http://www.microfinancegateway.org/p/site/m/
template.rc/1.11.48257/
CGAP Microfinance Gateway Hot Topic on Microinsurance. http://www.microfinancegateway.org/p/
site/m/template.rc/1.11.48248/
Microinsurance Network. http://www.microinsurancenetwork.org/
CGAP/World Bank, 2009 PD-1
S SE ES SS SI IO ON N 1 1: : W WE EL LC CO OM ME E A AN ND D I IN NT TR RO OD DU UC CT TI IO ON N
Session Summary
OBJECTIVES: By the end of the session participants will be able to:
State each others names
State the training objective and agenda
Relate objectives to their own expectations
TIME: 8593 minutes
SUPPLIES: Flipchart paper
Markers
Name tags or name tents (samples included)
Masking tape
Index cards
LED projector or overhead projector
Transparencies and markers
COURSE REFERENCE MATERIALS
For this session, the trainer should distribute all reading
materials for advance reading at the beginning.
The MBP Guide to New Product Development, Monica
Brand, ACCION International, August 2001
It Can Work: A toolkit for planning, conducting and
monitoring pilot tests for MFIs: Loan Products, Michael J.
McCord, MicroSave, 2003
It Can Work: A toolkit for planning, conducting and
monitoring pilot tests for MFIs: Savings Products, Michael
J. McCord, MicroSave, 2004
Microfinance Product Costing Tool, Brigit Helms and
Lorna Grace, 2004
Looking Before You Leap (MicroSave-Africa) (PD3-H4)
Market Research for Client-Responsive Product
Development (MicroSave-Africa)
TRAINER MATERIALS
PD1-M1 Product Development Precourse Skills Audit Answer Guide
PD1-M2 Suggested Duration of Sessions
PD1-M3 Sample Subgroup File Folder Cover
PD1-M4 Sample Name Tents
Trainer Instructions
PD-2
PARTICIPANT MATERIALS
OVERHEADS: PD1-O1 Goal
PD1-O2 Objectives
HANDOUTS: PD1-H1 Product Development Precourse Skills Audit
PD1-H2 Product Development Goal and Objectives
PREPARED FLIPCHART:
Prepare a flipchart with the list of personal information that participants
will share during introductions including name, institution, position, time
in position, one thing you would like the other participants to know
about yourself, and the like.
PD-3
Session 1: Welcome and Introduction
MICROFINANCE INSTITUTION BACKGROUND
1. (25 minutes) Representative of sponsoring organization welcomes participants
and opens workshop.
2. (2 minutes) Representative introduces and turns session over to trainers.
3. (5 minutes) To set the stage, welcome participants to the course using the
following points as a guideline:
Over the past 20 years a microfinance industry has emerged in response
to the lack of access to formal financial services for most of the worlds
poor. Microfinance institutions (MFIs) serve an ever-increasing number of
poor clients, but the demand for such financial services still far outstrips
their capacity.
Many MFIs began as nongovernmental organizations (NGOs) that initially
entered the financial business for social reasons. There are now thousands
of new MFIs around the world; many are small but many more have grown
to reach millions of people. As MFIs grow and become more business-
oriented, managers have found they gradually lose their ability to maintain
personal contact with what is happening at the field level and realize they
cannot adequately manage their portfolio and financial operations without
better information.
CGAP designed this course to share tools with microfinance institutions so
that they may develop new or refined products in a systematic, ongoing
process that will yield results. The course presents an overview of that
process, providing definitions, tools, and examples. Nearly every
component of the process can be followed up with a separate course (or
even a PhD). Additional courses that are available are MicroSave Market
Research for Microfinance and MicroSave Pilot Testing Products.
Though MFIs develop products all the time, some of them are not
successful, or are successful without the MFI knowing why. The process
introduced in this course is methodical, market driven, and client oriented.
It promotes continuous feedback and sees product development as an
integral and iterative part of delivering financial services. Using sound and
tested product development techniques, the process sells investment today
to prevent disasters and deliver greater benefits tomorrow.
Developing new products is a risky endeavor, but it is certainly necessary
for the growth of your businesses and probably essential to their survival.
Developing new products is generally a team effort that requires the input
of a variety of people with a variety of interests, talents, and skills.
Innovation in and of itself is not enough. You must market, distribute, and
continually refine and improve the product in response to and anticipation
of market needs and desires.
Trainer Instructions
PD-4
Remember, most new products are not inventions (wholly new to the
world), but innovations (enhancements of existing products).
During this course we will begin to develop plans for how to research,
design, cost, price, test, and roll out new and refined products for your MFI.
We will give you the steps in the process, but it will be up to you to apply
them in your MFI. Developing a financial product is not a simple linear
process. It will require close examination and comparison of what the
clients want with what you can offer and profitably provide.
We will use a variety of adult learning techniques that will draw on your
experience in this field. We also will refer to a case study throughout.
We will work on an action plan that will help you apply what you have
learned when you return to work, and together we will learn how to
overcome the obstacles that may arise in product development.
Remember, without your involvement, the course will not be a success.
We hope that this course will help you understand the process of product
development and apply such a process to your MFI.
Before we get started let us find out who we are and why we came!
PARTICIPANT INTRODUCTIONS
Have flipchart with introduction instructions; substitute introduction activity as desired.
4. (5 minutes) Name tag mix-up. Explain that participants will now introduce
themselvesin a participatory manner. Refer to the prepared flipchart and ask
each participant to write the following on a blank piece of paper:
Name
The institution he or she works for, position, and time at that position
A personal/professional fact he or she would like to share with the group
5. (10 minutes) Give each participant the name tag of someone else in the group
and ask each person to find the name tags owner and briefly exchange
introductions. At the same time, the name tag giver should give the sheet of paper
with his or her own information to the other person.
Allow participants to circulate until everyone receives his or her name tag and has
someone elses introduction information.
6. (1520 minutes) Have the group retake their seats, then have each person in turn
stand up and introduce the participant whose name is on the information sheet.
(This should be the person who gave back the name tag.)
7. (2 minutes) Explain that over the next four days they will get a number of chances
to learn about each other. Then take a moment to have participants describe why
they are taking the course.
PD1: Welcome and Introduction
PD-5
EXPECTATIONS
8. (10 minutes) Quickly divide the group into random subgroups of five or six and
ask them to discuss their expectations of the course. Ask them to list the top five
to seven expectations on a flipchart and prepare to present them.
9. (5 minutes) Post the flipcharts. Briefly review. Clarify points and merely note
comments that are repeated. Tell participants that the class will review the lists in
more detail shortly.
PRECOURSE SKILLS AUDIT
10. (15 minutes) Explain that in order to fine-tune their time together it is helpful to
hear what they already know. Tell them that there is a precourse audit they need
to complete. Remind participants that if they knew all the answers there would be
no need for them to attend this course. Joke that you hope there are some blank
spaces so that you can keep your job! Distribute PD1-H1. Collect and mark for
later analysis for group formation and course emphasis.
While participants are taking the audit, review the expectations, note the points
that will be met in the current schedule, and clearly mark the points that will not be
met, in order to explain why and/or how the participants might get that
information.
WORKSHOP OBJECTIVES, MATERIALS, RULES, AND LOGISTICS
11. (5 minutes) Using overheads PD1-O1 and PD1-O2 and handout PD1-H2, briefly
go over the workshop goals and objectives, tying the sessions into the
expectations expressed earlier by participants. If certain expectations will not be
met, explain why. If you have prepared a schedule for the course (using
suggested session times shown in PD1-M2), distribute as a handout and review.
12. (2 minutes) Explain that they have received a course binder, which will be used to
file all course handouts received. Explain the handout numbering system.
Distribute copies of relevant reading materials if desired.
13. (5 minutes) Complete a list of ground rules for the workshop by soliciting input
from the participants (for example, start on time, everyone must participate, ask if
anything is unclear, one person can speak at a time, there are no stupid
questions). Main points should be written on a flipchart and posted so it can be
used to remind participants later in the course what they agreed to.
Add the following ground rule (or similar) at the end: The last person to enter the
room will be the energizer of the day. Explain that when they feel that the
session is dragging a bit, they should ask someone to lead a one-minute
energizer to perk everyone up (this can be telling a joke, leading calisthenics, and
so forth).
Review any logistics (hotel, meals, break times, and so on).
Trainer Instructions
PD-6
CONCLUSION
14. (2 minutes) Remind participants that they are a vital part of the learning process;
they will be able to build on the experience and knowledge of other participants,
and share their own knowledge and experience for the benefit of others. State
that the course will employ the latest in adult education methods: learning by
doing. Participants will not be lectured to. They should allow the process to run its
course. Although trainers will be available to answer questions, the best
remembering comes from participants own discoveries. End with Lets get
started!
Trainer Notes:
After completing this session, the trainer must remember to evaluate the precourse skills
audit and decide on what basis to group participants. To facilitate group discussions, the
trainer should try to form subgroups of mixed abilities and experiences. However, he or she
then must monitor the groups, evaluate how they are functioning, and change group
makeup as necessary. Making lists of several subgroup options at this point will help when
the trainer needs to form different subgroups during the course.
Trainers also may want to prepare the following in advance:
Photocopy the case study sheets on a different color paper than the normal handouts.
It makes it easier to refer to and find them.
Create file folders in advance for the product development subgroups (use PD1-M3). In
this workshop, product development subgroups will have the same group members
throughout the development process. To prepare the folders in advance, glue the
printout to the front of each file folder. The folders will help the groups keep their
product design specs together and help them remember they are working on their own
unique products. Distribute the folders in session 3 or 4, when the subgroups are
formed.
Obviously if the groups are not working (not enough technical skill to complete the
product design specs correctly or members of a group are not getting along or in a
disagreement) the trainer must take steps to remedy this by either helping the group
better understand the design specs, mediating the group, or changing its members.
Create flipcharts that summarize pertinent information about UNIbank, such as size
(numbers of clients and portfolio), staff (some key names), branches, and so forth. The
idea is to make it easier for participants to grasp the basic data, as well as make
UNIbank more real to them. The flipcharts can be posted any time after session 3,
when the case study is introduced.
PD1: Welcome and Introduction
PD-7
PD1-M1
Product Development
Precourse Skills Audit Answer Guide
1. Give three reasons why you would develop a new product.
Client demand
Unpredictability of existing products
To increase client outreach, and so on
To decrease client dropout rate
2. What are the steps of the product development process?
Environmental and institutional context
Market research
Product concept/prototype design
Costing
Pricing
Pilot testing
Rollout
3. Who should be on a product development team? List by position.
Representatives of major departments: finance manager, management
information system (MIS) manager, operations manager, head of branch
supervision, and so forth.
4. Describe two types of qualitative and two types of quantitative market
research.
Qualitative Quantitative
Focus groups, client feedback
surveys
Seasonality analysis of household
income, relative preference ranking,
wealth ranking, cash mobility
mapping, etc.
MIS portfolio reports, national interest
rates survey
5. List the major characteristics of a credit product and savings product.
Credit product Savings product
Answer examples: Amount, term,
interest rate, collateral type, collateral
amount, fees, and so on
Answer examples: Deposit frequency,
withdrawal frequency, minimum
balances, fees, and so on
Trainer Instructions
PD-8
6. What is activity-based costing?
Activity-based costing (ABC) is a method that traces costs through significant
activities to products or other cost objects.
7. What factors would you consider when you price a product?
Client preferences and needs
Cost of product delivery
Cost of borrowing funds
Client loan servicing capacity
Competitio n
8. List three to four activities that would be conducted in the testing phase of
product development
Composing the pilot test team
Developing the testing protocol
Defining the objectives
Modeling the financial projections
Developing customer marketing materials
Installing/instilling all systems
Documenting the product definitions and procedures
Training the relevant staff
Commencing the product test
Reviewing the product, using the protocol
9. What institutional issues should be considered when developing new
products?
Institutions vision and strategy
Institutional capacity (staffing, resources)
Human resources and training requirements
MIS capacity
Risk management
Organizational structure
Institutional culture
Strategic linkages
10. State two critical issues you have faced in developing products in your MFI.
PD1: Welcome and Introduction
PD-9
PD1-M2
Suggested Duration of Sessions
(To be adjusted based on the trainers knowledge of participants and market)
PRODUCT DEVELOPMENT COURSE
Minutes
Min Max
1 Welcome and Introduction 85 93
2 What is Product Development? 55 70
3 Product DevelopmentAn Overview 168 215
4 Market Research 300 350
5 Product Concept and Design 162 227
6 Costing 235 335
7 Pricing 135 180
8 Pilot Testing and Rollout 215 270
9 Epilogue and Summary 95 120
10 Action Plan, Closure, and Evaluation 30 45
Total minutes 1,480 1,905
Total hours (divide by 60) 24.66 31.75
Total 6-hour days 4.11 5.29
Total 6.5-hour days 3.79 4.88
Trainer Instructions
PD-10
PD1-M3
Giving You the Credit You Deserve
Product Names:
Savings

Credit
Group Members



PD1: Welcome and Introduction
PD-11
PD1-M4
Sample Name Tents
To Use: Cut along solid lines, then fold on dotted line. Make sufficient copies (preferably
copied on hard paper) for all participants. Distribute to participants and ask participants to
write their name in the space provided.
I hear, I forget
I see, I remember
I do, I understand
PD1: Welcome and Introduction
PD-13

I hear, I forget
I see, I remember
I do, I understand
PD1: Welcome and Introduction
PD-15

I hear, I forget
I see, I remember
I do, I understand
PD1: Welcome and Introduction
PD-17

THE COMPLETE SET OF OVERHEADS IS IN A SEPARATE POWERPOINT FILE
ENTITLED CGAP PRODUCT DEVELOPMENT OVERHEADS
PD1: Welcome and Introduction
PD-19

CGAP/World Bank, 2009
Objectives Objectives
Objectives
To describe the process of product development
To assess institutional capacity for product development
To appl y various client-oriented market research
techniques
To interpret research results to design product prototypes
To cost and price products
To pilot test products
PD1-O2
To launch new new
products that result in products that result in
increased profits and increased profits and
client satisfaction client satisfaction
CGAP/World Bank, 2009
Goal Goal
Goal
To provide guidelines for a process of product
development that is:
Systematic
Client-focused
Anal ysis-driven
Results-oriented
PD1-O1

PD-21

PD1-H1 (page 1 of 2)
CGAP/World Bank, 2009
Product Development
Precourse Skills Audit
Name: _________________________ Organization: _________________________
Please answer these questions to the best of your ability. This is not a test, but it will help us
identify which topics to emphasize during the course. Use the reverse side of this paper if
necessary to complete your answers.
1. Give three reasons why you would develop a new product.
2. What are the steps of the product development process?
3. Who should be on a product development team? List by position.
4. Describe two types of qualitative and two types of quantitative market research.
Qualitative Quantitative


PD1-H1 (page 2 of 2)
CGAP/World Bank, 2009
5. List the major characteristics of a credit product and savings product.
Credit product Savings product

6. What is activity-based costing?
7. What factors would you consider when you price a product?
8. List three to four activities that would be conducted in the testing phase of product
development
9. What institutional issues should be considered when developing new products?
10. State two critical issues you have faced in developing products in your MFI.
PD1-H2
CGAP/World Bank, 2009
Goal
To provide guidelines for a process of product development that is:
Systematic
Client-focused
Analysis-driven
Results-oriented
Objectives
To describe the process of product development
To assess institutional capacity for product
development
To apply various client-oriented market
research techniques
To interpret research results to design
product prototypes
To cost and price products
To pilot test products
To launch new products that result in increased profits and client
satisfaction
Product Development


CGAP/World Bank, 2009 PD-27
S SE ES SS SI IO ON N 2 2: : W WH HA AT T I IS S P PR RO OD DU UC CT T D DE EV VE EL LO OP PM ME EN NT T? ?
Session Summary
OBJECTIVES: By the end of the session participants will be able to:
Define and list the characteristics of a microfinance product
Distinguish between a new and refined product
Define a process of product development
TIME: 6080 minutes
SUPPLIES: Flipchart paper
Markers
Masking tape
LED projector or overhead projector
TRAINER MATERIALS
PD2-M1 Systematic Product Development Process
PD2-M2 Steps of Product Development Cycle Puzzle (must be cut in pieces, one
set given to each subgroup)
PARTICIPANT MATERIALS
OVERHEADS: PD2-O1 Financial Product Characteristics
PD2-O2 Definitions: New Versus Refined Products
PD2-O3 Percentages of New and Refined Products
PD2-O4 Product Development Process
HANDOUTS: PD2-H1 Product Development Process
PREPARED FLIPCHARTS:
Systematic Product Development Process (use PD2-M1)
Product Development Process (using PD2-O4)
Trainer Instructions
PD-28
Session 2: What Is Product Development?
INTRODUCTION TO PRODUCT DEVELOPMENT
1. (5 minutes) Tell participants that this is a course on financialspecifically
microfinancialproduct development. Ask: What is a product? Take a few
answers and summarize to ensure a concrete definition is provided and the
concepts in PD2-M1 are highlighted as appropriate.
Give the answer: According to the Product Development and Management
Association (PDMA), product is the term used to describe all the goods and
services sold. Products are bundles of attributes (features, functions, benefits,
delivery, and uses) that can be either tangible (as in the case of physical goods)
or intangible, such as those associated with service benefits, or a combination of
the two. A product is what the customer buys. The total product includes
everything that is delivered to the client.
Refer to PD2-M1 for further explanation of the systematic product development
process and give analogies. Draw and show a flipchart of the process.
2. (7 minutes) Ask: What types of financial products do you have in your MFI?
Answers should include credit, savings, insurance, transfers, and so on. For each
product named, create a blank flipchart with that as the title. Then ask participants
to brainstorm a list of characteristics, elements, or components of the product.
3. (7 minutes) Briefly review the terms listed on the flipcharts with participants. Ask
them to very briefly explain or give an example of each. Use PD2-O1 as a
backup. These characteristics are what define products and differentiate them
from each other.
4. (3 minutes) Ask participants why and when the characteristics might differ by
product. Steer discussion to the market focus and purpose of the productfor
example, agricultural loans, working capital business loans, and short-term
savings.
5. (510 minutes) Ask: Who has developed products for their MFIs? Ask for a show
of hands. Ask if they were new products or refined or changed products. Now ask:
What is the difference? Note that this is a much debated definition pointthe
PDMA defines new as a product (either a good or service) new to the business
marketing it. That definition excludes products that are changed only in terms of
promotion, price, place, and so forth.
Ask for examples of new and refined products. Examples of new products for an
MFI with only a group loan would include the introduction of an individual loan
product, a savings product, or an insurance product. Examples of refinements
might be a change in interest rate, in withdrawal frequency allowances, or in loan
size. Consider using a quiz-type interaction to illustrate the point. For example,
PD2: What Is Product Development?
PD-29
ask: If you were to change the interest rate of one of your products would that be
a new or refined product?
Give this example: If someone only offers credit and then introduces savings, that
is definitely a new product. If someone changes only the loan term or the price,
that is not newit is refined, changed, innovated. Show PD2-O2 to emphasize.
Avoid getting too bogged down in the distinction. What matters most is that,
whether a product is new or refined, the same product development process
should be followed because the process is geared to evaluate client perception
and therefore lead to products that will interest them
6. (5 minutes) Summarize that it is not always necessary to design a totally new
product; participants should remember that they can choose to refine existing
products, which is also an important strategy. Remember a new product does not
have to be an entirely new invention. The majority of new products are
innovations based on existing products. Emphasize this point using PD2-O3.
Emphasize that whether the product is technically new or refined, participants
should follow the same process when developing it. Even if someone is only
changing the loan he or she should follow a process that includes proper
research, design, piloting, costing, pricing, testingall of which are necessary for
success. How does one decidenew or refined?
7. (1015 minutes) State: We have reviewed what product means. Now let us look
at the next word: development. Invite participants to spend some time thinking
about what product development is. Introduce a small group exercise to define
product development. Divide the group into neighboring subgroups of two to four
members each. Distribute the paper slips cut from PD2-M2 to each group. Tell
them that they are to study the concepts on the paper slips, remove the concepts
that do not apply to product development, and then sequence the remaining items
that do apply to product development.
Not all of the PD2-M2 pieces are part of the process, but have been included to
provoke participants to think about the process. Consider adding or removing
some of the options to reduce time or to better meet the groups level.
8. (510 minutes) Get the groups attention and ask participants to share their
responses and sequences with a neighboring subgroup.
9. (5 minutes) Tell the group that many terms and flowcharts are used for this
process, but all refer to the same basic activities. (For example, according to the
PDMA, the process includes strategy, organization, concept generation, creation
and evaluation of a product and marketing plan, and commercialization of a new
product.)
Show and explain PD2-O4; hang the flipchart of the same to give an overview of
the framework of the course. Remind participants that the process is iterative and
ongoing, rather than linear. Distribute handout PD2-H1.
Trainer Instructions
PD-30
10. (5 minutes) Take any remaining questions or comments. Bridge to the next
session by telling the group that now that they are all on the same page with
respect to what product development is, the discussion will focus next on its
merits and explain the steps.
Trainer Note:
Trainer may want to give participants time to prepare for the skit to be acted out in session 3
(Case Study Part 2A).
PD2: What Is Product Development?
PD-31
PD2-M1
Systematic Product Development Process
What is a product?
Source: PowerPoint presentation developed by Monica Brand for ACCION.
This picture helps us think about what a product is in a way that is distinct from the
conventional conception. The clientor more specifically, the clients needs and
wantsare seen as the core product.
Typically, new product development focuses on what is referred to as the actual
productin 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
needs and wants.
The distinction might seem slight, but it has strong implications for developing
products. Take the example of a florist. What does a florist sell? The common answer
is flowers, but it is not quite exact. Flowers are the actual product, but the core
product is love, sympathy, gratitudeeven sex.
The product 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?). With the focus on the core, in a situation such as sending flowers to express
sympathy for someone who has lost a loved one, the most important feature of the
total product is the note thats attached, not the type of flowers.
What does this conceptual framework imply for the development of new products?
First, that the process needs to be bottom up (market-driven). And, second, that the
product must be continually validated in the marketplace with focus groups, market
research, pilot tests, and so forth.
Corewhy
needs
wants
Actualwhat
terms
rate, guarantee, etc.
Augmentedhow
Core
Actual
Augmented
Trainer Instructions
PD-32
New product development
Karen Stewart of Richard Stockton College of New Jersey offers the following
approach to introducing the concept of new product development:
To help introduce the concept of new product development, I ask students to bring
either a new product to class or an ad for a new product. Students are then asked to
share with the class this new product idea. In addition to describing this new item,
students must also indicate whether the product represents:
a. a new-to-the-world product (10 percent of all new products introduced each
year)
b. a new product line (20 percent of all new products)
c. an addition to existing product lines (26 percent of all new products)
d. an improvement or revision of existing products (26 percent of all new
products)
e. a repositioned product (7 percent of all new products)
f. a lower-cost product (11 percent of all new products)
From this it is evident that textbook authors who have written about new product
development are correct when they state that most new products are either additions
to existing product lines or improvements/revisions of existing products. We then talk
about the reasons for this pattern. I also ask the students to indicate whether they
believe their new product will be among the few new product ideas that are truly
successful. This provides a good opportunity to address why companies spend a
considerable amount of time and effort developing new products even though the
chances of success are small. We can then discuss the new product development
process and the factors that contribute to new product success and product failure.
PD2: What Is Product Development?
PD-33
PD2-M2
Steps of Product Development Cycle Puzzle
Cut out each topic; distribute one complete set to each subgroup in step 7. The assignment is
for the participants to determine which activities are included in the product development
process and in what sequence.
Institutional capacity assessment Client visits
Market research Going to the bank
Client exit data Collecting repayments
Client application forms Paying staff
Competition Taking leave
Disbursing loans Evaluation
Training credit officers Tea breaks
Hiring new staff Staff performance appraisals
Budgeting MIS
Costing Financial analysis
Pricing Loan portfolio reports
Institutions history Recruiting clients
Macroeconomic environment Attending study tours
Market segmentation Launch
Prototype development
Product testing
Delivery

