2015年-世界发展银行全球_Emergency_Hand_Loan___A_Product_Design_Case_Study_17页_1mb

Emergency Hand Loan Case Study Summary

Core Content

The Emergency Hand Loan is a financial product designed to provide convenient, affordable emergency financing to low-income households in rural Orissa, India. It aims to bridge the gap between the financial needs of underserved populations and the limitations of both formal and informal financial systems.

Main Objectives

1. Provide convenient and affordable emergency financing to low-income families.
2. Enhance customer relationships with financial institutions to encourage future engagement.
3. Reduce reliance on informal lenders who often charge high interest rates and impose social penalties for non-repayment.

Key Insights

• Financial Needs of the Poor: Poor households often face unpredictable income and lack reliable financial instruments to manage short-term cash shortages. They may resort to informal loans, which are accessible but come with high costs and social risks.
• Behavioral Economics: The product is designed based on the concept of mental accounting, where people categorize money for specific purposes. Emergency loans should be small and short-term to align with this mental framework.
• Informal Lenders' Drawbacks: Informal lenders, such as pawnbrokers, often charge high interest rates and use public shaming as a collection method, which harms borrowers' social standing.
• Formal Alternatives: Formal financial institutions can offer more civil and transparent alternatives to informal lending, but must overcome the challenge of convenience and trust.

Product Design

• Purpose: To meet emergency financial needs, such as medical expenses, education costs, or sudden income loss.
• Loan Features:
  • Maximum Amount: Rs. 2000 (US$45)
  • Term: One month
  • Interest Rate: 2% per month
  • Repayment Penalties: Charged for each day of delinquency
  • Access: Available at any time, including after business hours
  • Eligibility: Customers must have an established relationship with Dhanei KGFS (at least 12 weeks, positive savings account balance, and no overdue loans)

Implementation

• Partner: Dhanei KGFS, a non-banking financial company (NBFC) in Orissa, partnered with CIFD (Center for Innovative Financial Design) and ideas42.
• Distribution Method: A plastic token (Emergency Card) is provided to eligible customers, acting as a form of pre-approved credit.
• Disbursement Process:
  • A trusted female customer acts as a disbursal agent.
  • The agent uses a lockbox with two 3-digit locks to dispense funds.
  • Codes for the lockbox are provided via SMS and phone calls from the call center.
  • Funds are replenished the next day by a wealth manager.

Results and Feedback

• Take-Up Rate: 225 customers took out at least one loan between January and July 2010, with 347 total disbursals.
• Repayment Rate: Approximately 98% of loans were repaid, with 86% repaid within a week of the due date.
• Customer Preferences:
  • For amounts below Rs. 2000, informal sources like friends and neighbors are preferred.
  • For amounts above Rs. 2000, professional moneylenders are more commonly used.
  • Dhanei KGFS's Hand Loan is seen as a more affordable and convenient alternative, especially for Rs. 2000 loans.

Challenges and Lessons Learned

• Design Changes:
  • Loan term was extended from two weeks to one month.
  • Maximum amount increased from Rs. 500 to Rs. 2000.
  • Interest rate was introduced to ensure profitability.
  • Personal visits were replaced with SMS reminders.
• Implications:
  • Changes were made to align the product with the MFI’s profitability goals.
  • These adjustments may have reduced customer benefits, especially for those needing smaller amounts.
• Future Enhancements:
  • More flexible loan amounts.
  • Better communication about repayment terms.
  • Implementation of SMS reminders and possibly automated alerts.
  • Longer-term relationship building and product diversification.

Financial Viability and Impact

• The product was not independently profitable during the pilot phase.
• However, it was designed to serve as a loss leader, aiming to build long-term relationships and increase client retention.
• A randomized controlled trial is needed to fully assess the financial cost-benefit of the product.

Conclusion

The Emergency Hand Loan represents a step towards responsible financial inclusion by offering a formal, affordable, and accessible emergency financing solution. While the pilot was successful in terms of repayment and customer satisfaction, it highlighted the need for a balanced approach between profitability and customer welfare in product design. Future iterations should focus on improving customer-centric features and ensuring clear communication to sustain the product’s impact.