FINCA’s Group Choice Loan reimagines group and individual lending by putting customer data at the heart of its development strategy.

Forty years ago, the concept of microcredit was revolutionary because it offered sorely needed financial products to massive, overlooked populations long shut out of traditional banking.

Those early group loans, and later individual loans, challenged conventional thinking on who “risky” customers were and opened the door to more inclusive lending. How did we get there? By listening to those underserved individuals and designing solutions for their unmet needs.

Yet, the products offered to these communities have remained largely unchanged in the four decades since. According to our own research, clients are frustrated by the rigid terms and high costs of the solutions available. Once again, we have an opportunity to challenge assumptions and redefine what’s possible. And once again, we’ll do so by learning from our customers.

Innovation may have stagnated in the inclusive finance space, but FINCA is breaking through with a data-driven, customer-focused approach tailored to real people, real needs, and real impact. Ultimately, our clients don’t want products — they want solutions that enable a healthy financial future. And we’re listening.

Reimagining Group and Individual Lending

Four decades ago, FINCA began with the idea of “Village Banking” — supplying small groups of customers with collective loans as a way of mitigating the risk of lending outside the formal financial sector. Today, FINCA still provides group loans because, for many clients, they remain the most effective lending model and serve as an on-ramp to credit for those who are new to banking.

For a long time, research (including FINCA’s own) has indicated that many customers do not appreciate a group borrowing structure and would prefer to borrow individually. Yet to date, few institutions have addressed this frustration.

At FINCA, we believe it’s possible to breathe new life into legacy products while preserving their core strengths. Our new Group Choice Loan offers a pathway for group members who want to migrate to individual loans — while simultaneously improving the experience for members who prefer to continue borrowing collectively.

This innovative loan product leverages group guarantee dynamics and scores individual member behavior to automate the underwriting of follow-up loans. Members who demonstrate good repayment can then choose between an individual unsecured loan or a repeat group loan based on credit scoring.

Our customers also told us they wanted a lending system that felt fair, not punitive. Microfinance conventionally uses negative incentive structures for risk mitigation, but the Group Choice Loan does away with this unpopular feature in favor of positive incentives — like a “cashback” percentage — to encourage good repayment behavior.

Agile Product Development for Inclusive Finance

Traditional strategies for building and deploying inclusive financial products often rely on cumbersome hierarchical models that are out of touch with shifting customer preferences and held back by fixed mindsets.

At FINCA, we are rewriting the innovation playbook and proving that adaptive, inclusive solutions like the Group Choice Loan are indeed possible with an agile development approach. This data-driven, customer-focused strategy enables us to constantly test, iterate, and refine our solutions without being locked into rigid processes.

When we say we listen to our customers, it goes well beyond simply listening to what they tell us in surveys. We also listen closely to what they tell us with their actions when using our products. We’re constructing a system where customer feedback directly drives continuous improvement, helping to bridge the divide between what they need and what we offer.

Our agile development model is built on the following four pillars, which we believe could be valuable for any organization looking to drive meaningful innovation:

1. Rigorous Product Charter

At FINCA, a successful product development process starts with a charter that is clear-eyed about how the eventual solution will deliver value. It is a living document that defines the product objectives, hypothesis, backing evidence, and success criteria for measuring outcomes. The charter lays out the roadmap for the entire process, breaking it down into shorter cycles called “sprints,” and ensuring alignment at every step of the way.

2. Minimum Viable Technology

You never know how customers will behave until you allow them to interact with a product in real life. Minimum viable technology (MVT) defines the least amount of technology possible to be able to deploy and test our product value propositions, so we can gather feedback from customers before investing vast amounts of money and resources. MVT enables smart, data-backed decisions on tough tech choices.

3. Test and Learn

Rather than devising full solutions based on a static set of feedback, we release a beta version to a sample group and then learn from how they use it. If customer behavior doesn’t match what we’re trying to achieve — and we can’t prove the product is generating customer and institutional value — we iterate and adjust quickly. Building the customer feedback loop directly into the development cycle gives us a much richer understanding of what users are experiencing and a more holistic view of their evolving needs and preferences.

4. Sandbox Environment

Traditional finance is beset by rules, regulations, and risk aversion, with little room for trial and error. That’s why we develop our products in a sandbox: a small team working in an isolated environment that is empowered to experiment without affecting business as usual. While adhering to regulations and keeping leadership informed, the sandbox can test whether a perceived risk is in fact backed by data — or if removing certain controls could allow products to function better while maintaining acceptable risk thresholds.

FINCA Drives Financial Inclusion Through Innovation

Being a cutting-edge inclusive finance provider doesn’t necessarily mean having the sleekest interface or the most advanced technology. It means listening to what your customers truly need and responding in an agile way to deliver products that meet their demands.

FINCA’s new approach ensures that innovation is more than a buzzword — it’s a tangible practice that drives meaningful change. We’re not just adapting to the times; we’re setting the stage for the next 40 years of financial inclusion.

This article first appeared on finca.org.