PD-35

THE COMPLETE SET OF OVERHEADS IS IN A SEPARATE POWERPOINT FILE
ENTITLED CGAP PRODUCT DEVELOPMENT OVERHEADS
PD2: What Is Product Development?
PD-37

CGAP/World Bank, 2009
Financial Product Characteristics Financial Product Characteristics Financial Product Characteristics
Credit Credit
Termfrequency, length Collateral type
Interest rate Collateral amount
Interest-rate method Fees
Loan amount
Savings Savings
Fees
Deposit Frequency
Withdrawal frequency
Minimum balances
Insurance Insurance
Fees
Premiums
Use
PD2-O1
CGAP/World Bank, 2009
Definitions: New Versus Refined Products Definitions: New Versus Refined Products Definitions: New Versus Refined Products
NEW = a product new to the
MFI that is marketing it
REFINED = an improvement or
addition to an existing
product
The end result is.
products appear in some degree
new and desirable to the consumer
PD2-O2
Trainer Instructions
PD-38

CGAP/World Bank, 2009
Product Development Process Product Development Process Product Development Process
PD2-O4
EVALUATION
&
PREPARATION
R
E
S
E
A
R
C
H
M
A
R
K
E
T
L
A
U
N
C
H
D
E
S
I
G
N
PILOT TEST
CUSTOMER NEEDS
INSTITUTIONAL
STRENGTHS
COMPETITIVE
POSITIONING
CGAP/World Bank, 2009
Percentages of New and Refined Products Percentages of New and Refined Products Percentages of New and Refined Products
Is your product...
a new-to-the-world product?
(10 percent of all new products introduced each year)
a new product line?
(20 percent of all new products)
an addition to existing product lines?
(26 percent of all new products)
an improvement/revision of existing products?
(26 percent of all new products)
a repositioned product?
(7 percent of all new products)
a lower-cost product?
(11 percent of all new products)
PD2-O3
Source: Karen Stewart, Richard Stockton College of New Jersey.

PD-39

PD2-H1
CGAP/World Bank, 2009
Product Development Process
EVALUATION
&
PREPARATION
R
E
S
E
A
R
C
H
M
A
R
K
E
T
L
A
U
N
C
H
D
E
S
I
G
N
PILOT TEST
CUSTOMER NEEDS
INSTITUTIONAL
STRENGTHS
COMPETITIVE
POSITIONING


CGAP/World Bank, 2009 PD-43
S SE ES SS SI IO ON N 3 3: : P PR RO OD DU UC CT T D DE EV VE EL LO OP PM ME EN NT T
A AN N O OV VE ER RV VI IE EW W
Session Summary
OBJECTIVES: By the end of the session participants will be able to:
Explain the importance of product development to an
organizations strategy
Describe the steps involved in a systematic product development
process
Discuss the implications of these steps on an MFIs human
resources, risk management, organizational structure,
institutional culture, vision, and so forth
Explain the context of the case studyUNIbank
Identify the optimum product development team
TIME: 168215 minutes
SUPPLIES: Flipchart paper
Markers
Masking tape
LED projector or overhead projector
PARTICIPANT MATERIALS
OVERHEADS: PD3-O1 Product Development Steps
PD3-O2 UNIbank Giving You the Credit You Deserve
PD3-O3 Product Development Success Factors
PD3-O4 Driving the Point Home Fail If You Want To Optional
HANDOUTS: PD3-H1 Product Development Implications Matrix Worksheet
PD3-H2 UNIbank Overview Worksheet
PD3-H3 UNIbank Team Formation Discussion Guidelines
PD3-H4 Looking Before You Leap (distributed at beginning of
workshop)
CASE STUDY: Part 1 Historical Background and Current Situation: The Senior Staff
Meeting
Part 2A Skit Bens Presentation
Part 2B A Team Effort
PREPARED FLIPCHART:
Steps in Product Development (same as PD3-O1)
Trainer Instructions
PD-44
Session 3: Product Development An Overview
INTRODUCTION TO PRODUCT DEVELOPMENT
1. (1 minute) Tell participants that this session will now take a closer look at the
product development process and begin to identify the steps in the process.
Advise them that they also will be participating in a skit to illustrate the product
development process, based on a case study, and that they will be given a short
break later on to prepare for this activity.
ORGANIZATIONAL IMPACT
2. (5 minutes) Take participants through PD3-O1, explaining and asking for
questions. (Make flipchart prior to class.) Go over steps in the product
development cycle. Remind participants that it is an iterative and ongoing
process, not necessarily a linear process (even though the points are presented
linearly). Briefly relate the process to the previous cycle discussed in session 2
(PD2-O4).
Take any remaining questions or comments on the process. Continue on to the
next section, asking what impact the process has on MFI operations.
3. (5 minutes) Ask participants to think about how these steps could affect their
MFIs operations. For example, in general, what institutional areas, functions, or
aspects might be affected when a new product is introduced? Take random
answers and write them on a flipchart. Answers should include human resources,
MIS, training, risk management, organizational structure, institutional culture,
vision, budget and profitability, strategic linkages, operations, and so forth.
4. (1520 minutes) Hand out PD3-H1, Product Development Implications Matrix
Worksheet. Ask participants to work again in the same groups as before to
complete the matrix. Have them consider not only which departments or
operations will be affected, but also in what ways they might be affected.
5. (10 minutes) Facilitate a general discussion on what was discovered. Ask
participants what they learned from this exercise. Comments may include (1) PD
affects every arm of the institution; (2) there are different implications for each
step of the process; (3) it is not a simple task; (4) it needs to be thought through
clearly: (5) it requires the involvement of many people, much time and money:
and so on.
6. (35 minutes) Summarize the discussion and draw conclusions that relate back to
the need for a systematic, ongoing, iterative process of product developmentthe
reason everyone is here!
PD3: Product Development An Overview
PD-45
CASE STUDY INTRODUCTION AND SKIT
7. (2540 minutes) Explain that they will be using a case study during the remainder
of this course and that, as with all case studies, it is a simulation. Tell participants
that the case is based on a number of combined, real MFI experiences. Explain
that, when using a case study, the trainer will use a number of shortcuts to
illustrate points and techniques in a short period of time. Participants are not
expected to be able to develop new products in one week! In real life, it would
take participants far longerfrom 5 weeks to 20 weeksto complete the process.
Ask again what the first step of product development is. (Answer: to understand
the context, environment, and methodology of a basic institutional analysis.)
Explain that they will now begin to look at the case, to examine what is going on,
and to begin to identify and solve problems. Show PD3-O2UNIbank
background, and introduce UNIbank. Distribute Case Study Part 1 and ask
participants to read it and be prepared to act out a skit based on their reading and
the discussion that is about to begin.
8. (5 minutes) Ask participants for initial reactions and comments. Ask them to briefly
explain UNIbanks current position. For example, the organization is growing, but
it is experiencing client dropout. It thinks a new product will help it but does not
know what the implications are.
9. (2025 minutes) Divide group into preassigned subgroups (based on the
precourse skills audit results). Ask them to discuss the questions on PD3-H2.
Take great care in forming the groups at this point. Participants will need to
remain in the same groups throughout most of the remainder of the course. Each
subgroup will actually be conducting market research analysis and developing a
prototype, including costs, price, and so on, for a unique product. The work will be
much clearer if the participants stay in the same group and work with the same
products throughout these stages.
10. (510 minutes) Reconvene the large group and review questions 14, discussing
only the main points or controversial points. (Remember that the participants have
been discussing the case study for the past 25 minutes.)
11. (5 minutes) Focus the discussion on UNIbanks product development process
thus far. Ask rhetorically: What do you think? Are they on the road to success?
Lets see what happens at Bens next meeting.
SKIT PERFORMANCE AND DISCUSSION
12. (3 minutes) Distribute Case Study Part 2A and act out the skit.
13. (5 minutes) Process the skit, briefly discussing in general terms what happened.
14. (1520 minutes) Divide the group into neighboring triads and ask the participants
to discuss the questions on page 2 of Part 2A.
Trainer Instructions
PD-46
15. (510 minutes) Focus on the information available from the case study. Facilitate
a discussion using the following questions as a guide:
What is UNIbank's vision?
What information is available from Ben's presentation? (Answers include
exit data, portfolio sectorwise, national statistics on poverty, statistics on
competition, information from only one branch, and information on savings
regulation.)
What information is missing? Answers include reasons for satisfaction and
dissatisfaction, information from other branches, demographics, direct
client needs, information on competition for saving and insurance products,
technology, and more.
16. (10 minutes) Now focus on getting the missing information. Ask and discuss: How
does your MFI go about collecting information? What information does your MFI
collect? How would you rate your MFIs information-gathering efforts in its product
development? Does your MFI apply a systematic process or is information-
gathering haphazard? Does it succeed in gathering information?
17. (1520 minutes) Distribute Case Study Part 2B and PD3-H3, UNIbank Team
Formation Discussion Guidelines. Ask participants to read the case and complete
the handout. Summarize main points. Process and emphasize the purpose of the
team, composition, problems arising in composing the team, team management,
the time line, and so forth.
18. (10 minutes) Ask participants to reflect on their own experiences and think back to
UNIbank. Discuss: What are some of the factors that could make product
development a success or a failure? List critical points on a flipchart. Reinforce
with PD3-O3, Product Development Success Factors, and PD3-O4, Driving the
Point HomeFail If You Want To. (The latter is optional if the group might get
sidetracked and want to argue with the negative points being made.)
Summarize, making the point that some businesses have discovered the hard
way that people do not always want something new. New products do fail. Many
factors contribute to the success of a product. PD3-O3 illustrates the top 10
factors for success.
19. (5 minutes) Close this session and link to the next session. Explain that now
participants have some basic information about the product development process
and about UNIbank. So far they have recognized some problems, appointed a
product development team, and realized they need information before action. In
the next session, they will proceed with the next step of product development,
which is market research.
Trainer Note:
The trainer may find it helpful to post a flipchart that summarizes pertinent information about
UNIbank. It can include size, number of clients, and portfolios; staff (some key names);
branches; and so on. The goal is to make it easier for participants to grasp the basic data and
also to make UNIbank more real to them.

PD-47

THE COMPLETE SET OF OVERHEADS IS IN A SEPARATE POWERPOINT FILE
ENTITLED CGAP PRODUCT DEVELOPMENT OVERHEADS
PD3: Product Development An Overview
PD-49

CGAP/World Bank, 2009
Product Development Steps Product Development Steps Product Development Steps
Environmental and institutional analysis
Market research
Product concept/prototype design
Costing and pricing
Pilot testing
Rollout
PD3-O1
CGAP/World Bank, 2009
Giving You the Credit You Deserve Giving You the Credit You Deserve Giving You the Credit You Deserve
PD3-O2
ARIMA
UNIbank
Branches
Trainer Instructions
PD-50

CGAP/World Bank, 2009
Product Development Success Factors Product Development Success Factors Product Development Success Factors
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. Speedbut not at the expense of quality
PD3-O3
CGAP/World Bank, 2009
Driving the Point Home
Fail If You Want To
Driving the Point Home Driving the Point Home
Fail Fail
If
If You Want To You Want To
Dont bother to analyze the market
Rush to the market with a defective product
Let wishful thinking drive development projections
Dont bother with timing
Just ignore the competition
Spend millions for R&D but not one cent on marketing
Believe a small market is better than none
Positioning!! Whats that?
PD3-O4

PD-51
PD3-H1
CGAP/World Bank, 2009
Product Development Implications Matrix Worksheet

Market
research
Product
design
Costing/
pricing Pilot test Rollout
Human
resources

Information
systems

Training

Organization
structure

Institutional
culture

Profitability

Strategy and
mission

Funding/
liquidity

Strategic
linkages

Risk
management


PD3-H2
CGAP/World Bank, 2009
UNIbank Overview Worksheet
1. What are some of the characteristics of UNIbank's existing product(s)?
2. What prompted Ben to think about new products for UNIbank?
3. Why does it seem important for UNIban k to develop new products or refine its
existing products?
4. What are some of the implications of product dev elopment for UNIbank's human
resources, MIS, training, risk management, organizational structur e, institutional
culture, strategy, vision, mission, profitability, strategic linkages, and liquidity?
5. Comment on UNIbank's product development process so far.
PD3-H3
CGAP/World Bank, 2009
UNIbank Team Formation Discussion Guidelines
1. Do you think Ben made a wise choice of personnel for the team? Why or why not?
2. Why do you think it is important to have a team effort for product development?
3. Did Ben overlook any important skills that might be needed on the team?
4. What organizational factors can make it difficult to organize such a team?
5. When should a product development team be organized?
6. Who should decide on the makeup of the team?
7. How would you selec t (or have you sele cted) a product development team in your
organization?
PD3-H4 (page 1 of 10)
CGAP/World Bank, 2009
Looking Before You Leap:
Key Questions That Should Precede Starting New Product Development
Wright, Graham, Monica Brand, Zan Northrip, Monique Cohen, Michael McCord, and Brigit
Helms. Looking before You Leap: Key Questions That Should Precede Starting New Produc t
Development. 2001. http://www.microfinancegateway.org/p/site/m/template.rc/1.9.28773
Introduction
The microfinance industr y is one of t he few remaining industries in the world that is primarily
product- rat her than market-driven. With the rising recogn ition of the costs associated with
high levels of dropouts and their implication s for achieving sustainability, there is a growing
appreciation of the need to deliver client-responsive products. Increasing levels of competition
in many markets have also highlighted the importance of a marke t-driven ap proach to
microfinance. There is l ittle reason to doubt that the microfinance industry will follow the trend
of the commercial world towards a market-driven approach and that MFIs that do not respond
to the needs of their clients will eventually fail.
Many MFIs are looking at new product develop ment as a way of responding to th eir clients
needs. However, the y often do not understand the complexity a nd cost of product
development. This note suggests a few essential questions t o ask prior to setting about new
product development.
1. Motivation: Are we starting product development to make our MFI more client-
driven?
2. Commitment: Are we setting about product development as a systematic process
based on defined objectives?
3. Capacity: Can our MFI handle the strains and stresses of introducing a new product?
4. Cost-effectiveness and profitability: Do we fully understand the cost structure of our
products?
5. Simplicity: Can we refine, repackage, and relaunch existing product(s) before we
develop a new one?
6. Minimize confusion, complexity, and cannibalization.
1
Are we falling into the product
proliferation trap?
1. Are we starting product development to make our MFI more market-driven?
MFIs profess many motivations to undertake product development, and it is essential that the
Board, man agement and staff involved in the process of product development clarify their
motivations. With increasing levels of competition within the industry, many MFIs set about
product development to find new clients or retain existing clients whose needs or expectations
have changed. Other MFIs initiate product development activities in response to high levels of
dropout or exit among their clients. Still others develop new products to help leverage existing
infrastructure, improve efficiency a nd profitability, or for o ther inst itutional con siderations.
These are all good, in deed compelling, reasons for con sidering sta rting the pr ocess of
product development.

1
Cannibalization i s when t he int roduction of a new product diverts sales from a companys exi sting
products and when revenue is displaced, rather than created.
PD3-H4 (page 2 of 10)
CGAP/World Bank, 2009
Other less convincing reasons for initiating product development include getting access to the
growing plethora of innovation funds avail able from donors and the microfinance industrys
current interest in product development. Effective product development is driven by an MFIs
desire to be come client- responsive and rarely b y external f actors.
2
Those MFIs developing
products for reasons ot her than a commitment to respo nding to the market and becoming
demand-driven may well discover th at they have entered int o a more co mplex and time- and
resource-consuming process than expected.
On the other hand, MFIs have to live with the products th ey deliver, and the investment in
developing client-responsive services may well be the most important and cost-effective one
they ever make.
2. Are we setting about product development as a process?
As with the formal sector banking industry several decades ago, the microfinance in dustry is
largely characterized by top-down or bathtub product development. This model o f product
development typically comprises a senior manager having what appears to be a go od idea in
the bath and then instructing all branches to offer the resulting new product as of a specified
date. Under this model, there is little or no market research, inadequate costing/pricing of the
new product, no attempt to describe the product in clear, concise client language, no pilot
testing, and no attempt at a planne d rollout of t he new product. The in troduction of the new
product is simply dictated from above.
A top-down or bathtub approach to product development can have expensive consequences
as man y MFIs th at h ave introduced produc ts with out following a s ystematic process ha ve
discovered. From Latin America to Asia, from Africa to Eastern Europe, MFIs have experienced
significant and costly problems as a result of rushing new products into the marketplace without
following a methodical set of procedures. These problems have arisen in such diverse areas as:
Limited demand for the new product (in some extreme cases, additional client
dropouts)
Cannibalization of existing products by the new one
Ineffective/inappropriate marketing of the new product
Set-up costs far in excess of those anticipated
Poor profitability of (or more specifically losses generated by) the new product
Management information systems unable to monitor/report on the new product
Poor product supervision by midlevel managers
Serious client problems when product alterations are made to address lack of
profitability
Staff inadequately trained to market and deliver the new product
Distortion of staff incentives and thus their activities in the field
Experience has repeatedly shown that invest ing small amounts up front in a systematic
process of product development can save large amounts and/or gene rate larger a mounts of
business in the future. One step of the product development process leads to and informs the
nextand provides a disaster/reality check that insulates the MFI from subsequent problems.
A proper pr ocess also provides th e MFI an o pportunity to correct pr oblems or r espond to
issues while they are limited by the confines of each step.

