Aga Khan Agency for Microfinance

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Product Development Overview

The traditional microfinance loan was a very simple product designed to provide groups of micro-entrepreneurs with a very small amount of working capital with which they could conduct day-to-day business. Loan maturities were extremely short and repayment was always sought monthly, if not weekly, from the outset of the loan. The entire microfinance sector has evolved enormously since those products took the stage and now there is both the capacity to develop, and the demand from clients for a wide range of sophisticated and tailored products. Product development is a critical activity for any growing microfinance institution, particularly those that have reached maturity and sustainability and those operating in saturated markets.

While all AKAM institutions continue to offer the simplest of working capital loans, many have also developed new financial products for their clients. To help guide this growth, AKAM Geneva works closely with all of its affiliates to establish standards for products and that best practices are reflected in their design. Most AKAM institutions now offer a dozen or more loan and savings products, with varying terms and delivery methods. AKAM institutions offer both group and individual loans with differing maturities, grace periods, and interest rate structures. Each loan product is designed with the client’s needs and the purpose of the loan in mind, whether it be for working capital, acquisition of fixed assets or for housing, health, or education purposes. Similarly, AKAM institutions offer a number of different savings vehicles that seek to build strong savings habits and encourage clients to work towards achieving their financial objectives.

Several of these institutions are also offering other financial services, including payment and remittance services, leasing and insurance. In 2007 AKAM established its first dedicated insurance agency in Pakistan, which is focusing on the provision of health financing for thousands of poor families. Other product development highlights included the growth of the AKAM housing finance portfolio and the growing commitment to addressing the “missing middle” of financial access by providing larger loans for Small and Medium Enterprises (SME). All of these services represent areas in which AKAM has introduced important innovations in 2007.