Financial Product Development

One common mistake made by financial institutions considering the financing of agribusiness is trying to use their existing suite of products. Conventional financial products are based on expectations that cash flows are regular and relatively uniform, and that clients are salaried and hold assets that are easily valued. These expectations are rarely the case with rural agribusinesses.

INSPIRED specializes in developing low risk/high return agribusiness financial products.

The methodology follows this logic:

• The market demand for a given product, including the proposed client group’s ability to pay from cash flows enabled by the product, is first analyzed.
• The internal capacity of the lender to adopt the new product and the cost implications of that adoption are then analyzed.
• Cash flows and their timing are considered from an asset-liability management perspective.
• Risk management strategies are elaborated and procedures developed.
• Promotional strategies are then developed and finally the product costing is finalized.
• Finally evaluation on the basis of the costs and revenues for the financial institution are compared to the costs and revenues of the client. Only when it is clear that both the financial institution and the client are better off is the product considered ready for market.