2
Although some product development is appropriately spurred by external factors such as changes in
the legal/regulatory environment.
PD3-H4 (page 3 of 10)
CGAP/World Bank, 2009
WHAT IS THE PROCESS?
The product development process is a systematic step-by-step approach to develo ping new,
or refining existing, products:
1. Evaluation and Preparation
1.1 Analyze the institutional capacity and readiness to undertake product development.
1.2 Assemble the multidisciplinary pr oduct development team, including product
champion.
2. Market Research
2.1 Define the research objective or issue.
2.2 Extract and analyze secondary market data.
2.3 Analyze institution-ba sed information, financial information/client r esults from
consultative groups, feedback from frontline staff, competition analysis, and so forth.
2.4 Plan and undertake primary market research.
3. Concept/Prototype Design
3.1 Define initial product concept.
3.2 Map out operational logistics an d processe s (includ ing MIS and personne l
functions).
3.3 Undertake cost analysis and revenue projections to complete initial financial analysis
of product.
3.4 Verify legal and regulatory compliance.
3.5 On the basis of the abo ve plus client feedback sessions, refine the product concept
into a product prototype in clear, concise, client language.
3.6 Finalize prototype for final quantitative prototype testing or pilot testing, a ccording to
the risk/cost nature of the product.
4. Pilot Testing
4.1 Define objectives to be measured and monitored during pilot test, primarily based on
financial projections.
4.2 Establish parameters of pilot test t hrough the pilot test pr otocol, including sample
size, location, duration, periodic evaluation dates, and so forth.
4.3 Prepare for pilot test, in stall and test systems, draft procedures manua ls, develop
marketing materials, train staff, and the like.
4.4 Monitor and evaluate pilot test results.
4.5 Complete recommenda tion letter documenting the results of the pilot test,
comparison with projections, lessons learned, finalized systems/procedures manual,
initial plans for the rollout, and so forth.
5. Product Launch and Rollout
5.1 Manage transfer of product prototype into mainstream operations.
5.2 Define objectives to be measured and monitored during rollout based on financial
projections.
PD3-H4 (page 4 of 10)
CGAP/World Bank, 2009
5.3 Establish p arameters of rollout t hrough the rollout pro tocol including schedu le,
location, tracking, budget, and process.
5.4 Prepare for rollout, insta ll and test systems, finalize procedu res manuals, develop
marketing materials, train staff, and the like.
5.5 Monitor and evaluate rollout process and results.
Systematic Product Development Process
3. Can our MFI handle the strains and stresses of introducing a new product?
The process of product development consumes time and mon ey. It often highlight s
opportunities or needs to change central elements of an MFIs systems. MFIs should
therefore carefully consider before jumping into product development the questions: Are we
really ready? Do we h ave the resources? and Are we really commi tted to this? As a first
step to answering these questions, the MFI should conduct a thorough institutional analysis.
3.1 Institutional Strategy
The institutional analysis should sta rt with a review of the MFIs institu tional strategy and the
business plan to ach ieve it. The MFI should have a business pla n t hat both in cludes and
specifically allocates fu nds for product development. This requiremen t will necessitate the
preparation/ integration of the pro duct develo pment process int o th e cash flo w budget
prepared with the business plan t o clearly document the resources allocated t o product
development and the expected returns. These business plan components set out the

EVALUATION
&
PREPARATION
R
E
S
E
A
R
C
H
M
A
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K
E
T
L
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U
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C
H
D
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PILOTTEST
CUSTOMERNEEDS
INSTITUTIONAL
STRENGTHS
COMPETITIVE
POSITIONING
PD3-H4 (page 5 of 10)
CGAP/World Bank, 2009
institutional priority placed on produ ct development as a controlled and integrated part of the
MFIs overall strategy.
3.2 Financial Viability
The MFI should also analyze its current and projected financial viability, including capacity for
managing liquidity, ensuring full pr oduct cost ing of current products, and attaining self-
sufficiency. A new product can seriously af fect finan cial viability and proper financia l
management, and an MFI should manage and track these key performance areas prior to
embarking on any product development.
3.3 Organizational Structure and Philosophy
For effective product development, an MFI needs an organ izational structure and philosophy
that encompasses an d encourage s both a customer-service orienta tion and a culture of
innovation. This structu re will require effect ive and efficient internal co mmunications among
all levels. Good commu nication allows the MFI to enforce conformity to standard procedures
in branches (through the development and use of procedures manuals), with clear authorit y
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, t he MFIs Board must have the commitment to customer se rvice and
the will to follow the product development process in a systematic and structured manner.
3.4 Human Resources
The MFI will also need the human resources to conduct product development in terms of the
availability and experience of a ppropriate staff . Product d evelopment requires tr aining of
existing staf f and therefore a strong training department o r 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 t he product development team to oversee and implement
the process.
3.5 Marketing
An MFI serious about cl ient-responsive product development will need t o focus on marketing
to track progress of existing produ cts, formally assess co mpetition on a regular basis, and
understand the MFI's str engths 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 produ ct development, the MFI should en sure that it has some marketing
capacity available. The MFI should already possess skills in assessing client needs and
satisfaction (including the instituti onal ability to perform qualitative research), tracki ng 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.
3.6 Systems
The MFI should complete a thorough review of its existing systems with a view to o ptimizing
them in response to client needs and organizational efficiency goals prior to entering into
product development. Current syste ms form the basis of new product systems and so th ey
should be capable, user friendly, accurate, timely, and comprehensive in reporting and
tracking. These features pertain to both electr onic and manual systems. A process review o f
the systems assesse s staff satisfa ction with curr ent systems, and analyzes the abilit y of the
systems to deliver accurate, timely, comprehensive data to users.
PD3-H4 (page 6 of 10)
CGAP/World Bank, 2009
The system should encompass procedures for monitoring and auditing financial controls,
including external audit s, as well as a manual or electronic system able to track finan cial and
nonfinancial data by product and branch.
Current sys tems 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 prod ucts will not only require modifications to the information
systems but may also necessitate completely different delivery systems.
In summary, an MFI should already:
Practice the level of tracking and management required of a new product
Understand the capacity issues in all relevant departments
Have the will and full commitment of management and the Board behind the process
Possess or have available staff and systems that can manage, implement, and develop
the new product
Have the capacity to train all releva nt staff before significant funds are expended on
the new product development process
4. Do we fully understand the cost structure of our products?
In view of increasing professionalism of MFIs and the competition in the MFI marketplace, it is
essential th at MFIs un derstand exactly how much each part of their operation s costs to
facilitate informed management decisions. Key decisions include how to increase profitability
by cutting costs and/or increasing income; how to asse ss product-level performance, and if
necessary modify the price of existing produ cts; whethe r to accept and imple ment new
products; and how to price new products.
Product c osting o n a si mple all ocation bas is is a re latively strai ghtforward e xercise which
provides the MFI with a weal th of in formation and acti vity-based costing, while more compl ex
activity-based costing provides additional information on how and why costs are incurred. This
information is of great value to management teams committed to cost-efficient operations and:
1. Determines the full costs of delivering products
2. Determines the profitability/contribution of the products, including over time
3. Assists making informed decisions a bout selection of products, includin g cost/benefit
analysis
4. Promotes a high-quality MIS
5. Facilitates development of cost/profit centers
6. Reveals hidden costs
7. Instills cost-consciousness among product/service department managers enhances
productivity
8. Facilitates the pricing of current/future products
9. Provides a basis for business planning and investment decisions (e.g., which product
to market, etc.)
10. Can be used as a basis for variance analysis (budget v. actual comparisons, etc.)
11. Provides important insights that assist with identifying inefficient procedures
12. Facilitates re-engineerin g processe s and procedures use d to deliver the MFIs
products
PD3-H4 (page 7 of 10)
CGAP/World Bank, 2009
5. Can we refine, repackage, and relaunch existing product(s) before we
develop a new one?
Product refinement fine-tunes or a djusts existing products, often with limited effe ct on t he
existing systemsfor example by changing th e interest r ate or marketing strate gies of an
existing product.
New product development is the process of developing a brand new productfor example a
housing loan or a contr actual savings product. Prior to star ting the pro cess of new product
development, MFIs should give careful conside ration to options for refining, repackaging, or
relaunching their existing products. Product refi nement is considerably less expensive, time-
consuming, and disruptive than new product development.
Market research often shows that MFIs simply need to change the w ay that their staff ta lk
about or describe an e xisting product to bring in new clients or reta in those wh o might
otherwise le ave. This slight change is clearly o ne of the le ast disrupt ive forms of product
refinement since it only requires that the MFI invest in retraining staff and develop appropriate
marketing materials. Similarly, refining smaller, client-sensitive details of existing products can
often yield significant results at a relatively low cost.
Opportunities for product refinement can ar ise from both the front- and back-office aspects of
the existing product. For example, increasing the efficiency of the back-office staff or systems
can have a significant e ffect on the demand for the product and the rete ntion of clie nts. For
instance, in creased efficiency can result in faster loan disbursements in response to loan
applications or decreased interest rate or fees as a result of cost reductions. Re-e ngineering
back-office systems is as much of an innov ation as developing a ne w product, a fact that
should be clearly communicated to those administering donors innovation funds.
Upon completing the pr ocess of refining or repa ckaging an existing productwhether in the
front office, the back office, or boththe MFI c an relaunch the existing product. The relaunch
provides an important marketing opportunity through which the MFI can demonstrate it s
demand-led approach and its commitment to meeting the needs of it s current a nd future
clients.
6. Are we falling into the product proliferation trap?
Product proliferation is increasingly common among some MFIs that try to tailor p roducts to
respond to individual market segments with specific needs. These MFIs can find th emselves
offering many slightly different loan products. A multitude of products often results in:
Confusion amongst front-line staff and clients
Complex delivery systems
Complicated management information systems
Cannibalization among products
MFIs Cannot Do Everything!!
When evaluating the diverse needs of clients, the MFI should recognize that it cannot design
a product to respond to each and e very individual specific need. The MFI should group the
most common and prevalent needs and develop products in response to them. The following
variables must be considered when evaluating the most common ne eds among an MFIs
clients:
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
PD3-H4 (page 8 of 10)
CGAP/World Bank, 2009
Liquidity the ease of access to savings/speed of disbursement of loan
Access issue branch proximity/opening hours and numbers of withdrawals/
concurrent loans
One product can be marketed in many different ways to meet a variety of clients needs. The
MFI can market the same short term emergen cy loan as an education loan to meet periodic
school fees, a health loan to meet doctors fees and medication, or a loan to allow client s to
take advantage of an unexpected opportunity to name but a few.
Conclusion
Product development is an essential activity for market-responsive MFIs. As clien ts and their
needs chan ge, so the market-driven, demand-l ed MFI must refine its existing products or
develop new ones. But product development i s a co mplex, resource-consuming activity that
should not be entered into lightly. This paper outlines some of the basic q uestions and issues
that MFIs should address prior to embarking on the product development process.
Recognizing all of the above, those MFIs committed to being market leade rs and to
responding to their client s must indeed conduct product development. Effectively conducted,
systematic product development wi ll result in p roducts that are popular with clients (even in
very compe titive environments) and more cost-effective o perations fo r MFIs. More client-
responsive products will reduce dropouts, attract increasing numbers of new clients, and
contribute substantially to the long-term sustainability of the MFI.
Indeed, in the long run, those MFIs that do not embark on a systematic product d evelopment
process will suffer the fate of all businesses that do not respond to their clients needs.
PD3-H4 (page 9 of 10)
CGAP/World Bank, 2009
Annex
Selected Resources Available
Market research and product de velopment have only recently become hot topics in
microfinance, so there are relatively few resources available. That said, because they are now
hot topics, t he number of resource s is growing. The best of those currently available include
(as of 2002).
3

Process Step Resources Available
Overview of the
Product
Development
Cycle
Brand, Monica, New Product Development for Microfinance:
Evaluation and Preparation, Microenterprise Best Practices Project,
Technical Note # 1, DAI, Washington, 1998
Brand, Monica, Product Development Cycle, Microenterprise Best
Practices Project, Technical Note # 2, DAI, Washington, D.C., 1998
Brand, Monica, The MBP Guide to New Product Development,
ACCION International, 2001
CGAP Training Course on Introduction to Product Development,
CGAP, Washington, 2000
Wright, Graham A. N., Beyond Basic Credit and Savings: Designing
Flexible Financial Products for the Poor, in Micro-Finance Systems:
Designing Quality Financial Services for the Poor University Press
Ltd, Dhaka and Zed Books, London and New York, 2000.
Wright, Graham A. N., Market Research and Client Responsive
Product Development, MicroSave-Africa, 2001
Market Research MicroSave-Africa, Market Research for MicroFinance (A Training
Course), MicroSave-Africa, Nairobi, 2001
Wright et al., Participatory Rapid Appraisal for MicroFinance,
MicroSave-Africa, 1999.
Wright , Graham A. N., Market Research for MicroFinance Letting
Demand Drive Product Development, MicroSave-Africa, 2001
SEEP Network, Learning from Clients: Assessment Tools for
MicroFinance Practitioners, USAID-AIMS, Washington, 2000
Grant, Bill, Marketing in Microfinance Institutions: The State of the
Practice Microenterprise Best Practices Project, DAI, Washington
D.C., 1999
Krueger, Richard, Focus Groups: A Practical Guide for Applied
Research, Sage Publications Inc., California, 1998
Lee, Nanci, Client-Based Market Research: The Case of PRODEM,
Calmeadow, Toronto, 2000

3
The list was compil ed at the time of th e writing of the course, in 2002. Mi croSave-Africa has since
become Mi croSave and most of the Mi croSave documents listed here were subsequently publi shed.
Most are available from the MicroSave web site ( http://www.microsave.org) o r on the Microfinan ce
Gateway (http://www. microfinancegateway.org).
PD3-H4 (page 10 of 10)
CGAP/World Bank, 2009
Process Step Resources Available
Concept
Development
MicroSave-Africa, Market Research for MicroFinance (A Training
Course), MicroSave-Africa, Nairobi, 2001
Rutherford Stuart, Raising the Curtain on the Microfinancial Services
Era CGAP Focus Note, Washington, 2000
Refine to
Prototype
MicroSave-Africa and Research International, Market Research for
MicroFinance (A Training Course), MicroSave-Africa, Nairobi, 2001
Costing and
Pricing
CGAP Costing and Pricing MFIs Products CGAP Toolkit (draft),
2001
MicroSave-Africa and Aclaim, Toolkit for MFIs Costing and Pricing
Financial Services, MicroSave-Africa, Kampala, 2000
CGAP Setting Interest Rates on MicroFinance Loans CGAP
Occasional Paper, Washington, 1997
Quantitative
Prototype Testing
MicroSave-Africa and Research International, Prototype Testing
Using Quantitative Techniques, MicroSave-Africa, Kampala, 1999
Pilot Testing McCord Michael and MicroSave, Planning, Conducting and
Monitoring Pilot Tests for MFIs: Savings Products, MicroSave,
Nairobi, 2004
McCord Michael and MicroSave, Planning, Conducting and
Monitoring Pilot Tests for MFIs: Loan Products, MicroSave, Nairobi,
2001
McCord Michael and MicroSave-Africa, Planning, Conducting and
Monitoring Pilot Tests for MFIs: MicroInsurance Products, MicroSave-
Africa, Nairobi, 2001
Rollout McCord Michael and MicroSave-Africa, Planning, Conducting and
Monitoring Roll out for MFIs
Useful websites
MicroSave: http://www.microsave.org
CGA P: http://www.cgap.org


