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Innovative Business Models
This training module assists microfinance CDFIs to identify opportunities for improving their business models to achieve greater effectiveness, efficiency, scale, and impact. This module presents case studies of business model innovation among loan fund and credit unions involved in microfinance, explores themes of pricing, structure, and sustainability strategies, and presents a tool – The Business Model Canvas – to assist in conceptualizing your CDFI’s business model now and in the future.
- Authors: Elaine Edgcomb, FIELD at The Aspen Institute, and Ginger McNally, National Federation of Community Development Credit Unions
- Summary: This presentation explores how business model innovation is critical for the survival and scaling of microfinance in the United States. It also introduces the Business Model Canvas, a tool for understanding how the various components of your CDFI’s business models can work together to support scale. Additionally, this presentation outlines how organizations can foster a culture of innovation through a variety of simple practices including listening to staff, mining existing organizational data, and market research.
Case Studies:
Progreso Financiero: A Case Study of Business Model Innovation:
- Author: Luz Gomez, FIELD at The Aspen Institute
- Summary: Progreso Financiero is a fast growing, for-profit CDFI providing small dollar loans focused on the unbanked/underbanked Latino population in Texas and California. The organization has developed a unique business model that facilitates the deployment of 15,000 loans per month with an average size of $1,000. This case study outlines the CDFI’s business model and path to scale.
Self-Help: Scaling Microfinance in California:
- Author: Ginger McNally, National Federation of Community Development Credit Unions
- Summary: Self-Help is a family of non-profit organizations serving low-income and low-wealth individuals in North Carolina, California, Washington DC, and other states across the country. This case study focuses on the evolution of the Community Trust and Prospera Divisions integral to Self-Help’s expansion in California, outlining the challenges and opportunities of developing and implementing new, innovative business models to best meet the needs of the underserved.
Additional Tools:
Comparison of International and Domestic Microfinance Institution Business Models:
- Author: Elaine Edgcomb, FIELD at The Aspen Institute
- Summary: This worksheet compares the business models of international and domestic microfinance institutions. Even though international and domestic microfinance institutions operate under different circumstances, there are important lessons that can be learned by comparing their business models.
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New Products
General Introduction to the Module: Adding new products to a CDFI’s microfinance product suite is one pathway to scale as the CDFI can reach more clients or serve existing clients more broadly. This module presents data from the Center for Financial Services Innovation (CFSI) that illustrates emerging trends in products for unbanked and underbanked consumers. Building from this data, this module outlines steps in a product development process, highlighting the importance of using market research to inform the creation of new microfinance products. In addition to providing this product development framework, this module presents case studies of credit unions and loan funds that have taken very different paths to building new transaction, savings, and lending products to meet their unique customers’ needs.
Presentation: New Products
- Authors: Sarah Gordon and Mónica SanMiguel, CFSI
- Summary: This presentation presents data outlining trends in the underbanked financial services marketplace which could present opportunities for CDFIs to achieve scale through expanded product offerings. Additionally, the presentation provides a framework for how CDFIs can create a new product, focusing on the importance of utilizing solid market research to meet the unique needs of the targeted clients.
Case Studies: Opportunity Fund’s Start2Save Program vs. Justine PETERSEN’s Secured Card
- Authors: Sarah Gordon and Mónica SanMiguel, CFSI
- Summary: This set of case studies reviews how two loan funds have created new products with potential to scale. The first is Opportunity Fund’s Start2Save Program which is a matched emergency savings account done in partnership with Citibank. The second is Justine PETERSEN’s secured card, also done in partnership with Citibank. This presentation outlines the market research performed by both organizations as well as walks through the product development process to create and refine these products.
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Talent Management
General Introduction to the Module: Scaling microfinance requires change at all levels of an organization including building the skills of current staff, learning to work with employees in multiple locations, or hiring and training new staff members to take on completely new roles. These changes are an opportunity to build talent throughout your organization. This module provides an overview and tools to assist your organization in three areas: 1) developing and training staff as they progress through your organization, 2) effectively managing change as your CDFI scales microfinance operations, and 3) developing one’s own leadership legacy.
- Author: Dr. Monica McGrath, Resources for Leadership, Inc.
- Summary: This presentation provides CDFIs with a menu of best practices to build and manage talent throughout the employee development lifecycle from recruitment to on-boarding new staff to motivating current staff. Additionally, this presentation provides a framework for ways a CDFI and CDFI leaders can understand and effectively manage change that comes along with scaling microfinance operations. Finally, the presentation focuses on developing a personal leadership legacy that is a roadmap for the future.
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Technology Solutions:
This training module examines each step of the lending process from customer acquisition to underwriting to collections to see how both well-established and cutting edge technologies can increase efficiencies, improve performance, and decrease costs as microfinance CDFIs scale. This module also presents case studies of technology systems used by loan funds and credit unions involved in microfinance.
- Author: Joyce Klein, FIELD at The Aspen Institute
- Summary: This presentation provides an overview of technology solutions that can address the key “pain points” CDFIs experience in microfinance lending operations. At each step in the lending process, well-established and cutting-edge technologies may be able to improve efficiencies and performance for microfinance CDFIs. This presentation discusses these high tech solutions as well as mentions low-tech solutions to assist in making the lending process effective and efficient.
Case Studies:
A Comparative Study of The Intersect Fund & Opportunity Fund
- Author: Joyce Klein, FIELD at The Aspen Institute
- Summary: Opportunity Fund and The Intersect Fund are two microlenders that utilize technology to rapidly turn applications into successful loans and to increase the ability of their loan officers to be in the field. However, the technology systems they use are distinct. This case study presentation compares the two different approaches these CDFIs have taken to improve their performance and enhance efficiencies.
Alternatives Federal Credit Union: A Shared Technology Platform to Improve Performance and Service:
- Author: Alison Carr, National Federation of Community Development Credit Unions
- Summary: Alternatives Federal Credit Union (Alternatives) provides its members with a wide variety of products and services to build wealth and create economic opportunity for underserved people and communities. This case study outlines how the credit union changed its core processing system to a shared technology platform that enables Alternatives to meet member demand for more technology-based services, improve lending efficiencies, and enhance member services. While focused on technology within a credit union, this case study is relevant to all types of CDFIs, particularly as they scale.
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