CGAP/World Bank, 2009 PD-69
S SE ES SS SI IO ON N 4 4: : M MA AR RK KE ET T R RE ES SE EA AR RC CH H
Session Summary
OBJECTIVES: By the end of the session participants will be able to:
Define market research and discuss its importance to product
development
Use some client-oriented approaches to market research and
explain the advantages and disadvantages of each
Develop a research problem
Design a focus group session and questions
Determine when and how to use participatory rapid appraisal
(PRA)
Analyze research findings
TIME: 300350 minutes
SUPPLIES: Flipchart paper
Markers
Masking tape
LED projector or overhead projector
Prepared PRA matrix
Subgroup folder files
Focus group CD video if available (from MicroSave)
CD projector for CD video if used
TRAINER MATERIALS
PD4-M1 Market Research Key Terms
PD4-M2 Focus Group Discussions and Participatory Rapid Appraisal for Microfinance
PD4-M3 Focus Group Interviewing
PARTICIPANT MATERIALS
OVERHEADS: PD4-O1 Market Research
PD4-O2 Market Research Is Important
PD4-O3 Steps in Market Research
PD4-O4 Participatory Rapid Appraisal Toolkit
HANDOUTS: PD4-H1 Worksheet on Developing a Research Objective
PD4-H2 Focus Group Discussion Guide
PD4-H3 Action Plan Market Research
PD4-H4 Technical Notes
CASE STUDY: Part 3 Bens Flashbacks Market Research
Parts 4A & B The Tatano Focus Groups
Part 5A Market Research Results
Trainer Instructions
PD-70
Session 4: Market Research
INTRODUCTION TO MARKET RESEARCHWHAT AND WHY
1. (5 minutes) Ask: What is our first major task in the product development process?
What do we mean by market research? Take a few answers, record main terms
on a flipchart. Show PD4-O1, Market research definition. State that this will now
be the group's focus in this session. Say: We will briefly introduce some well-used
market research techniques that have been proven in the industry. Remind
participants that this is not a course in market researchto become very familiar
with these tools and techniques, they will need further training and exposure.
2. (3 minutes) Say: Lets take another look at UNIbanks environment and see what
has been done there. Distribute and refer to Case Study Part 3. Ask participants
to read Critical Incident 1: ABCO's savings disaster. (The lesson: introducing
savings without market research leads to failure.)
3. (5 minutes) Conduct a brief large-group discussion: What are the main issues?
Case study questions:
What problems did ABCO face with its new savings product?
What are some of the possible reasons ABCO's product failed?
How could it have avoided these problems?
4. (3 minutes) Now ask participants to read and discuss Critical Incident 2: ABCO's
recovery. (The lesson: reengineering the failed savings product with market
research leads to success.)
5. (5 minutes) Ask: How did ABCO salvage its savings product? Follow the
discussion by asking participants why market research is important for UNIbank.
Briefly discuss the benefits when market research is conducted properly. (Some
benefits are less costly in the long run, better designed, client oriented, and so
forth).
End discussion by emphasizing that to develop good products, participants must
listen to their clients, consider the environment and the institution, and determine
what they want and need.
6. (510 minutes) Ask participants to share their own experiences. Ask: Who does
market research? In general, what do they do, how is the information theyve
gathered used, and how much time do they spend on market research? What are
the resultsare they as expected?
Finally, ask: What are your feelings about the usefulness of capturing market
information? Why is market research important? Show PD4-O2.
PD4: Market Research
PD-71
MARKET RESEARCH METHODS
7. (5 minutes) Say: We are now going to discuss more specifically and tangibly what
market research is and how we can do it. Refer to comments from the previous
discussion. Ask participants how they think UNIbank can get market information.
Write specific responses on a flipchart. Answers can include performing surveys,
talking to clients, looking at competition, looking at own data previously collected,
and so on. Respond that these are all good examples of different types and
methods of collecting information.
8. (10 minutes) Introduce the concepts of primary and secondary data. Briefly ask
the participants what each means and focus responses on the difference. Ask for
an explanation of ongoing and periodic data collection. What are the differences?
When are they best used? Ask for examples of each and classify those previously
listed. (If desired, list terms on a flipchart, and complete gaps in the explanations
as necessary.)
Lead a discussion on the importance of the variety and mix of techniques to be
used and the value of ongoing data collection to the microfinance institution in the
long run. See PD4-M1 for technical notes.
9. (10 minutes) Tell the group that there are more categories. Ask: Who knows what
they might be? Ensure that you elicit definitions of quantitative and qualitative.
Ask: What do you understand by quantitative research? Qualitative research?
Give an example. Use two flipcharts and label one "Qualitative" and the other
"Quantitative." Using the example of gathering information related to client exits;
create a list of data collection items for each. Prepare questions that will elicit at
least the following answers.
Quantitative Qualitative
Number of clients leaving
Which products are being left
Loan balance at exit
When did client exitafter first loan,
etc.
Why are you leaving?
What would have made you stay?
Why might you come back?
Briefly discuss the pros and cons of each category.
10. (5 minutes) Summarize types of research and their merits. Ask and discuss: Why
is it important to use various types of research methods? What are the benefits of
ongoing collection of data? What might trigger a periodic market-research effort?
What are the advantages of using both qualitative and quantitative methods? Why
is a mix of tools and techniques important?
Trainer Instructions
PD-72
COST CONSIDERATIONS
11. (510 minutes) Briefly discuss cost considerations. Ask participants what should
be considered in a discussion about costs. Answers may include staff time,
transport, possible consultants, and so on.
Follow up by asking what factors to consider when conducting market research
with respect to costs. What are some cost-effective ways to gather information?
Answers may include using a sample of the population versus the entire
population, using information that is already available, combining information
gathering with other ongoing activities, having a clear idea of what information is
being collected, and so forth.
Summarize by stating the costs of all resources for market research must be
taken into consideration. Remind participants that the resources expended on
market research will be well spent (PD4-O2).
12. (5 minutes) State that you will begin by looking at the basic steps in market
research. Through questioning, explain the steps and show PD4-O3. Tell the
group that the remainder of the session will go through each of these steps.
RESEARCH OBJECTIVES AND METHODS
13. (5 minutes) Define and give guidelines for formulating a research objective. Ask:
What do we mean by research objective? Why do we need one? How will we
develop one?
The research objective is a statement that precisely delineates or defines what
information is needed. It details the specific, measurable outcomes or results that
an organization plans to achieve with its market research. It is the breaking down
of the problem into a series of statements that constitute the results sought by the
research project. Defining the research objective guides the entire research
process.
14. (1520 minutes) Have the group divide into preassigned small groups for practice.
Give them the exercise: Using all the information you have on UNIbank, formulate
a research objective. Distribute PD4-H1, Worksheet on developing a research
objective.
15. (1015 minutes) Have a large group discussion and compare research problems
generated by the small groups. State that Moona will submit the research
objective to the General for approval before they begin the research. Summarize
by asking why it is important to develop a clear research objective before starting
to gather information.
16. (510 minutes) State: Now that we have identified the problem, how can we get
the data? Brainstorm to generate a list of research activities in response to the
research objective. Examples may include focus groups, surveys, interviews,
PD4: Market Research
PD-73
participatory rapid appraisal, use of secondary data, and so on. Highlight once
again the need for a mix of the activities.
17. (5 minutes) Explain that there are many ways to capture data. The choice will
depend on a number of variables: research objectives, resources available, and
so forth. Emphasize that this course will present only a few of the possibilities.
Ask participants where the focus of this course might be. Answer that it will focus
on the most participatory approaches those that are client-oriented, such as
focus groups and PRA. Ask if anyone can describe these methods. Take a few
quick responses and explain that they will experience them through UNIbank.
Consider reminding participants that there are other courses and tools on the
market that will provide more details: MicroSaves Market Research for
Microfinance (MR4MF) Tools, AIMS tools, and so on.
18. (5 minutes) State the UNIbank is also trying to use some of these techniques.
Say: Lets see how they are doing. Distribute Case Study Part 4AThe Tatano
focus groups. Say: The Tatano research effort begins. Point out the cartoon of the
focus group and ask participants to read the case. (This part of the case study
may be replaced by a video on bad and good focus groups if available.)
19. (5 minutes) Facilitate a discussion on what happened. Ask: What do you think
about the focus group? What might you change and why?
20. (5 minutes) Distribute Case Study Part 4B. Give participants a few moments to
review the cartoon.
21. (5 minutes) Quickly review the focus group event. Ask: What changed? What
made it better?
22. (10 minutes) Facilitate a general discussion on focus groups through questions
and answers. Ask: What are they? When and how are they used? Why do we use
them? What are the characteristics of a good focus group? Quickly record
answers on a flipchart. These may include planning, developing questions to ask,
determining which people to invite, arranging conducive seating, using skilled
moderators with proven facilitation and questioning skills, having good recording
devices, doing follow-up, and so on. Review strengths and weaknesses of focus
groups as a technique for market research.
23. (15 minutes) Say: Ben has asked us as the product development team to help
him design and prepare for the next focus group. Put the participants in pre-
assigned small groups and ask them to complete a focus group design using
PD4-H2, Worksheet on developing focus groups, as a guide.
24. (10 minutes) After 15 minutes, tell the groups that they will have 10 minutes to
prepare a cartoon (as in the case study) of their focus group for presentation to
the large group. Consider asking a group to role-play their plan.
Trainer Instructions
PD-74
25. (1520 minutes) Small groups present their depictions of the focus group. Ask
and answer the questions as per their completed handout while explaining their
picture. Discuss the questions asked: How/why they think it improved on the
previous two focus groups held at Tatano? How did they get additional
information? What techniques did they employ and why?
26. (5 minutes) Summarize main points on focus groups and take any questions. Tell
participants that technical notes distributed at the end of the session will have
references to focus groups.
PARTICIPATORY RAPID APPRAISAL (PRA) TECHNIQUES
27. (3 minutes) State that MFIs often use a focus group structure to administer other
types of qualitative research tools. Ask who knows what some might be. Perhaps
they have used them in their MFIs. Briefly discuss and ultimately focus content on
PRA techniques.
28. (5 minutes) Lead the group in a fishbowl simulation activity. Conduct a mini-PRA
activity on some training-related issue. For example, prepare a PRA activity
asking evaluation questions, or nutrition and menu questions, and so forth. Have
markers and matrixes already prepared. The purpose of the exercise is to
illustrate quickly how the placing of the beans works, while having fun.
29. (5 minutes) Ask participants what happened and offer their comments on the
technique. Discuss through questions and answers the definition of and reasons
to use PRA, and have the group give examples. Fill in as necessary.
30. (510 minutes) Show PD4-O4. Facilitate general discussion on the use of PRA in
microfinance. Ask for examples of how to use the various tools and elicit
participants' opinions of their strengths and weaknesses. See PD4-H4, Technical
Notes, for complete descriptions.
ANALYSIS OF RESULTS
31. (30 minutes) Ask participants to resume the same preassigned subgroups as in
Research Objectives and Methods above. Distribute Case Study Part 5AMarket
Research, which includes all the data collected by UNIbank to date. Tell
participants that they are to analyze the data and make a report for submission to
the team and the general group on their research findings. They should bear in
mind that this research will be used to form the product prototype.
From this point forward make sure that subgroups remain the same, since they
will be working on designing their products, and different groups will yield different
results. Ensure, too, that folders have been distributed. It is important for the
subgroups to keep their product information together.
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PD-75
32. (1525 minutes) Ask subgroups to present their findings and describe what they
consider to be the major findings of the market research regarding UNIbank
product development.
33. (10 minutes) Synthesize discussions on PRA and market research in general.
Summarize main points.
34. (510 minutes) Lead a general discussion on using the variety of research types
and tools in microfinance. Ask: What conclusions can be drawn? Why? Ensure
that participants leave the session knowing that (1) market research is vital to the
success of microfinance product development; (2) it must be well thought out and
planned; (3) MFIs must have and be willing to commit resources for market
research; (4) best results come from combinations of techniques and types of
market researchprimary, secondary, internal, external, periodic, ongoing,
qualitative, quantitative, individual, group, and so on; and (5) market research
takes timeit cannot be taught or conducted in a day. There are many resources
available for you to become adept at market research. Refer once again to AIMS
tools and MicroSave-Africa courses and materials.
35. (20 minutes) Say: Given the many points presented, think about how to use them
in your own MFIs. Distribute PD4-H3Action plan worksheet. Have participants
complete the work plan either individually or with people from their own
organization.
36. (15 minutes) Ask participants to share some of their thoughts from their action
plan, either in a large group or with their neighbors.
CONCLUSION
37. (5 minutes) Summarize main points and take final questions. Remind participants
that market research must be well thought out and planned. The MFI must commit
resources to this effort in advance. Emphasize that best results begin there, and
that half measures dont produce half resultsthey produce no results.
Bridge to the next section, analyzing the information and developing the
prototype. Distribute PD4-H4.
Trainer Instructions
PD-76
PD4-M1
Market Research Key Terms
Different MFIs have different approaches to market research. Those that are
committed to offering client- or market-driven financial services use a variety of
market research tools in various combinations; they are always collecting information
in one form or another.
Primary data are collected for the first time by a researcher for the specific research
project at hand.
Secondary data were previously gathered for some other purpose. More often than
not the proper place to begin a study is to investigate previous work related to the
research issues. Secondary data can also be divided into internal and external
sources.
The classification has nothing to do with relative importance. Whether the data are
primary or secondary is determined by whether or not they originated with the specific
preexisting study under consideration.
Ongoing activities and systems include:
Simple questions on loan application or savings account opening forms
Suggestion boxes in branches
Dropout questionnaires
Discuss ing client-focused information at staff meetings
Monitoring internal management and financial information
Reviews of industry data and trends
Periodic activities and systems are often activated in response to signals from the
ongoing systems and include:
Customer consultative groups
Focus group discussions with clients, potential clients, and dropouts
Minisurveys of three to six questions
Detailed competition analysis
Examples of classifying research techniques
ONGOING PERIODIC
Primary Secondary Primary Secondary

MIS portfolio reports
MIS other reports
Client feedback
surveys
Focus groups
Product satisfaction
surveys
Individual interviews
Observation
Client exit forms
Client intake forms
Client household
survey
Branch market
analysis
MIS reports
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PD-77
Qualitative. Data derived from behavioral sciences. Concerned with understanding,
illuminating, and explaining human behavior and ideas. Not concerned with
measuring. Use transcripts and grids to compare the outcome from each group or
individual and draw conclusions about behavior.
Quantitative. Data with a scientific basis. A representative sample can replace a
population within a measurable approximation (confidence level). In a representative
sample, each individual belonging to the eligible population has an equal chance of
selection.
A more pragmatic approach is to combine sampling methods using both random
sampling and sampling by quotas. Data tables are used to show trends and
variations.
Note: In quantitative research, the questi ons and range of possible ans wers are
determined beforehand, which is not the case with qualit ative research. In qualitative
research, one question and its answer(s) lead(s) to another set of questions.
The sample used in qualitative research is composed of people of the same
demographics, while the sample used in quantitative is representative of the
population.
QUALITATIVE QUANTITATIVE
Un structured questioning
For in-depth understanding of consumer
behavior and motives
Output: consumer words and descriptions
Highly trained professional moderator
Moderator must understand brief (research
objectives, discussion guide, etc.)
Questions not determined
Range of possible answers not determined
Samplegroup of people with demographic
similarities
Use of structured questionnaire
Statistically representative of population
Used to measure behavior and attitudes
Statistical output
Analyzed by computer
Enumerators trained for consistency and
accuracy in asking questions
Enumerators do not have to understand or
interpret brief
Questions determined beforehand
Usually range of possible answers determined
beforehand.
Sample representative of the population
Source: MicroSave-Africa toolkit/course assembled and developed by Graham A. N. Wright, Shahnaz
Ahmed, and Leonard Mutesasira, with help from Stuart Rutherford.
Cost considerations include staff members or consultants time, transportation, and
other associated costs.
Tell students: Consider using sample populations, using secondary data, and
combining activities as strategies to keep costs down.
Trainer Instructions
PD-78
Research objective. The research objective is a statement in precise terminology of
what information is needed. It breaks the problem into a series of statements that
constitute the end results sought by the research project.
Defining the research objectives guides the entire research process. Translated into
specific information needs, the objectives show what the project is expected to add to
what is already known. It reveals any limitations to scope or scale.
Essentially there are three types of research objectives:
Exploratory to gather preliminary data to shed light on the real nature of the
problem and to suggest possible solutions or new ideas
Descriptive to ascertain certain magnitudes (for example, how many people do
or do not agree to a certain savings idea, and so forth)
Causal to test cause-and-effect relationships
Here is an example of a causal objective: MFI A is experiencing high levels of
dropouts. Initial review of secondary data suggests that this is related to the:
Loan cycle
Size of the installment
Ratio of compulsory savings to loan size
MFI A wishes to understand the details behind the reasons for client dropouts with a
view to refining its current loan products (both urban and rural).
Focus group. A technique for data collection that became popular in the United
States in the early 1940s. Used to collect qualitative data, it provides descriptive
information, not numbers and figures. Six to eight homogeneous participants discuss
a particular issue led by a moderator, whose task is probing (not prompting) and
helping the group explore the issues in depth. The discussion is recorded.
According to the Product Development and Management Association, the focus group
is a qualitative market research technique where 8 to 12 market participants are
gathered in one room for a discussion under the leadership of a trained moderator.
Discussion focuses on a consumer problem, product, or potential solution to a
problem; the results of these discussions cannot be projected to the general market.
Focus group process (using MicroSaves Market Research for Microfinance,
MR4MF, Tools) The focus in focus group discussion describes the importance of
focusing on a few key (generally related) issues:
Get to know the sector
Get to know the clients
Arrange logistics and select interviewees/participants
Select and train appropriate moderator
Prepare and pretest the discussion guide
Conduct the focus group discussion
Analyze the data and prepare the report or presentation
PD4: Market Research
PD-79
UNIbank Part 4 case study guidelines
Comic strips (probing the reasons for dropping out) and controlled discussion on client
exits:
BAD FOCUS GROUP DISCUSSION (FGD) PROCESS:
Only one or two people participating
Poor handling of participant
Many closed or prompted questions
Illogical sequence of questioning, etc.
GOOD FGD PROCESS:
Full participation
All open questions
Effective probing, etc.
CONTENT OF FGD THAT SHOULD COME OUT WHEN DISCUSSING THE CARTOONS:
High weekly installments stretching household budget
Seasonality of income
Competitors offering long-term loans with lower installments
Competitors offering open-access savingsused to manage repayments in the
lean season
Source: MicroSave-Africa toolkit course assembled and developed by Graham A.N. Wright, Shahnaz
Ahmed, and Leonard Mutesasira with help from Stuart Rutherford.
Trainer Instructions
PD-80
PD4-M2
Focus Group Discussions and Participatory
Rapid Appraisal for Microfinance
Excerpted from MicroSave Africa toolkit course assembled and developed by Graham A.N. Wright,
Shahnaz Ahmed, and Leonard Mutesasira with help from Stuart Rutherford.
Introduction
There is a growing recognition of the need for microfinance institutions (MFIs) to conduct
market research in order to tailor financial products and services to the needs of their clients.
In addition, there is also a growing recognition that the same types of procedures and
methods that can and should be used to design MFIs products and systems can (and
perhaps should) also be used to examine impact. However, there are few tools available to
assist those who wish to use market research in this way.
Traditional quantitative research methods fail to capture the rich complexity of poor
households reality and livelihoods. The traditional quantitative approaches (typically focusing
on increasing income alone) overlook the importance of microfinance services role in
diversifying sources of income, smoothing income and expenditure fluctuations, protecting
and developing important household assets (physical as well as human), and developing key
social contacts and skills.
This course introduces a series of tools, including focus group discussions (FGDs) and
participatory rapid appraisal (PRA) that allow the researcher or practitioner to examine the
complexity of poor households financial, economic, and social environment. It also provides
guidelines on how to analyze the results to identify common trends, patterns, recurring
themes and issues, and to triangulate evidence for the same.
This toolkit/course provides an introduction to FGDs and PRAs with practical in-the-field
exercises to maximize the practical learning experience. Contact MicroSave-Africa for more
details on this course. Course contents are outlined below.
The Workshop
Introduction:
Semi-structured dialogue
Focus group discussions:
What is an FGD?
When is an FGD useful or applicable?
How to conduct an FGD
Qualities of a good moderator
Preparing a discussion guide
Pretesting a discussion guide
Site and participant selection
Preparing for the FGD
Conducting the discussion
How to analyze the FGD
Sample FGD discussion guides on financial services and institutions
PD4: Market Research
PD-81
Participatory rapid appraisal:
What is a PRA?
The main advantages of undertaking PRA
Basic principles of PRA
Initial PRA meetings and consultations
Practical tips for facilitators
Checklist of materials required
The PRA Toolkit for Microfinance
1. Seasonality analysis of household income, expenditure, savings, and credit is used
to obtain information on seasonal flows of income and expenditure, and the demand for
credit and savings services. This analysis also provides insights into some of the risks
and pressures faced by clients and how they use MFIs financial services to respond to
these. This tool also provides insights into the financial intermediation needs of the
community and what products the MFIs can design in response to these.
2. Seasonality analysis of migration, casual employment, and goods and services
provided by the poor looks at the availability of cash to the people in the community and
examines how far they might have to migrate to find work (when it is available). This has
important implications for their ability to make regular savings and loan repayments.
3. Life-cycle profile is used to determine which of the events require lump sums of cash, to
examine the implications of these for household income and expenditure, to establish
current coping mechanisms, and then finally to discuss how access to MFI financial
services can help the household respond to these events. The information gathered is
useful in designing financial products that match the various needs expressed at different
milestones during a persons life cycle.
4. Venn/Chapati diagram allows analysis of financial service groups or organizations within
the community and their roles, and helps to understand more about the social capital
accumulated by participants.
5. Simple ranking can be used to explore a wide variety of issues when an understanding
of the relative importance/desirability, and so on, is needed (for example, for
understanding the relative importance of different elements of productsinterest, rate,
opening balance, grace period, and the like).
6. Relative preference ranking is used to see how clients and potential clients perceive
the financial service providers and components of the financial services they provide.
7. Pair-wise ranking is used to examine in detail how clients and potential clients compare
and contrast critical components of financial services, and why those elements are
important for them.
8. Simple wealth ranking provides a rapid way of segregating a community into three
basic categories, and is useful in situations where there are many households in a
community. This exercise can also be useful in impact assessment and for examining the
socioeconomic characteristics of people who chose to join (or dont join) the MFI and also
those who leave or whose accounts become dormant.
9. Detailed wealth ranking provides (1) an understanding of how and why rich people are
wealthy and the poor are poor and (2) a ranking of the households in the village, from the
wealthiest to the poorest, as seen by the members of the community.
Trainer Instructions
PD-82
10. Cash mobility mapping provides an understanding of where the community goes to
acquire or spend cash (markets, waged labor, cooperatives, informal financial
organizations, and so on) and can be used to lead into discussions of which financial
service institutions people trust or value and why. The exercise also provides initial
insights into potential income-generating ventures or projects in which the clients might
become involved.
11. Time series detailing sickness, death, loss of employment, theft, natural disaster,
and the like. (for example, for this year, last year, 5 and 10 years before) provides an
opportunity to learn how the community views change over time in various areas related
to a series of crises. It also allows the research team to integrate key changes into the
community profile, which will simplify problem identification, and to begin to organize the
range of opportunities for improved delivery of financial services.
12. Time series of asset ownership (this year, last year, 5 and 10 years before) is useful in
determining what productive and protective assets (in a broader sense) are valued the
most and thus assist in evaluating the potential for designing or refining corresponding
financial products, including leasing and contractual savings deposits (for example, for
housing, education, health insurance, and so on).
13. Financial services matrix is useful in determining which financial services are used by
which socioeconomic or sociocultural strata of society and why, and thus the potential for
designing or refining appropriate financial products.
14. Financial sector trend analysis is useful in determining which financial services have
been used over time by which socioeconomic or sociocultural strata of society, and thus
for understanding the changes in the use or availability of a variety of financial services
over time, and why participants used them.
SampleResearch Plan for MFIA
RESEARCH ISSUE
MFIA is experiencing high levels of dropouts. Initial review of secondary data suggests that
this is related to:
The loan cycle
The size of the installment
The ratio of compulsory savings to loan size
MFIA wishes to understand the details behind the reasons for client dropouts with a view to
refining its current loan product.
RESEARCH PLAN
Four to six PRA sessions on each of the following:
Product Attribute Ranking
To understand which elements of MFIAs system/product really matter to the client and
which do not. To allow triangulation with the FGD information below.
Defining and Ranking the Reasons for Client Dropouts
To allow MFIA to get a clear understanding of the chief reasons underlying the
dropouts in its program. To allow triangulation with the FGD information below.
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Wealth Ranking and Dropouts
To allow MFIA to analyze the nature of dropouts, specifically whether they are
predominantly at either end of the socioeconomic spectrum of clients (that is, are the
poorer or the richer clients dropping outand if so, for what reasons).
Two to four PRA sessions on each of the following:
Financial sector trend analysis
To provide the background setting and to allow MFIA to understand the competitive
environment in which it is operating and changes in it over time.
Seasonality analysis (if the results of the FGDs suggest this is important)
To look for seasonal issues that are driving dropouts. To allow triangulation with the
FGD information below.
The following discussion guide for the FGDs o n dropouts may require changing, depending
on the results of the PRA work.
Focus Group Discussion Guide
Welcome
Thank you for comingwe are grateful for your time.
We are from an organization called MicroSave. MicroSave is a research organization
that looks at financial services for people who do not have access to banks. We try to
ensure that the clients voices and ideas are heard by the organizations that provide
financial services to poor people.
We are holding these discussion groups to try to understand MFIA clients reasons for
dropping out.
We would very much like to record these discussions to help us remember them and to
ensure that we do not miss any of the issues and ideas you give us. The details of these
discussions will not be shared with MFIA and your names will be kept confidential, so
please do not be concerned. Feel free to express your opinions about the products openly.
As a first step, lets all introduce ourselves, beginning with you. My colleague here will
prepare name tags to help us remember your names.
Core questions Probes
Warmup questions:

1. How long have you been with MFIA?
2. What business do you run?
3. What makes people like yourselves
decide to join MFIA?
4. What makes people decide to leave
MFIA?
(If interesting response) Have these
expectations been met?
General questions:

1. For what purposes did you use the loans
you took from MFIA?
2. Did the loans allow you to meet your
needs? If not, why not?
Why did you borrow from MFIA?
How did you use the loans you took from
MFIA?
Were the loans offered by MFIA
appropriate for your needs?
Trainer Instructions
PD-84
Core questions Probes
Impact on dropouts questions:

1. What are the main reasons for clients
leaving your groups?
2. Have you seen a change in the number
of people leaving the group in the last
year? If so, why?
3. Who makes the decision that people will
leave the MFIA program?
4. What should MFIA do to further improve
its loan program?
5. What procedures or systems would you
like to see change in MFIA?
6. In what other ways could MFIA have
better met your needs?
For what reasons did the last three
people who left your groups decide to
leave? (Note: Ensure that the answers
are carefully probed to discover
underlying reasons.
1
)
Is the number of people leaving MFIA
increasing or decreasing? Why is this
happening?
Who are the people who decide that
members should leave the program?
Please make recommendations on how
MFIA might revise its loan program to
better suit your needs.
If you were the manager of MFIA, which
rules would you change to reduce
dropouts from the program?
Describe other ways that MFIA might
help its clients and retain them as
members of the organization.
Conclusion
Thank you. Your answers and discussion have been very informative. We are very grateful
for the information you have provided.
Do you have any questions or suggestions for us?
Suggested Timetable
(Note: this may need to change as more is learned about the research issue)
Sites to be determined by the research and development department.
9:00 a.m. 12:00 p.m. 2:00 p.m.
Week 1
Monday Financial sector trend
analysis
Financial sector trend
analysis
Analysis
Tuesday Product attribute ranking Wealth ranking Analysis
Wednesday Defining and ranking
reasons for dropouts
Defining and ranking
reasons for dropouts
Analysis
Thursday FGD Product attribute wealth
ranking
Analysis
Friday FGD Seasonality analysis or
defining and ranking
reasons for dropouts
Analysis

1
Typically clients will say, My business was failingbut the reasons for the failure of the business
need to be explored and understood. Was it because of the lack of grace period? The loan size was
too small? The instalments were inappropriately scheduled and the like? Or was it because the client
had other responsibilities such as caring for sick household members and so on?
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PD-85
9:00 a.m. 12:00 p.m. 2:00 p.m.
Week 2
Monday Product attribute ranking Product attribute ranking Analysis
Tuesday Defining and ranking
reasons for dropouts
Defining and ranking
reasons for dropouts
Analysis
Wednesday FGD FGD Analysis
Thursday FGD FGD Analysis
Friday FGD or financial sector
trend analysis
Seasonality analysis or
defining and ranking
reasons for dropouts
Analysis
Source: MicroSave-Africa, assembled and developed by Graham A.N. Wright, Shahnaz Ahmed, and
Leonard Mutesasira with help from Stuart Rutherford.
MicroSave-Africa, a UNDP/DFID initiative Promoting secure, high-quality savings services for poor
people, Centre for MicroFinance, PO Box 24204, Plot 21 Kawalya Kaggwa Close, Kololo, Kampala,
Uganda Tel. 256 (0)41 347481-3 Fax. 256 (0)41 347635 Email: msa@infocom.co.ug Web site:
http://www.undp.org
Trainer Instructions
PD-86
PD4-M3
Focus Group Interviewing
One of the most popular exploratory research techniques, focus group interviewing consists
of a small group of people (usually 8 to 12) assembled for the purpose of discussing in an
unstructured, spontaneous manner topics introduced by a group moderator. The objective of
conducting focus groups is to accomplish the goals of a survey, but at a lower cost. In fact,
focus groups, as an exploratory research technique, cannot be substituted for a descriptive
researchs survey design. Focus groups are such a popular technique because, when
appropriately used, they can effectively and efficiently achieve the goals of exploratory
research:
Generating new ideas or hypotheses that can be tested in later phases of the research
study
Clarifying concepts, actions, or terms used by consumers
Prioritizing issues for further investigation
Providing an opportunity for management to see how their "real" consumers think, feel,
and act
Obtaining an early read on changing market trends
Focus groups are good at accomplishing such objectives because their relatively unstructured
approach permits a free exchange of ideas, feelings, and experiences to emerge around a
series of topics introduced by a moderator. The moderator works from a topic outline that
covers the major areas of interest to the client firm, but because each group session consists
of different individuals with their own feelings, desires, opinions, and so forth, no two sessions
with the same agenda will be exactly the same in conduct or findings. The term "focus group"
is used because the moderator focuses the group's attention on the predetermined subjects,
without letting the discussion go too far afield. However, it is considered unstructured in the
sense that a good moderator will consider the particular dynamics of each group when
introducing these topics and the order in which they are brought up for discussion. Because
they are so frequently used in marketing research, several books have been exclusively
devoted to a discussion of how to conduct and analyze focus group sessions. We will confine
our discussion here to a few of the more important aspects of using focus groups as a
qualitative exploratory research approach.
Why Conduct Focus Groups?
The standard reasons for conducting focus groups include:
Idea Generation
Consumers or knowledgeable experts may provide a good source of new products or
other ideas in the fertile environment of a group setting.
Reveal Consumers' Needs, Perceptions, Attitudes
Probing consumers on why they think or act the way they do may reveal less obvious,
but no less important, reasons for their behavior.
Help in Structuring Questionnaires
Hearing the way consumers think and talk about a product, activity, or consumption
experience not only generates hypotheses that might be tested in a descriptive
PD4: Market Research
PD-87
research design, but also informs the researcher about how to word questions in ways
directly relevant to the consumer's experience.
Some less frequently mentioned reasons for conducting focus groups include:
Post-Quantitative Research
Focus groups are most often mentioned as research done prior to a survey, but they
might be of equal value in helping researchers to "put flesh on the bones" of
quantitative research. Discovering that a certain percentage of consumers behave in a
particular fashion may make it desirable to probe a group of those consumers in some
depth to discover why and how they came to act in that manner.
Making the Abstract Real
One of the most memorable qualities of focus groups is their ability to make real what
was heretofore only considered in a very abstract manner. For example, it is one thing
for a product manager of a brand of dog food to know that many dog owners really love
their dogs. It is quite another for that product manager to see dog owners in a focus
group take obvious delight in recounting their Ginger's latest adventure with a raccoon,
or grow misty-eyed in remembering Biff, now dead ten years, or hear the soft lilt in their
voice as they describe the relationship they have with Jason, their golden retriever.
Attendance at a focus group can infuse lifeless market data with new meaning and
make its implications more memorable and meaningful. One checklist for management
using focus groups to obtain a more three-dimensional understanding of their actual
customers includes the following advice:
Don't expect your customers to look like the models in your ads. Fitness seekers
don't all look like Jane Fondathey are trying to.
Don't expect your customers to like you. Sitting behind the mirror can be blitz group
therapy. Your ego and your company's ego are in the hands of a few customers. It
can be upsetting and anger-provoking to hear what they have to say. Be prepared.
Don't expect consumers to care as much about your product as you do. It
represents only a small part of their lives.
Don't expect your customers to be people just like youor, on the other hand, to be
unlike you.
Don't expect people to be consistent, and don't label them as hypocrites when they
aren't.
Use your qualitative researcher as a consultant to put the study in contextare
these customers satisfied or dissatisfied, compared to what the researcher has seen
in other categories?
Remember, if they buy your product, they are your customerswhether or not you
like the way they look, talk, think, or feel about you.
Be honest about your expectations. There is no clean slate. Everyone has
preconceptions about their customers. Ask where your expectations come from
research, or prejudice.
Reinforcing Beliefs
Judith Langer recounts a focus group experience by the Gillette Company that
illustrates the ability of focus groups to convey a message much more powerfully to
employees than repeated admonitions by management:
Trainer Instructions
PD-88
The Gillette Company asked us to conduct research on "quality," a major
issue in the 1980s. What does quality mean to consumers; when do they
and don't they look for it; how do they recognize it? A focus group with
women showed that consumers are more demanding and "educated"
about quality than in the past. This comment was typical:
I think as consumers we're becoming more aware of what goes into a
product. For myself, I have become more aware of the ingredients
food or clothing or whatever. I feel that I'm not the same shopper I
was perhaps six years ago. That was just fad buying. Now I look at
something.
Marketing, market research, and research and development people
observed the group; the videotape of the session has since been shown
to others in the company. Hans Lopater, Gillette's research director, says
that the focus group made what top management has been saying more
tangible and believable. This wasn't another generalized corporate
lecture. These were real people who cared, who could tell the difference,
who shopped what they believed. Understanding the importance of
quality in today's competitive marketing environment, one can argue, can
affect not only a company's attitude, but ultimately its bottom line.
Early Barometer
Focus groups may provide an early warning system of shifts in the market. Probing
consumers on lifestyle changes, consumption patterns, opinions of new competitive
entries, and so forth, may reveal threats and opportunities entering the market long
before they might be revealed in a large-scale survey. Keeping an open mind and
maintaining an active curiosity allow researchers to see the far-reaching significance of
seemingly innocuous observations made by focus group participants.
Focus Group Composition
Conventional industry wisdom suggests that focus groups should consist of 8 to 12 people
selected to be homogeneous along some characteristic important to the researcher (for
example, do a lot of baking, own foreign luxury cars, manage their own retirement account
with more than $100,000 invested, and so on). Usually recruitment of focus group participants
strives to find people who fit the desired profile but who do not know each other, thus
reducing the inhibitions of group members to describe their actual feelings or behaviors.
Typically, group sessions last from one and a half to two hours. Going against such
conventional wisdom may be necessary in some cases.
For example, one of the authors conducted research for a food company that wanted a few
direct questions asked prior to presenting participants with prepared versions of their food
products, as well as their competitor's. While not a taste test per se, the client wanted to hear
the subjects reactions to the products and a discussion of the circumstances under which the
products would be used in their homes. For this study, a series of one-hour group sessions
were run with five people per group. The more structured discussion and the desire to query
each participant made the shorter time and smaller group more conducive to achieving the
study's objectives.
Selection and Recruitment of Group Participants
The research objectives and research design will indicate the types of people to be recruited
for a focus group. If a facility especially designed for focus group use is contracted with, the
management of the facility typically will conduct recruitment of focus group members. If a
PD4: Market Research
PD-89
marketing research firm is being hired to conduct the groups, they usually hire the facility;
identify, recruit, and select the participants; moderate the groups; and make an oral and
written report of the findings. Sometimes the client organization will provide a list of possible
participants taken from a master list of customers, members, users, and so on. It is usually
necessary to provide at least four names for every respondent needed (that is, approximately
50 names per focus group).
Prospective participants are screened when contracted to ensure their eligibility for the group,
but without revealing the factors used to assess their eligibility. For example, if the researcher
is interested in talking with people who have traveled to Europe in the past year, he or she
would also ask about other trips or activities to camouflage the central issue under
investigation. This deception is helpful in discouraging respondents from answering in ways
strictly intended to increase or diminish chances for an invitation, and to discourage selected
participants from preparing "right" answers for their participation in the group sessions. It is
advisable to provide a general idea of the topic for discussion (for example, personal travel) to
encourage participation. Participants are usually rewarded with an honorarium (say US$25
$50 per person) for their time. The size of the honorarium depends upon the type of
participant (for example, physicians expect more than mechanics). The focus group facility
management usually covers the cost of recruiting, hosting, and compensating the groups in
their fee.
In conclusion, here are six rules for recruiting focus group members:
1. Specifically define the characteristics of people who will be included in the groups.
2. If an industrial focus group is being conducted, develop screening questions that probe
into all aspects of the respondents' job functions. Do not depend on titles or other
ambiguous definitions of responsibilities.
3. If an industrial focus group is being conducted, provide the research company with the
names of specific companies and employees, when possible. If specific categories of
companies are needed, a list of qualified companies is critical.
4. Ask multiple questions about a single variable to validate the accuracy of answers.
Therefore, if personal computer users are to be recruited, do not simply ask for the
brand and model of personal computer they use. In addition, ask them to describe the
machine and its function; this will ensure that they are referring to the appropriate
equipment.
5. Do not accept respondents who have participated in a focus group during the previous
year.
6. Have each participant arrive 15 minutes early to complete a prediscussion
questionnaire. This will provide additional background information on respondents,
reconfirm their suitability for the discussion, and help the company collect useful factual
information.
Moderator Role and Responsibilities
The moderator plays a key role in obtaining maximum value from conducting focus groups.
The moderator helps design the study guide, assists the manager or researcher who is
seeking the information, and leads the discussion in a skillful way to address the study's
objectives while stimulating and probing group participants to contribute to the discussion.
Listed below are 10 traits of a good focus group moderator.
Trainer Instructions
PD-90
1. Be experienced in focus group research.
2. Provide sufficient help in conceptualizing the focus group research design, rather
than simply executing the groups exactly as specified.
3. Prepare a detailed moderator guide well in advance of the focus group.
4. Engage in advance preparation to improve overall knowledge of the area being
discussed.
5. Provide some added value to the project beyond simply doing an effective job of
conducting the session.
6. Maintain control of the group without leading or influencing the participants.
7. Be open to modern techniques such as visual stimulation, conceptual mapping,
attitude scaling, or role-playing, which can be used to delve deeper into the minds of
participants.
8. Take personal responsibility for the amount of time allowed for the recruitment,
screening, and selection of participants.
9. Share in the feeling of urgency to complete the focus group while desiring to achieve
an excellent total research project.
10. Demonstrate the enthusiasm and exhibit the energy necessary to keep the group
interested even when the hour is running late.
Reporting the Results of Focus Groups
In writing the findings of focus groups, care must be taken not to imply that results typify the
target population. The groups were not formed in an effort to generate inferential statistics,
but rather to clarify concepts, generate ideas and insights, make the abstract real, and so on.
Therefore, it is the qualitative rather then quantitative conclusions that should be the focus of
the written report. Goldman and McDonald (The Group Depth Interview, 1987) make the
following suggestions about writing the report on focus group findings:
The report should not be a sequential summary or transcript of the sessions, but rather
a "logically organized and coherent interpretation of the meaning of these events."
The report should begin with an introductory section that reviews the research purpose
and objectives, and a short description of the research methodology. This is followed
by a report of findings, the marketing implications, recommendations, and suggestions
for future research phases.
An executive summary at the beginning of the report should cover the major
discoveries as well as the relevant marketing implications that can be justifiably
concluded based on the qualitative research results.
The results section is not necessarily best done by following the sequence of topics
covered in the discussions. It may rather be approached as focusing on marketing
problems or market segments, and may discuss the findings from the groups that might
have been addressed in diverse order during the group sessions.
The written analysis should progress from the general to the more specific. For
example, a report on a new snack product concept might start with a discussion of
general observations about snack eating, then go to a discussion of brand image and
loyalty, then address the response to the new snack concepts.
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PD-91
The marketing implications section should provide guidance for the development of the
marketing response to the findings without overstating the conclusiveness of the
qualitative findings. Everyonereport writers and readersshould remain aware of the
limited objectives for conducting the groups, as well as the limitations of this type of
research method in general.
Source: Stevens,Robert, Bruce Wrenn, Morris Ruddick, and Philip Sherwood. The Marketing Research
Guide. Binghamton, N.Y.: Haworth Press, 1997.

PD-93

THE COMPLETE SET OF OVERHEADS IS IN A SEPARATE POWERPOINT FILE
ENTITLED CGAP PRODUCT DEVELOPMENT OVERHEADS
PD4: Market Research
PD-95

CGAP/World Bank, 2009
Market Research Market Research Market Research
Procedures and techniques: Procedures and techniques:
Invol ved in the design, data collection, analysis and
presentation of information
Used by managers in making marketing decisions
To respond to needs and opportunities by: To respond to needs and opportunities by:
Improving current marketing, promotion,
outreach, and delivery activities
Refining existing products
Developing new products
PD4-O1
CGAP/World Bank, 2009
Market Research Is Important Market Research Is Important Market Research Is Important
BECAUSE WITHOUT IT WE FAIL!
PD4-O2
Each step is 10 times more
costly than the previous!
Cost to correct product error
1,000 Design
10,000 Design testing
100,000 Process pl anning
1,000,000 Test production
10,000,000 Final production
D
u
r
i
n
g
Trainer Instructions
PD-96

CGAP/World Bank, 2009
Steps in Market Research Steps in Market Research Steps in Market Research
Define research objectives
Define research methods
Review secondary data
Prepare for primary data collection
Collect primary data
Anal yze all data
Report
PD4-O3
CGAP/World Bank, 2009
Participatory Rapid Appraisal Toolkit Participatory Rapid Appraisal Toolkit Participatory Rapid Appraisal Toolkit
Seasonality anal yses
Life-cycle profile
Rankings
Wealth ranking
Cash mobility mapping
Time series
Financial services matrix
Financial sector trend anal ysis
PD4-O4
PD-97
PD4-H1
CGAP/World Bank, 2009
Worksheet on Developing a Research Objective
The research objective is a statement in precise terminology of the information needed. It is the
decomposition of the p roblem into a series of statements, which con stitute the end results
sought by t he research project. Defining the r esearch ob jectives guid es the ent ire research
process. The object ives are translat ed into specific information needs. They are used to show
what the project is expected to add to what is already known, as well as any limitations to scope
or scale. Essentially there are three types of research objectives:
Exploratoryto gather preliminary data to shed light on th e real natur e of the problem
and to suggest possible solutions or new ideas
Descriptiveto ascertain certain magnitudes (how many people do or do not agree about
a certain savings idea, etc.)
Causalto test cause-and-effect relationships
Clearly state what you think UNIbanks problems are.
What information will you need to collect to make decisions to address the problems?
Develop one exploratory, one descriptive, and one causal objective for UNIbank.
Exploratory:
Descriptive:
Causal:
Are you satisfied that your market research goal will address UNIbanks problems?
PD4-H2 (page 1 of 2)
CGAP/World Bank, 2009
Focus Group Discussion Guide
Use this for m to plan your focus gr oup meeting. Make not es for the introduction and closing
and write out the questions for each section.
Welcome
Core questions Probes
Warmup questions:

General questions:

PD4-H2 (page 2 of 2)
CGAP/World Bank, 2009
Core questions Probes
Impact on dropouts questions:

Other:

Conclusion
Describe whom you would invite.
When would you have the focus group? How many? How often?
PD4-H3 (page 1 of 2)
CGAP/World Bank, 2009
Action Plan Market Research
This exercise is to help you get started conducting market research for your MFI. While some
of the topics and ideas are fresh in our minds, it will be helpful to think what applies to yo ur
MFI. Try to answer as many questions as possi ble now. This will help you discuss the areas
with others once you return home.
1. Define the exact nature of your MFIs problem or opportunity, if you can.
2. If you cannot define the problem, list the symptoms being experienced.
3. Are other MFIs experiencing s imilar symptoms or are these symptoms unique to
your MFI?
4. List the relevant research objectives st ated as questions the research will seek to
answer.
5. If a problem or oppor tunity has been defined, w hat kind of information would he lp
you solve the problem or take advantage of the opportunity?
PD4-H3 (page 2 of 2)
CGAP/World Bank, 2009
6. How would you get this information? What secondary information exists? What
methods would you use to collect primary data?
7. Who would be in charge of initiating the project? Who would actually do the work?
8. What obstacles might you encounter and how would you surmount them?
PD4-H4 (page 1 of 12)
CGAP/World Bank, 2009
Technical Notes
MARKET RESEARCH KEY TERMS
Different MFIs have dif ferent approaches to m arket resear ch. Those t hat are co mmitted t o
offering client- or market-driven financial services use a variety of market research tools in
various combinations; they are always collecting information in one form or another.
Primary data are collect ed for the first time by a researcher for the specific research project
at hand.
Secondary data were previously gathered for some other purpose. More often than not the
proper place to begin a study is to investigate previous work related to the research issue s.
Secondary data can also be divided into internal and external sources.
The classification has nothing to do with relative importance. Whether the data are primary or
secondary is determined by whethe r or not they originated with the specific preexisting study
under consideration.
Ongoing activities and systems include:
Simple questions on loan application or savings account opening forms
Suggestion boxes in branches
Dropout questionnaires
Discussing client-focused information at staff meetings
Monitoring internal management and financial information
Reviews of industry data and trends
Periodic activities and systems are often activated in response to sig nals from th e ongoing
systems and include:
Customer consultative groups
Focus group discussions with clients, potential clients, and dropouts
Minisurveys of three to six questions
Detailed competition analysis
Examples of classifying research techniques
ONGOING PERIODIC
Primary Secondary Primary Secondary

MIS portfolio reports
MIS other reports
Client feedback
surveys
Focus groups
Product satisfaction
surveys
Individual interviews
Observation
Client exit forms
Client intake forms
Client household
survey
Branch market
analysis
MIS reports
Qualitative. Data derived from behavioral science s. Concerned with und erstanding,
illuminating, and explaining human behavior a nd ideas. Not concerne d with meas uring. Use
transcripts and grids to compare the outcome fro m e ach group or individual and draw
conclusions about behavior.
Quantitative. Data with a scientif ic basis. A representative sample can replace a p opulation
within a measurable a pproximation (confiden ce level). I n a representative sa mple, each
individual belonging to the eligible population has an equal chance of selection.
PD4-H4 (page 2 of 12)
CGAP/World Bank, 2009
A more pragmatic approach is to combine sampling methods using both random sampling
and sampling by quotas. Data tables are used to show trends and variations.
Note: In quantitative research, the questions and range of possible an swers are determined
beforehand, which is not the case with qualitative research. In qualitative research, one
question and its answer(s) lead(s) to another set of questions.
The sample used in qualitative research is composed of people of th e same demographics,
while the sample used in quantitative is representative of the population.
QUALITATIVE QUANTITATIVE
Un structured questioning
For in-depth understanding of consumer
behavior and motives
Output: consumer words and descriptions
Highly trained professional moderator
Moderator must understand brief (research
objectives, discussion guide, etc.)
Questions not determined
Range of possible answers not determined
Samplegroup of people with demographic
similarities
Use of structured questionnaire
Statistically representative of population
Used to measure behavior and attitudes
Statistical output
Analyzed by computer
Enumerators trained for consistency and
accuracy in asking questions
Enumerators do not have to understand or
interpret brief
Questions determined beforehand
Usually range of possible answers determined
beforehand.
Sample representative of the population
Source: MicroSave-Africa toolkit/course assembled and developed by Graham A. N. Wright, Shahnaz Ahmed, and
Leonard Mutesasira, with help from Stuart Rutherford.
Cost considerations include staff members or consultan ts time, transportation, and other
associated costs.
Tell st udents: Consider using sample populat ions, using secondary data, and combining
activities as strategies to keep costs down.
Research objective. The research objective is a statement in precise terminology of what
information is needed. I t breaks the problem into a series of statements that constitute the
end results sought by the research project.
Defining the research objectives guides the entire research process. Tr anslated into specific
information needs, the objectives show what the project is expected to add to what is already
known. It reveals any limitations to scope or scale.
Essentially there are three types of research objectives:
Exploratory to gather preliminary data to shed light on the real nature of the problem
and to suggest possible solutions or new ideas
Descriptive to ascertain certain magnitudes (f or example, how many people do or do
not agree to a certain savings idea, and so forth)
Causal to test cause-and-effect relationships
Here is an example of a causal objective: MFI A is experiencing high levels of dropouts. Initial
review of secondary data suggests that this is related to the:
Loan cycle
Size of the installment
Ratio of compulsory savings to loan size
PD4-H4 (page 3 of 12)
CGAP/World Bank, 2009
MFI A wishes to under stand the details behind the reasons for client dropouts with a view t o
refining its current loan products (both urban and rural).
Focus group. A technique for data collect ion that became popular in the United States in the
early 1940s. Used to collect qualitative data, it provides descriptive infor mation, not numbers
and figures. Six to eig ht homogeneous participant s discu ss a particular issue led by a
moderator, whose task is probing (not prompting) and helping the group explore the issues in
depth. The discussion is recorded.
According t o the Product Development and Management Associatio n, the focus group is a
qualitative market research techniq ue where 8 to 12 market participant s are gathered in one
room for a discussion under the le adership of a trained moderator. Discussion fo cuses on a
consumer problem, product, or potential so lution to a problem; the results of these
discussions cannot be projected to the general market.
Focus group process (using MicroSaves Market Research for Microfinance , MR4MF,
Tools) The focus in fo cus group d iscussion describes the importance of focusing on a few
key (generally related) issues:
Get to know the sector
Get to know the clients
Arrange logistics and select interviewees/participants
Select and train appropriate moderator
Prepare and pretest the discussion guide
Conduct the focus group discussion
Analyze the data and prepare the report or presentation
Source: Day 1, Slide 62: The Research Objective, from MicroSave-Africa toolkit/course assembled and
developed by Graham A. N. Wright, Shahnaz Ahmed, and Leonard Mutesasira with h elp from Stuart
Rutherford.
PARTICIPATORY RAPID APPRAISAL FOR MICROFINANCE
Excerpted from MicroSave-Africa tool kit/course assembled and developed by Graham A. N. Wright,
Shahnaz Ahmed, and Leonard Mutesasira, with help from Stuart Rutherford.
1. Seasonality analysis of household income, expenditure, savings, and credit is used
to obtain information on seasonal flows of income and e xpenditure, and the dema nd for
credit and savings services. This a nalysis also provides in sights into some of the risks
and pressures faced by clients and how they u se MFIs financial services to resp ond to
these. This tool also provides in sights into t he financia l intermediation needs of the
community and what products the MFIs can design in response to these.
2. Seasonality analysis of migration, casual employment, and goods and services
provided by the poor loo ks at the availability of cash to the people in the community and
examines how far they might have to migrate to find work (when it is available). This has
important implications for their ability to make regular savings and loan repayments.
3. Life-cycle profile is used to determine which of the events require lump sums of cash, to
examine th e implicatio ns of these for househ old income and expenditure, to est ablish
current coping mechanisms, and t hen finally t o discu ss h ow access to MFI financial
services can help the household r espond to t hese events. The infor mation gathered is
useful in designing financial products that match the various needs expressed at different
milestones during a persons life cycle.
PD4-H4 (page 4 of 12)
CGAP/World Bank, 2009
4. Venn/Chapati diagram allows analysis of financial service groups or organizations within
the commu nity and their roles, and helps to u nderstand more about the social capital
accumulated by participants.
5. Simple ranking can be used to explore a wide variety of issues when an understanding
of the relative importance/desira bility, and so on, i s needed (for exa mple, for
understanding the relative importan ce of diffe rent elements of productsinterest, r ate,
opening balance, grace period, and the like).
6. Relative preference ranking is used to see h ow clients a nd potential clients per ceive
the financial service providers and components of the financial services they provide.
7. Pair-wise ranking is used to examine in detail how clients and potential clients compare
and contrast critical components of financial services, a nd why tho se elements are
important for them.
8. Simple wealth ranking provides a rapid way of segregating a community into three
basic categ ories, and is useful in situations where there are man y h ouseholds in a
community. This exercise can also be useful in impact assessment and for examining the
socioeconomic characteristics of people who chose to join (or dont join) the MFI and also
those who leave or whose accounts become dormant.
9. Detailed wealth ranking provides (1) an understanding of how and why rich peopl e are
wealthy and the poor are poor and (2) a ranking of the households in the village, from the
wealthiest to the poorest, as seen by the members of the community.
10. Cash mobility mapping provides an understa nding of wh ere the co mmunity goes to
acquire or spend ca sh (markets, waged labor, coop eratives, informal financial
organizations, and so on) and can be used t o lead into discussions o f which f inancial
service institutions peo ple trust or value and why. The exercise also provides initial
insights into potential income-generating ventures or proje cts in which t he client s might
become involved.
11. Time series detailing sickness, death, loss of employment, theft, natural disaster,
and the like. (for example, for th is year, last year, 5 and 10 years be fore) provides an
opportunity to learn how the commu nity views change over time in various areas related
to a serie s of crises. It also allows the research team to in tegrate key changes int o the
community profile, which will simplify problem identification, and to begin to organize the
range of opportunities for improved delivery of financial services.
12. Time series of asset ownership (this year, last year, 5 and 10 years before) is useful in
determining what produ ctive and protective assets (in a broader sense) are value d the
most and thus assist in evaluating the potential for designing or refining correspon ding
financial products, including leasing and contra ctual savings deposit s ( for example, for
housing, education, health insurance, and so on).
13. Financial services matrix is useful in determining which f inancial services are used by
which socioeconomic or sociocultural strata of society and why, and thus the potential for
designing or refining appropriate financial products.
14. Financial sector trend analysis is useful in determining which finan cial services have
been used over time b y which socioeconomic or sociocult ural strata of society, and thus
for understanding the changes in the use or availability of a variety of financial se rvices
over time, and why participants used them.
PD4-H4 (page 5 of 12)
CGAP/World Bank, 2009
FOCUS GROUP INTERVIEWING
Excerpted from Stevens, Robert, Bruce Wrenn, Morris Ruddick, and Philip Sherwood, The Marketing
Research Guide, 1997.
One of the most popular exploratory research techniques, f ocus group interviewing consist s
of a small g roup of people (usually 8 to 12) assembled for the purpose of discu ssing in an
unstructured, spontaneous manner t opics introduced by a g roup moderator. The ob jective of
conducting f ocus groups is to acco mplish the goals of a su rvey, but at a lower cost. In fact,
focus groups, as an exploratory research tech nique, cannot be subst ituted for a descriptive
researchs survey design. Focus groups are such a p opular tech nique beca use, when
appropriately used, they can effectively and efficiently a chieve the goals of exploratory
research:
Generating new ideas or hypotheses that can be tested in later phases of the research
study
Clarifying concepts, actions, or terms used by consumers
Prioritizing issues for further investigation
Providing an opportunity for management to see how their "real" consumers think, feel,
and act
Obtaining an early read on changing market trends
Focus groups are good at accomplishing such objectives because their relatively unstructured
approach permits a free exchange of ideas, fe elings, and experiences to emerge around a
series of topics introduced by a moderator. T he moderator works fro m a topic o utline that
covers the major areas of interest to the client firm, but because each group session consists
of different individuals with their own feelings, desires, opinions, and so forth, no two sessions
with the same agenda will be exactly the same in conduct or findings. The term "focus group"
is used because the moderator focuses the gr oup's attention on the predetermined subjects,
without letting the discussion go t oo far afield . However, i t is con sidered unstruct ured in the
sense that a good mo derator will consider the particula r dyna mics of each group when
introducing these topics and the order in which t hey are bro ught up for discussion. Because
they are so frequently used in marketing rese arch, several books h ave been exclusively
devoted to a discussion of how to conduct and analyze focus group sessions. We will confine
our discu ssion here to a few of th e more imp ortant aspe cts of u sing focus grou ps as a
qualitative exploratory research approach.
Why Conduct Focus Groups?
The standard reasons for conducting focus groups include:
Idea Generation
Consumers or knowledgeable experts may pro vide a good source of ne w products or
other ideas in the fertile environment of a group setting.
Reveal Consumers' Needs, Perceptions, Attitudes
Probing consumers on why they think or a ct the way they do may reveal less obv ious,
but no less important, reasons for their behavior.
Help in Structuring Questionnaires
Hearing the way consumers think and talk ab out a produ ct, activity, or consumption
experience not only g enerates hypotheses th at might b e tested in a descriptive
research design, but also informs the researcher about how to word questions in ways
directly relevant to the consumer's experience.
Some less frequently mentioned reasons for conducting focus groups include:
PD4-H4 (page 6 of 12)
CGAP/World Bank, 2009
Post-Quantitative Research
Focus groups are most often mentioned as research done prior to a su rvey, but th ey
might be of equal value in helping researchers to "pu t flesh on the bones" of
quantitative research. Discovering that a certain percentage of consumers behave in a
particular fashion may make it desirable to pro be a group of those consumers in some
depth to discover why and how they came to act in that manner.
Making the Abstract Real
One of the most memorable qualities of focus groups is their ability to make real what
was heretofore only considered in a very abstract manner. For example, it is one thing
for a product manager of a brand of dog food to know that many dog owners really love
their dogs. I t is quite an other for that product manager to see dog owners in a focus
group take obvious delight in recounting their Ginger's latest adventure with a raccoon,
or grow misty-eyed in remembering Biff, now dead ten years, or hear the soft lilt in their
voice as they describe the relation ship they have with Jason, their g olden retriever.
Attendance at a focus group can infuse lifele ss market data with new meaning a nd
make its implications more memorable and meaningful. One checklist for management
using focus groups t o obtain a mo re three-dimensional un derstanding of their act ual
customers includes the following advice:
Don't expect your customers to look like the models in yo ur ads. Fitn ess seekers
don't all look like Jane Fondathey are trying to.
Don't expect your customers to like you. Sitting behind the mirror can be blitz group
therapy. Your ego and your compa ny's ego are in the hand s of a few customers. It
can be upsetting and anger-provoking to hear what they have to say. Be prepared.
Don't expe ct consume rs to care as much a bout your product as you do. It
represents only a small part of their lives.
Don't expect your customers to be people just like youor, on the other hand, to be
unlike you.
Don't expect people to be consistent, and don't label them as hypocrites when they
aren't.
Use your qualitative re searcher as a cons ultant to put th e study in contextare
these customers satisfied or dissatisfied, compared to what the researcher has seen
in other categories?
Remember, if they buy your product, they are your customerswhether or not you
like the way they look, talk, think, or feel about you.
Be honest about your expectations. There is no cle an slate. E veryone ha s
preconceptions about their customers. Ask where your e xpectations come fro m
research, or prejudice.
Reinforcing Beliefs
Judith Lang er recounts a focus group experi ence by th e Gillette Compan y that
illustrates the ability of focus groups to convey a message much more powerfully to
employees than repeated admonitions by management:
The Gillette Compan y asked us t o conduct r esearch on "quality," a
major issue in the 1980s. What does quality mea n to consumers; when
do they and don't they look for it; how do the y recognize it? A fo cus
group with women showed that co nsumers are more demanding and
"educated" about quality than in the past. This comment was typical:
I think as consumers we're becoming more aware of what goes into a
product. For myself, I have become m ore aware of the ingre dients
PD4-H4 (page 7 of 12)
CGAP/World Bank, 2009
food or clothing or whatever. I feel that I'm not the same shopper I
was perhaps six years ago. That was j ust fad buying. Now I loo k at
something.
Marketing, market research, and research and development people
observed the group; the videotape of the session has since been shown
to others in the compa ny. Hans Lopater, Gillette's resea rch director,
says that the focus group made what top management has been saying
more tangible and believable. This wasn't another generalized corporate
lecture. Th ese were real people who care d, who co uld tell the
difference, who shopped what they believed. Understanding the
importance of quality in today's competitive marketing environment, on e
can argue, can affect n ot only a company's at titude, but u ltimately its
bottom line.
Early Barometer
Focus groups may pro vide an early warning system of shifts in the market. Probing
consumers on lifestyle changes, co nsumption patterns, op inions of ne w competitive
entries, and so forth, may re veal threats and opportunities entering the market long
before they might be r evealed in a la rge-scale survey. Keeping an open mind and
maintaining an active curiosity allow researchers to see the far-reaching significance of
seemingly innocuous observations made by focus group participants.
Focus Group Composition
Conventional industry wisdom suggests that f ocus groups should con sist of 8 to 12 people
selected to be homogeneous alo ng some characteristic important t o the resea rcher (for
example, do a lot of ba king, own foreign luxury cars, manage their own retirement account
with more than $100,000 invested, and so on). Usually recruitment of focus group participant s
strives to find people who fit the desired pr ofile but wh o do not know each other, thus
reducing th e inhibition s of group members to describe t heir actual feelings or behaviors.
Typically, group sessio ns last fro m one and a half to two hours. Going against such
conventional wisdom may be necessary in some cases.
For exampl e, one of th e authors conducted re search for a food company that wanted a fe w
direct questions asked prior to presenting part icipants wit h prepared versions of their food
products, as well as their competitor' s. While not a taste test per se, the client wanted to hear
the subjects reactions to the products and a discussion of the circumstances under which the
products would be used in their ho mes. For thi s study, a s eries of one-hour group session s
were run wit h five people per group. The more structured discussion and the desire to query
each participant made t he shorter time and s maller group more condu cive to achieving the
study's objectives.
Selection and Recruitment of Group Participants
The research objectives and resear ch design will indicate the types of people to be recruited
for a focus group. If a facility especially designe d for focus group use is contracted with, the
management of the fa cility typically will cond uct recruitment of focu s g roup memb ers. If a
marketing research fir m is being hired to con duct the groups, they usually hire the facility;
identify, recruit, and select the participants; moderate the groups; and make an oral and
written report of the findings. Someti mes the cli ent organization will provi de a li st of possible
participants taken from a master list of cu stomers, members, user s, and so on . It is usually
necessary to provide at least four names for every respondent needed (that is, app roximately
50 names per focus group).
Prospective participants are screened when contracted to ensure their eligibility for the group,
but without revealing the factors used to assess their eligibility. For example, if the researcher
PD4-H4 (page 8 of 12)
CGAP/World Bank, 2009
is interest ed in talkin g with people w ho have traveled to Europe in the p ast year, he or she
would also ask about other trips or activities to camouflage the central issue under
investigation. This dece ption is help ful in discou raging respondents from answering in ways
strictly intended to increase or diminish chances for an invit ation, and t o discourage selected
participants from preparing "right" a nswers for t heir participation in the group sessions. It is
advisable to provide a general idea of the topic for discussion (for example, personal travel) to
encourage participation. Participant s are usually rewarded with an honorarium (say US$25
$50 per pe rson) for th eir time. The size of the honorarium depends upon the type of
participant ( for example, physician s expect mo re than mechanics). The focus gro up facilit y
management usually covers the cost of recruiting, hosting, and compe nsating the groups in
their fee.
In conclusion, here are six rules for recruiting focus group members:
1. Specifically define the characteristics of people who will be included in the groups.
2. If an industrial focus group is being conducted, develop screening questions that probe
into all asp ects of the respondents' job fun ctions. Do not depend on titles or oth er
ambiguous definitions of responsibilities.
3. If an industrial focus group is being conducted, provide the research company with the
names of specific companies and employees, when possible. If specif ic categories of
companies are needed, a list of qualified companies is critical.
4. Ask multiple question s about a sin gle variable to validate the accura cy of answers.
Therefore, if personal computer users are to be recruited, do not simply ask for the
brand and model of personal computer they use. In additio n, ask them to describe the
machine and its funct ion; this will ensure that they are referring to t he appropri ate
equipment.
5. Do not accept respondents who have participated in a focus group during the previous
year.
6. Have each participant arrive 15 minutes early to complete a prediscu ssion
questionnaire. This will provide ad ditional background inf ormation on respondent s,
reconfirm their suitability for the discussion, and help the company collect useful factual
information.
Moderator Role and Responsibilities
The moderator plays a key role in obtaining maximu m value from conducting focu s groups.
The moderator helps design the study guide, a ssists the manager or research er who is
seeking the information , and lead s the di scussion in a skillful way to address t he study's
objectives while stimulating and probing group participan ts to contrib ute to the discussion .
Listed below are 10 traits of a good focus group moderator.
1. Be experienced in focus group research.
2. Provide sufficient he lp in conceptu alizing the f ocus group research design, rathe r
than simply executing the groups exactly as specified.
3. Prepare a detailed moderator guide well in advance of the focus group.
4. Engage in advance preparation to improve o verall knowledge of the area being
discussed.
5. Provide some added value to the project beyond simply doing an ef fective job of
conducting the session.
6. Maintain control of the group without leading or influencing the participants.
PD4-H4 (page 9 of 12)
CGAP/World Bank, 2009
7. Be open to modern techniques such as visual stimulation, concept ual mapping,
attitude scaling, or role- playing, which can be u sed to delve deeper into the minds of
participants.
8. Take perso nal responsibility for th e amount of time allo wed for the recruitment,
screening, and selection of participants.
9. Share in the feeling of u rgency to complete the focus group while desiring to achieve
an excellent total research project.
10. Demonstrate the enthusiasm and exhibit the energy necessary to keep the grou p
interested even when the hour is running late.
Reporting the Results of Focus Groups
In writing the findings of focus groups, care mu st be taken not to imply that results typify the
target population. The groups were not formed i n an effort to generate inferential st atistics,
but rather to clarify concepts, generate ideas and insights, make the abstract real, and so on.
Therefore, it is the qualit ative rather then quantit ative conclusions that should be the focus of
the written report. Goldman and McDonald ( The Group Depth Interview, 1987) make the
following suggestions about writing the report on focus group findings:
The report should not be a sequential summary or transcript of the sessions, but rather
a "logically organized and coherent interpretation of the meaning of these events."
The report should begin with an introductory section that reviews the research purpose
and objectives, and a short descrip tion of the research methodology. This is follo wed
by a report of findings, the marketing implications, recommendations, and suggestions
for future research phases.
An executive summary at the beginning of the report should co ver the ma jor
discoveries as well a s the relevant marketing implications that ca n be justif iably
concluded based on the qualitative research results.
The result s section is n ot necessarily bes t done by following the seq uence of to pics
covered in the discussions. It may rather be approached as focusin g on marke ting
problems or market segments, and may discuss the findings from the groups that might
have been addressed in diverse order during the group sessions.
The written analysis should progress from t he general to the more specific. For
example, a report on a new snack product concept might start with a discussion of
general observations about snack e ating, then go to a discussion of brand image and
loyalty, then address the response to the new snack concepts.
The marketing implications section should provide guidance for the devel opment of the
marketing response to the finding s without o verstating t he conclu siveness of t he
qualitative findings. Everyone rep ort wr iters and readersshould remain aware of
the limited objectives for conducting the groups, as well as the limitations of this type of
research method in general.
PD4-H4 (page 10 of 12)
CGAP/World Bank, 2009
SAMPLE FGD DISCUSSION GUIDES ON FINANCIAL SERVICES AND INSTITUTIONS
Developed by Graham A.N. Wright and MicroSave-Africa
1. These discussion guides and questions are guidelines only. Please use the result s of the
FGD/PRA e xercises to guide you about which ones to use , to make changes to t hese
questions, and to help you think up additional q uestions if t hey are necessary to help you
understand the financial landscape of the community and its needs for financial services
and new products.
2. The resulting FGD discussion guid e must be pilot-tested a nd amended in response to the
results of that test.
3. Initially, you should con duct three f ocus group discussions in each co mmunity (one with
just men, o ne with ju st women, and one mixed) and then follow with two more (one with
just men a nd one wit h just women) to see if you get broadly th e same qu ality of
information. Remember the roles of men and women in obtaining and managing household
cash are different!
Illustrative FGD Discussion Guides and Probes I
Core questions Related probe questions
General questions

1. What kind of business is your household
involved in ? Or for rural areas: What
crops/animals does your household
grow/raise?
2. How have these businesses/activities
been running in the last two years?
3. Are there marked seasonal changes in the
flows of income and expenditure in these
activities? If so please describe them.
4. How do households manage these
seasonal changes?
Probe for multiple businesses/farming
activities.
Probe for what they did with additional
income in the good times and how they
managed through the harder times.
Probe for times when there is not enough
money in the household to manage day-to-
day needs and times when the household
can afford a few simple luxuries.
Probe for initial comments on various
financial services.
Savings questions

1. Who saves in this community?
2. For what purposes do they save?
3. How and where do they save?
4. What are the existing indigenous savings
practices in the community?
5. What are the barriers to saving in this
community?
6. How do people overcome these barriers?
7. In a year, generally what are the months
that you would call savings months?
Probe the varying needs/roles of men and
women.
Probe roles of:
formal sector schemes/services: formal
banks, NGO-MFIs, cooperatives etc.
informal sector schemes/services: in-
the-house savings, RoSCAs/merry-go-
rounds, ASCAs, funeral funds, deposit
collectors, savings clubs, money guards
etc.
Probe why months are labeled in this way.
PD4-H4 (page 11 of 12)
CGAP/World Bank, 2009
Core questions Related probe questions
Credit questions

1. If necessary, where do people go to get
credit?
2. What are the conditions for getting credit?
3. What are the barriers to getting credit?
4. How do people overcome these barriers?
5. In a year, generally what are the months
you would call credit months?
Probe the varying roles of men and women.
Probe roles of:
formal sector schemes/services: formal
banks, NGO-MFIs, cooperatives, etc.
informal sector schemes/services:
RoSCAs, merry-go-rounds,
moneylenders, pawnbrokers, etc.
Probe why months are labeled in this way.
Institutional questions

Note: You may have to ask one set of
questions for the informal financial service
schemes (RoSCAs/merry-go-rounds/deposit
collectors, etc.) and another for more formal
MFIs (post offices, banks, cooperatives, etc.)
1. How many informal financial services
systems exist in this community?
2. How do they operate? (Membership, rules
and regulations, amounts, regularity of
meetings, etc.)
3. Which one is the most popular informal
financial service scheme? Why?
4. Which one is least popular informal
financial service scheme? Why?
5. If friends asked your advice and wanted to
save using any financial institutions/
informal schemes in this community, which
one would you recommend and why?
Probe to generate a comprehensive list.
Ensure that you have all the information
and could describe the system in detail if
called upon to do so.
Probe to get a clear understanding of why
people value or dislike the services offered
by the various service providers.
Illustrative FGD Discussion Guides and Probes II
Core questions Related probe questions
Wealth and poverty

1. How would you describe a poor
household (HH) in your community?
2. How would you describe a not-so-poor
HH in your community?
3. How would you describe a rich HH in
your community?
4. What is the difference between a poor
and rich household?
Probe ability to meet basic needs (food,
clothing, health, shelter).
Probe sources of income, seasonality of
income.
Probe children in school.
Probe savings/membership of informal
financial service schemes.
Probe access to financial services.
Probe differences between men and
women.
PD4-H4 (page 12 of 12)
CGAP/World Bank, 2009
Core questions Related probe questions
Risks

1. What are the key sources of risk for your
community as a whole and specifically
for poor families in the community?
2. What are two to three key
crises/shocks/pressures the poor families
in your community have experienced
over the past two to three years?
Probe structural factors.
Probe unanticipated emergencies.
Probe life cycle factors.
Probe differences between men and
women.
Role of existing financial services

1. What role do financial services play in
the ways that the community copes with
crises?
2. How can access to financial services
help protect the household in times of
crisis?
3. What other financial services are
available to people in your community?
4. Which of these other financial services
do people use and why?
5. Describe the opportunities a woman has
to earn money in your community.
6. How does a woman contribute to the
survival and development of the
household?
Probe roles of:
formal sector schemes/services: formal
banks, NGO-MFIs, cooperatives, etc.
informal sector schemes/services: in
the house savings, RoSCAs/merry-go-
rounds, funeral funds, deposit
collectors, savings clubs,
moneylenders, pawnbrokers, etc.
Probe the role of both loans and savings
in times of crisis.
Probe prevalence of moneylenders,
savings collectors, RoSCAs,
pawnbrokers, etc.
Probe whether membership in one MFI
assists access to other financial services
(moneylenders/RoSCAs/pawn-brokers,
etc.).
Probe why other services are needed,
what is lacking in the MFIs system.
Probe contribution of assets to livelihood
and risk/crisis management, particularly
savings.
Probe pawning/mortgaging/selling.
Potential role of financial services

1. What kind of financial services would
help you to protect against risks in the
future?
2. Are you using similar services? (If not,
why not?)
Probe roles of:
formal sector schemes/services: formal
banks, NGO-MFIs, cooperatives, etc.
informal sector schemes/services: in
the house savings, RoSCAs/merry-go-
rounds, funeral funds, deposit
collectors, savings clubs,
moneylenders, pawnbrokers, etc.
improved money management
diversification of use of schemes
increased savings


CGAP/World Bank, 2009 PD-117
S SE ES SS SI IO ON N 5 5: : P PR RO OD DU UC CT T C CO ON NC CE EP PT T A AN ND D D DE ES SI IG GN N
Session Summary
OBJECTIVES: By the end of the session participants will be able to:
Use market research results to design product prototypes
Consider institutional issues in product design
Explain why it is important to repeatedly return for client
comments
TIME: 162227 minutes
SUPPLIES: Flipchart paper and markers
Masking tape
LED projector or overhead projector
Index cards (or blank pieces of paper of similar size)
PRE-SESSION READING MATERIAL (FOR TRAINER
AND PARTICIPANT REFERENCE):
Phase 2: Prototype Design and Development, The MBP
Guide to New Product Development by Monica Brand,
ACCION International, 2001
TRAINER MATERIALS
PD5-M1 Focus Group Role-Play Character Descriptions
PARTICIPANT MATERIALS
OVERHEADS: PD5-O1 Institutional Considerations
HANDOUTS: PD5-H1 Product Specification Worksheets: Credit Product; Savings
Product
PD5-H2 Focus Group Development Guide
PD5-H3 Product Concept and Prototype Action Plan
CASE STUDY: Part 5A Market Research (previously distributed in Session 4)
Part 5B Focus Group Transcript
Trainer Instructions
PD-118
Session 5: Product Concept and Design
INTRODUCTION TO PRODUCT CONCEPT AND DESIGN
1. (510 minutes) Introduce the session, saying: It seems that UNIbank has done
quite a bit of research and analysis and is ready to move forward. Ask participants
what they think will happen next. Take answers and refer back to the flipchart
showing where the group is in the systematic product development process.
Explain that UNIbank needs to conceptualize and design a product prototype.
Ask: How do you think this will happen? What steps would you or have you
followed to develop a prototype?
2. (510 minutes) Distribute and have the participants read Case Study Part 5B and
PD5-H1Product specification worksheets. Take any questions from the group
about the specification sheets. Ask: Where did these product specifications come
from? Remind them that Ben had actually started these worksheets back at the
beginning of the process; they provide a beginning framework for the product
design.
3. (5080 minutes) Divide the group into the same preassigned subgroups as used
for market research. Each group will function as a product design team for
UNIbank, designing two products (one savings, one credit). Explain that they will
need to use the information provided in the case, as well as their findings and
conclusions from the case. Tell participants they will eventually have to present
their product designs and choose which final products UNIbank will go forward
with. Ensure that they name their products and create what they believe will be
commercially viable options for UNIbank.
Think about organizing the role-play while the participants are working on this
exercise. Have some ideas as to who will play what roles for each group.
4. (1015 minutes) Tell the groups that they will have to prepare for a focus group to
get preliminary feedback from consumers on the prototypes. Distribute
preparation guidelines (PD5-H2).
FOCUS GROUP ROLE-PLAY
5. (510 minutes) Distribute two blank pieces of paper or index cards to each group.
Instruct them to write the name of the savings product on one piece and the credit
product on the other. Collect them and randomly select one savings and one
credit product to be used for focus group role-play. (Make sure the credit and
savings products are from two different groups.) Distribute role-play character
descriptions from PD5-M1. Have the two groups, whose products will be
presented, prepare to facilitate the focus group; help the participants selected as
focus group participants to develop their roles.
PD5: Product Concept and Design
PD-119
6. (2030 minutes) Conduct two separate (one for savings and one for credit) five- to
eight-minute role-plays in a fish bowl of focus groups who are being presented
with a new product idea. Have observers take notes on the process and any
important comments on the product.
7. (10 minutes) Process the focus group role-plays. First, discuss the process itself.
Stimulate discussion with some or all of the following questions: Why did we go
back to the clients? Were focus group rules followed? What did the facilitator do
well? What could the facilitator have done better? What might you have done
differently? Did you think it was successful? Why or why not? What did other
groups plan? What would you change or improve for next time? Summarize the
discussion.
8. (5 minutes) Distribute the Case Study Part 5B: Focus group transcript. Discuss
results of the focus groups. Tell participants that, based on the concepts
illustrated through the role-play case study and now the transcript summaries of
UNIbanks work with focus groups, they are to use this information to fine-tune
their product prototypes.
9. (1520 minutes) Have the participants resume their small groups, and ask them
to reexamine their prototype to ensure it reflects the information recently gathered
in the focus group discussions.
10. (15 minutes) Reconvene the large group. Announce that the General has heard
about the prototypes, seen some of the product specifications and read the report
of the recent focus groups. Tell them she thinks it sounds as if it is all going well
but wonders why no one has mentioned anything about how the product will fit
into the institution. Ask: Is UNIbank capable of handling such products?
Facilitate a discussion through questioning. Ask: What do you think the General is
talking about? What does she mean by institutional issues and fit? Why is she so
concerned?
List responses on a flipchart and facilitate a discussion on each. Issues should
include:
Operational methodology fit. Will methodology have to be changed?
How? Do we add these products to our current menu? Do we stop offering
other products? Which ones? How do we deliver it? By ourselves?
Through others?
IS fit. How will IS have to be changed? Who will do it? How much will it
cost? How long will it take?
Staffing fit. Do we have enough staff with the right skills? Will they need
training?
Infrastructure fit. How would savings be protected? Do we have enough
space for new clients? Is the space adapted according to client demand for
products in the right place?
Legal and regulatory issues. Will the new products comply?
Trainer Instructions
PD-120
Competition. Who considered this? What do we know?
(See Brand, The MBP Guide to New Product Development for more issue
details.)
Summarize the main points of the issues discussion: Use PD5-O1 and refer
participants to the MBP Guide for further details. Emphasize the importance of
these issues in product development.
11. (5 minutes) Summarize the main points of product concept and design. Take any
questions.
ACTION PLAN
12. (10 minutes) Suggest that group members take a few minutes to note some
salient points that they might wish to remember and apply in their MFIs when
designing the product prototype, getting feedback from clients and assessing their
MFIs ability to deliver the products. Distribute PD5-H3, and have participants
complete an action plan.
13. (5 minutes) Review the main obstacles noted by the MFIs. Discuss some
solutions to overcome them.
14. (2 minutes) Tell the group that the General finally is satisfied that the institutional
issues have been considered, but now she wants to know: How much will this
cost, and what will the client ultimately pay for these products? Review the main
points and where the group is in the product development process. Tell
participants that the next session will be devoted to product costing.
PD5: Product Concept and Design
PD-121
PD5-M1
Focus Group Role-Play Character Descriptions
There are two focus group role-plays for two different products (one credit and one savings,
selected randomly), chosen from two different groups. The group whose credit product was
chosen will identify a facilitator from among the members of that group; the savings product
group whose product was chosen will do the same, resulting in facilitators, one for each focus
group. For each role-play, the other training participants will either play a role or be an
observer.
Select several participants from the other product development groups to be members of the
focus group. Assign them each a role as outlined below, providing them with a written
description of their roles. The trainer should work with the role-players to develop roles
pertinent to the products chosen for discussion. It is recommended that the trainer also play a
role to ensure some controversy!
Some suggested roles (the trainer may add others) include:
Role 1
You are a happy client who doesnt really want or need anything different than what you have
now. You heard that UNIbank was going to focus on smaller loans. You are very excited
because you think it will be easier to repay a loan if under $300.
Role 2
You are a skeptical client. Nothing has changed in the past; you do not think this is any
different.
Role 3
You are very interested in savings. You would like to be able to access your savings at least
once a week.
Role 4
You are eager to get a new loan (at a lower price, of course) but actually price is not your
major concern. You have no time for group meetings and, after one year of attending them,
you feel that this should no longer be a requirement. You are currently saving happily at the
bank, but and might be interested in a new savings product if there were lower minimum
balance requirements and if you could access your savings more frequently.
Role 5
You have been a loan client in the past but are very anxious to have a savings mechanism
you want your money to be safe from relatives.
Role 6
You have never had any loans from UNIbank, but have just been made redundant and are
thinking about starting a small business in banana fiber to support your family. You will need a
loan to buy the machinery, but do not think you will be able to repay anything on the loan for
two to three months after receiving it.
Role 7
Create your own to match the course!

PD-123

THE COMPLETE SET OF OVERHEADS IS IN A SEPARATE POWERPOINT FILE
ENTITLED CGAP PRODUCT DEVELOPMENT OVERHEADS
PD5: Product Concept and Design
PD-125

CGAP/World Bank, 2009
Institutional Considerations Institutional Considerations
Institutional Considerations
Operational methodology
Information system
Human resources
Infrastructure
Legal and regulatory
Competition
PD5-O1

PD-127
PD5-H1 (page 1 of 4)
CGAP/World Bank, 2009
Product Specification Worksheet: Credit Product
PRODUCT CHARACTERISTICS CREDIT PRODUCT
1. Product Name
2. Purpose and Focus
Loan use
Client profile
Location(s)




3. Amount
Minimum loan amount
Maximum loan amount
Average loan amount



4. Preconditions
Collateral requirements (including
compulsory savings)
Collateral type
Control of collateral
Collateral amount
Collateral basis (flat amount, % of loan,
% of payment)
Collateral payment timing
Collateral payment frequency
Interest rate on collateral
Interest rate method on collateral
Savings collateral set in reserve %
Interest on reserve %
Indexing of collateral
Other Requirements
Group membership




PD5-H1 (page 2 of 4)
CGAP/World Bank, 2009
Product Specification Worksheet: Credit Product (continued)
PRODUCT CHARACTERISTICS CREDIT PRODUCT
5. Pricing
Interest rate
Interest rate method
Commissions and fees
timing/frequency: upfront ongoing
basis: fixed amount or % of loan
amount or % of monthly principal
payments
Index to external value
Loans in foreign currency
Loans indexed to inflation rate
Penalties



6. Disbursement
Loan disbursement timing
Wait period between loans




7. Repayment Conditions
Repayment frequency
Effective loan term
Grace period





PD5-H1 (page 3 of 4)
CGAP/World Bank, 2009
Product Specification Sheet: Savings Product
PRODUCT CHARACTERISTICS SAVINGS PRODUCT
1. Product Name
2. Purpose and Focus
Savings use
Client profile
Location(s)




3. Amount
Minimu m balance
Minimum deposit amount
Maximum deposit
Minimu m withdrawal
Maxi mum withdrawal



4. Preconditions
Opening balance
Minimu m balance
Average balance to maintain account
Basis for calculating average balance
(daily, monthly, etc.)
Calculation method for average
balance
Minimum and maximum deposit
Minimum and maximum withdrawal
Deposit frequency
Withdrawal frequency





PD5-H1 (page 4 of 4)
CGAP/World Bank, 2009
Product Specification Sheet: Savings Product (continued)
PRODUCT CHARACTERISTICS SAVINGS PRODUCT
5. Pricing
Interest rate
Interest rate method
Commission and fees
timing and frequency: upfront
ongoing
basis
Index to external value
Penalties







PD5-H2
CGAP/World Bank, 2009
Focus Group Development Guide
You will be conducting a five-minute focus group to get feedback on your product
design to date. Plan for that group meeting.
1. Set the climate.
2. How will you present your product? What features will you focus on?
3. What questions will you ask?
4. Who will you invite? How will you invite the participants?
5. Where will you have it? How will people sit?
6. Will you give them tea? Pay them?
7. How long will it take? How will you end the meeting?
8. Prepare any visuals.
9. Appoint a facilitator for the focus group. Help plan her or his role.
PD5-H3
CGAP/World Bank, 2009
Product Concept and Prototype Action Plan
1. How do you imagine the product specifications list will be defined in your MFI? Who
will do this?
2. Describe the process of prototype development in your MFI.
3. What problems do you foresee in conceptualizing and designing a product
prototype?
4. How will you get client feedback and input to the prototype?
5. What organizational issues do you anticipate arising in your MFI when introducing a
new product? How will they be resolved?


CGAP/World Bank, 2009 PD-137
S SE ES SS SI IO ON N 6 6: : C CO OS ST TI IN NG G
Session Summary
OBJECTIVES: By the end of the session, participants will be able to:
Distinguish between cost allocation and activity-based costing
Describe the basic procedures and benefits of ABC
Describe implications of new products for the MFIs systems
Estimate the total cost of new or refined product
TIME: 235335 minutes
SUPPLIES: Flipchart paper
Markers
Masking tape
LED projector or overhead projector
TRAINER MATERIALS
PD6-M1 ABC Optional Overhead
PD6-M2 CGAP Activity-Based Costing Paper (Microfinance Product Costing Tool to
be downloaded from CGAP website), if not given to participants in Session 1
PARTICIPANT MATERIALS
OVERHEADS: PD6-O1 Cost Allocation
PD6-O2 Activity-Based Costing
PD6-O3 Cost Allocation and Activity-Based Costing (comparison)
PD6-O4 Activity-Based Costing Steps
PD6-O5 Staff Costs for Answering Client Questions Optional
PD6-O6 UNIbanks Previous ABC Results
PD6-O7 Driving Unit Costs
HANDOUTS: PD6-H1a New Core Processes and Activities Dictionary
PD6-H1b Revised Branch Staff Time Estimates
PD6-H1c Revised Head Office Staff Time Estimates
PD6-H2 Calculating Branch Nonstaff Costs and Total Costs
(Worksheet 1)
PD6-H3 Calculating Head Office Nonstaff Costs and Total Costs
(Worksheet 2)
PD6-H4 Total Branch Staff and Nonstaff Costs (Worksheet 1
Answers)
PD6-H5 Total Head Office Staff and Nonstaff Costs (Worksheet 2
Answers)
PD6-H6 All Costs Per ActivityFinal
Trainer Instructions
PD-138
PD6-H7 Calculating Unit CostsAssigning Driver Volumes
(Worksheet)
PD6-H8a Drive Unit Costs to Participant Credit Product
PD6-H8b Drive Unit Costs to Participant Savings Product
PD6-H9 CGAP Activity-Based Costing Paper (see PD6-M2), if not
given to participants in Session 1
CASE STUDY: Part 6 Costing Information for UNIbank
Note: Do not photocopy as double sided. Make sure the case study is
copied on colored paper.
PREPARED FLIPCHART:
Per PD6-04: Activity-Based Costing Steps

PD-139
Session 6: Costing
Note: At least two trainers will need to be actively involved in this session. The group
work and the volume of handouts need close monitoring; expertise is vital.
Consider having participants start the session already sitting in their working groups.
This way they can easily work in a subgroup or in pairs and trios within the subgroup
without having to move around too much. Also, identify appropriate breaks for this
sessions heavy workload.
INTRODUCTION TO COSTING
1. (510 minutes) Lead a discussion using the following as probing questions: What
do you think about the generals request? What is the big deal about costing?
What have been your experiences? How have you gone about it?
2. (35 minutes) Brainstorm: What are the elements of a product costs?
3. (3 minutes) Have the group categorize them and determine when they occur. Try
to arrange them into categories:
Product development costsfrom market research to rollout
Product delivery costspost-rollout
Operating costsdirect and indirect
Financ ial costs
4. (2 minutes) Explain that there are many factors and approaches to consider in
costing, but there is agreement on a few things. First, it is easier to price a new
product if the price of current products is known. Current costs can be used as a
basis to estimate future costs for a new product. (Fortunately UNIbank knows the
costs of its current products.) Second, the group will have to work through an
activity-based costing approach to understand how this can be applied to our new
product costing!
Note: The CGAP costing paper PD6-M2 should have been previously assigned to
the participants as reading. Be prepared to discuss with the group how a new MFI
with no current products might go about this task.
5. (5 minutes) Ask: What do we mean by cost allocation? (Tie this to previous
discussions as seems relevant.) Show PD6-O1 and present an overview of cost
allocation as it applies to microfinance. (See CGAP costing paper for details.)
6. (10 minutes) Show PD6-O2. Now ask: What do you understand by activity-based
costing? Then explain, using the CGAP costing paper as a reference. Summarize
costing approaches using PD6-O3; compare the two approaches and discuss
possible points of overlap.
Trainer Instructions
PD-140
7. (5 minutes) As time allows, briefly explore the pros and cons of each method.
Through question and answer, lead a discussion of these points as highlighted in
the CGAP costing paper and excerpted in PD6-M1. Close the discussion
explaining that the group has chosen activity-based costing (ABC) based on its
strengths, specifically the additional ability to explore inefficiencies.
8. (10 minutes) Introduce the specific steps of ABC. Use PD6-O4 as a reference.
Previously prepare the same list of steps on a flipchart.
9. (5 minutes) Say that UNIbank has been using ABC in the past so the ABC system
should be helpful to them when they cost the new products. Distribute Case Study
Part 6, and allow time for participants to read and review it.
10. (1020 minutes) Discuss Case Study Part 6, using a question-and-answer
method and going through the case study page by page, relating it to the ABC
steps. Make sure all participants understand UNIbanks costing results and the
purpose of the information on the spreadsheets. Use optional overhead (PD6-
O5) of the case study as needed. Be prepared to illustrate calculations on
flipcharts. The level of detail and the time of this discussion will vary greatly,
depending on participants previous experiences with activity-based costing.
Note: If a question about viability arises, say: We will get to it in the next session.
11. (510 minutes) Allow participants, individually or in neighboring pairs, time to read
and begin to analyze the information from UNIbanks ABC results.
12. (1020 minutes) Ask the group as a whole for general comments about
UNIbanks costing dilemma. Discuss why Ben made the notes about cross-
subsidizing and trimming transaction costs in his diary. (Have them look at the
bottom line of the Case Study product activity costs tableProduct costs; explore
costs of activities for different loan types to understand Bens suspicions.) Ask:
What prompted him to ask these questions? Which activities seem to be the most
expensive? What does this tell you?
13. (5 minutes) Ask the group: In general, how can we use the ABC results to cost
our new products? What will we need to change, add, and so forth? Have
participants look at the activities dictionary. Ask: How might this need to change?
Are there new core processes? New activities? What about staff time allocations?
Take a few answers, and focus on new savings products that will have different
activities.
14. (1520 minutes) Refer to the case study and explain that fortunately Ben has
been up all night working on these tasks. Distribute PD6-H1a, H1b, and H1c.
Allow time for participants to review the documents and ask questions. Be
prepared to ask questions to stimulate discussionfor example, what is different
about the activities dictionary? (Answer: deposits.) Or, how will that impact staff
time? Have the group look at PD6-H1b, in which staff time estimates also have
changed.
PD6: Costing
PD-141
15. (5 minutes) Follow up by explaining that calculating costs per activity comes next.
Ask: How do we do that? Direct the group to look at staff costs first.
For example, ask: What is the cost of loan officers to answer client questions and
provide advice? Take answers, then show PD6-O6 or work through an example
on a flipchart.
16. (5 minutes) Ask: What is the monthly cost of answering client questions by the
cashiers? Allow a few moments for the participants to calculate. (Answer: 5
percent of $1,200 = $60.) Explain that this is how all staff time costs are
determined. Show ABC optional overhead (PD6-O5) if needed to summarize.
17. (1015 minutes) Ask the class how it thinks that nonstaff costs per branch are
calculated. Allow a few moments for the participants to think through possible
responses. Take answers.
Take the group step by step. First find out what the total nonstaff branch costs
are. (This is $400,000, according to the branch financial statements.) Then
consider how to divvy up this total.
Tell the group that UNIbank has decided to allocate the nonstaff costs in the same
proportion as the branch time to total time.
Give this example (consider illustrating it on a flipchart or an overhead): The time
spent by all branch staff on answering client questions is 10.5 percent. If that 10.5
percent is multiplied times 400,000, the result is $41,968the annual branch
nonstaff costs associated with answering client questions.
Adding the staff costs to the nonstaff costs gives total costs at both the branch
and head office, which in this case equals $102,688$60,720 (total annual staff
costs) plus $41,968 (annual nonstaff costs). So UNIbanks total cost for answering
client questions on an annual basis is $102,688 since there are no head office
costs associated with answering client questions.
18. (1015 minutes) Referring to the case study, state that once again Ben has been
busy calculating. He has already figured out all of the staff costs and needs a little
help calculating the nonstaff costs. Distribute PD6-H2, Calculating branch nonstaff
and total costs, and PD6-H3, Calculating head office nonstaff costs and total
costs. Ask participants to complete the worksheets. Consider dividing the
assignment, asking one group to work on only the activities within the servicing of
existing loans, for example, while another works on another core process, etc.
19. (5 minutes) After giving the group a few moments, distribute PD6-H4, H5, and H6
solutions and have them correct their own answers. Take any questions.
20. (5 minutes) Ask the group: Now that we know the total costs by activity, what
does activity-based costing require next? (Answer: we need to calculate the unit
cost.) Pose other questions: What is the purpose of the unit cost? How will we use
it? And finally, how do we do this? (Answer: by assigning drivers and determining
their monthly volume, then dividing the volume of the drivers into the total costs.)
Trainer Instructions
PD-142
Briefly review the concepts of assigning drivers. Have them look at a few
examples from the Case Study Part 6 charts showing UNIbanks original ABC
numbers.
Guide participants back to the case study, not to the handouts, saying that they
will be working with the colored case study parts here. Explain that they need to
get the information from the case study, since they are looking for historical
information, not projectionswhich is what we have just been working on and
which the handouts represent.
21. (5 minutes) Show PD6-O7 and explain that participants are now looking at
historical costs; the numbers in the overhead are from the case study, not the
handouts.
22. (2045 minutes) Tell the group members that they have reached the interesting
part. They all have designed productsnow it is time to cost them! From here on
they will be working on their own products, assigning the driver volume to each
activity for the product as designed and determining the unit costs. Remind them
that the volumes must be achievable! Distribute PD6-H7 and ask participants to
complete it, based on what they think their products will require.
This can be an individual exercise within the subgroups, or subdivided further into
twos and threes. It is good for everyone to practice calculating a few unit costs,
assigning drivers, and so forth, but the group as a whole must agree on the
drivers and come up with one cost and price for the product they have designed.
23. (2545 minutes) Tell participants that they now have all the pieces of information
to calculate an estimate of what their new products will cost. Distribute PD6-H8a
and H8b, and have participants follow instructions to complete the separate
costing of their two products.
Note: There are no answer sheets for this exercise, since answers will be based
on information generated in this and previous sessions. Pay close attention to
individual work to gather material for processing and to ensure participants are
calculating correctly.
This exercise must be completed before the session can continue. (It is a major
building block.) Participants must have sufficient information to continue with
costing their products.
24. (1015 minutes) Ask participants how they feel about the cost of their products:
Are the unit costs comparable? What have they left out of the equation? (Answer:
financial costs!) Note that fees charged to clients and the interest rate paid to
clients for each product also need to be taken into accountthey will work on this
shortly. Take any questions on the application of activity-based costing in new
product development.
PD6: Costing
PD-143
GENERAL REVIEW
25. (15 minutes) Facilitate a discussion based on the following questions: What are
the elements of product costing? Can they describe the process of how to
estimate the costs of new product development? What are the critical points to
remember to get the best estimates? Why is it important to understand product
costs?
26. (10 minutes) Suggest that the group think about the implications of the exercise
for their MFI. Ask for participants to share experiences of what they have done or
what they will do, based on this session. Discuss how they can use this costing
information in the rest of the product development cycle, and what other uses
there are for this information. Briefly touch on efficiency issues and how the
information is or can be used to explore cost-cutting opportunities.
27. (510 minutes) Summarize and clarify main messages.
28. (5 minutes) Set the stage for a brief skit: Ben is relieved that the products have
been costed using the best possible data. He meets the General in the hallway.
He excitedly tells her that they have costed the product down to the tiniest detail
and are now ready to roll with the pilot testing. Once again the General stops him
cold in his tracks: She says: Wait, that is greatbut what it will cost us to get it to
market and what will the clients pay for it? What is the price we will charge for
these new products? And even if the clients are willing to pay, does it mean we
can afford it? Will we break even? How much profit will we earn (what will be the
return)? The list of questions goes on and on and on, until finally the General
says, I need answers! and walks away. Ben remains speechless.
29. (35 minutes) Process very briefly. Ask: What are the Generals expectations?
(Answer: profit!) Encourage them; say: Lets see if we can get there!
Bridge to next session on pricing.
Trainer Instructions
PD-144
PD6-M1
ABC Optional Overhead
PD6: Costing
PD-145
PD6-M2
CGAP Activity-Based Costing Paper
Download Microfinance Product Costing Tool from CGAP Web site.

PD-147

THE COMPLETE SET OF OVERHEADS IS IN A SEPARATE POWERPOINT FILE
ENTITLED CGAP PRODUCT DEVELOPMENT OVERHEADS
PD6: Costing
PD-149

CGAP/World Bank, 2009
Cost Allocation Cost Allocation
Cost Allocation
PD6-O1
Staff costs
Nonstaff
costs
Loan
product
#1
Loan
product
#2
Savings
product
#1
Staff
time
sheet
Portfolio
volume
Income and
expense statement Allocation bases Product costs
CGAP/World Bank, 2009
Activity-Based Costing Activity Activity- -Based Costing Based Costing
PD6-O2
Staff costs
Nonstaff
costs
Loan
product
#1
Loan
product
#2
Savings
product
#1
Income and expense
statement
Staff time
allocation Product costs Drivers Activities
Core process A
Core process B
Core process C
Sustai ning
acti vi ties
# loan
applications
# transactions
$$$$$$
$$$$
$$$$
$$
Trainer Instructions
PD-150

CGAP/World Bank, 2009
Cost Allocation Cost Allocation Cost Allocation
Activity-Based
Costing
Activity Activity- -Based Based
Costing Costing
Staff costs
Nonstaff
costs
Loan
product
#1
Loan
product
#2
Savi ngs
product
#1
Staff
ti me
sheet
Portfol i o
vol ume
Income and
expense statement Allocation bases Product costs
Staff costs
Nonstaff
costs
Loan
product
#1
Loan
product
#2
Savings
product
#1
Income and expense
statement
Staff ti me
allocati on Product costs Dri vers Activi ti es
Core process A
Core process B
Core process C
Sustaining
activities
# l oan
appl i cati ons
# transacti ons
$$$$$$
$$$$
$$$$
$$
PD6-O3
CGAP/World Bank, 2009
Activity-Based Costing Steps Activity Activity- -Based Costing Steps Based Costing Steps
1. Plan for the costing exercise
2. Identify products for costing
3. Ascertain core processes
4. Designate specific activities for each core process
5. Conduct staff time estimates for each activity
6. Calculate costs per activity
7. Assign cost drivers and determine unit activity costs
8. Drive unit activity costs to products
PD6-O4
PD6: Costing
PD-151

CGAP/World Bank, 2009
Staff Costs for Answering
Client Questions
Staff Costs for Answering Staff Costs for Answering
Client Questions Client Questions
There is no other staff involved in answering questions
TOTAL STAFF TIME FOR answering questions = A$5,060 monthly
Annually equals $5,060 x 12 = A$60,720
Staff
Percent
time
Monthly
salary
Cost per
one staff # staff
Total
costs
LO 12.5% 200 25 200 5,000
Cashier 5% 100 5 12 60
PD6-O5
CGAP/World Bank, 2009
UNIbanks Previous ABC Results UNIbank UNIbank s Previous ABC Results s Previous ABC Results
Cost per activity for staff Cost per activity for staff
Loan Officers spend
hours or of their time
Answering client questions/advising
21.5 hours or 21.5 hours or of L.O. time per month of L.O. time per month
Total Loan Officer costs per month =
The costs of answering client questions/advise
by Loan Officers per month is A$5,000!
PD6-O6
%
12.5% 12.5%
A$40,000 A$40,000
12.5% of A$40,000 = A$5,000 12.5% of A$40,000 = A$5,000
Trainer Instructions
PD-152

CGAP/World Bank, 2009
Driving Unit Costs Driving Unit Costs Driving Unit Costs
Answering client questions for Answering client questions for existing existing products products
The total annual cost: 223,867.50
Total monthly cost: 18,655.60
The driver assigned is number of loan applications
Monthl y volume of loan applications is 3,200
The unit cost for answering client question =
18,655.60 3200 =
5.83 cost per client question
PD6-O7
Numbers are from case study as we are using exi sting product costs in this examplenot proj ecti ng.

PD-153
PD6-H1a
CGAP/World Bank, 2009
BEN'S REVISED UNIBANK ACTIVITIES
DICTIONARY FOR NEW PRODUCTS
Core Processes & Activities
ACTIVITIES DICTIONARY
Core Processes Activities
Making Loans Answer client questions/advise
Accept loan application
Review and approve loan application
Perform general loan disbursement admin
Opening Deposit Accounts Answer client questions/advise
Perform general loan administration
Servicing Existing Loans Follow up with delinquent clients
Track repayments and delinquency
Perform portfolio analysis
Servicing Deposit Accounts Update passbooks, issue replacements
Issue passbook
Perform general new deposit admin
Close deposit accounts
Perform portfolio analysis
Handling Cash Transactions Collect and record cash in
Perform general deposit administration
Sustaining Activities Engage in general marketing and promotion
Disburse and record cash out
Perform general cash administration
Maintain donor/investor relations
Perform general accounting and reporting
Perform general administration
Recruit, train and pay staff
Maintain information technology

PD6-H1b
CGAP/World Bank, 2009

BEN'S REVISED UNIBANK BRANCH STAFF TIME
Hours % Hours % Hours % Hours %
0.0 0.0% 21.5 12.5% 0.0 0.0% 8.6 5.0%
0.0 0.0% 17.2 10.0% 0.0 0.0% 0.0 0.0%
25.8 15.0% 25.8 15.0% 0.0 0.0% 0.0 0.0%
12.9 7.5% 17.2 10.0% 0.0 0.0% 0.0 0.0%
38.7 22.5% 81.7 47.5% 0.0 0.0% 8.6 5.0%
0.0 0.0% 17.2 10.0% 0.0 0.0% 0.0 0.0%
8.6 5.0% 8.6 5.0% 0.0 0.0% 8.6 5.0%
8.6 5.0% 8.6 5.0% 0.0 0.0% 8.6 5.0%
8.6 5.0% 0.0 0.0% 0.0 0.0% 8.6 5.0%
25.8 15.0% 34.4 20.0% 0.0 0.0% 25.8 15.0%
25.8 15.0% 21.5 12.5% 0.0 0.0% 8.6 5.0%
0.0 0.0% 0.0 0.0% 25.8 15.0% 0.0 0.0%
12.9 7.5% 8.6 5.0% 25.8 15.0% 0.0 0.0%
38.7 22.5% 30.1 17.5% 51.6 30.0% 8.6 5.0%
0.0 0.0% 0.0 0.0% 8.6 5.0% 8.6 5.0%
0.0 0.0% 0.0 0.0% 12.9 7.5% 8.6 5.0%
0.0 0.0% 8.6 5.0% 12.9 7.5% 0.0 0.0%
0.0 0.0% 8.6 5.0% 12.9 7.5% 8.6 5.0%
0.0 0.0% 17.2 10.0% 47.3 27.5% 25.8 15.0%
0.0 0.0% 0.0 0.0% 25.8 15.0% 34.4 20.0%
0.0 0.0% 0.0 0.0% 25.8 15.0% 34.4 20.0%
0.0 0.0% 0.0 0.0% 21.5 12.5% 34.4 20.0%
0.0 0.0% 0.0 0.0% 73.1 42.5% 103.2 60.0%
8.6 5.0% 8.6 5.0% 0.0 0.0% 0.0 0.0%
0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
34.4 20.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
17.2 10.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
8.6 5.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
68.8 40.0% 8.6 5.0% 0.0 0.0% 0.0 0.0%
All Processes All Activities 172.0 100% 172.0 100% 172.0 100% 172.0 100%
Staff Time Estimates (Monthly)
Branch
Supervisor
Loan Officer Teller Cashier
Activities
Making Loans Answer client questions/advise
Perform general loan disbursement admin
All Activities
Accept loan application
Review and approve loan application
Core Processes
Servicing Existing Loans Follow up with delinquent clients
Track repayments and delinquency
Perform portfolio analysis
Perform general loan administration
All Activities
Opening Deposit Accounts Answer client questions/advise
Issue passbook
Perform general new deposit admin
All Activities
Servicing Deposit Accounts Update passbooks, issue replacements
Close deposit accounts
Perform portfolio analysis
Perform general deposit administration
All Activities
Handling Cash Transactions Collect and record cash in
Disburse and record cash out
Perform general cash administration
All Activities
Sustaining Activities Engage in general marketing and promotion
Maintain donor/investor relations
Perform general accounting and reporting
Recruit, train and pay staff
All Activities
Maintain information technology
Perform general administration
BRANCH STAFF time in Hours per month
(Average hours per Staff Type per Month)
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