Developing useful tools and processes to improve financial education and consumer protection in the microfinance sector is fundamental to MFTransparency’s strategy. We believe it is imperative for the health of the market for consumers to be educated and informed on the services and products they have access to.

As part of MFTransparency’s enabling APR & EIR Program, financial education experts have developed a universal pricing education package, aimed at consumers of microloans. Using proven financial education models and lessons learned from other countries, these resources have been developed to be tailorable, aknowledging the diversity of Africa’s communities.

MFTransparency is pleased to share this consumer pricing education package. These materials may be reproduced, translated or adapted with minor changes to meet local needs, provided that they are distributed for free or not for profit and provided any changes maintain the integrity of the book. Please inform us of plans to adapt or translate these materials, provide us with a copy of the adapted publication, and ensure recognition of MFTransparency and MasterCard Foundation.

MFTransparency is the leading provider of educational materials on pricing in the microfinance industry.

We are committed to providing an array of resources to enable industry stakeholders to better understand and implement responsible pricing and adopt more transparent practices.  MFTransparency is excited to announce a series of new resources from our work in the field of consumer pricing education.

View our complete Resources library here

From the blog:

• Shaping the Path in Financial Literacy, click here.
• Learning the Client Perspectives on Pricing: Insights from the Field, click here.
• Financial Education: From Russia to Rwanda, click here.
• Financial Education: Key Component to Responsible Pricing, click here.

 The enabling APR & EIR Program is sponsored by the MasterCard Foundation. The Progam has worked to promote improved consumer protection principles through microfinance product pricing transparency. Through the enabling APR & EIR Program, MFTransparency has raised awareness of transparent pricing issues in seven countries in Africa –  Malawi, Uganda, Rwanda, Ghana, Tanzania, Zambia and Mozambique.

Many factors are responsible for the international variations between microfinance industries, including differences in regulation, the cost of funds, level of competition, financial inclusion, operating costs and the broader economic and political framework of the country. These create a unique set of circumstances in each country, governing the origins, present state and future development of its microfinance market. 

For each of the countries in which MFTransparency works a thorough review is conducted, known as a Country Survey, outlining these national socio-economic, political and historic factors. Summarizing the country specific context, Country Surveys form a valuable backdrop against which to examine a market’s pricing data. 

MFTransparency is pleased to share the Country Surveys for the microfinance markets involved in the enabling APR and EIR Program - an initiative sponsorred by the MasterCard Foundation. The Country Surveys were prepared by a team of talented interns working for MFTransparency, and should be viewed as a resource offering general contextual information for the Transparent Pricing Initiative in each country. 

MFTransparency is the leading provider of educational materials on pricing in the microfinance industry.

Home to one of the world’s fastest growing microfinance sectors, and with one of the largest microfinance markets in Africa, Ethiopia and its microfinance pricing dynamics are of keen interest to the industry. MFTransparency’s work in Ethiopia has provided a unique insight into a market where several MFIs have achieved financial and operational sustainability whilst at the same time maintaining a strong social mission and very low product pricing. We were pleased to see many examples in Ethiopia on the practice of responsible pricing. 

Concluding months of research and analysis we launched our transparent pricing dataset for Ethiopia last week. This can be viewed here, accompanied by a webinar recording of MFTransparency’s CEO Chuck Waterfield giving an overview of the data. The interactive dataset includes institutions serving more than 2 million active clients with over 1,000 branch networks across the country. Many interesting themes can be seen within the data, including a strong focus on enterprise financing and lengthy average loan terms. Amongst the trends seen, MFTransparency research highlights that:

• Ethiopian microfinance institutions are demonstrating the successful large scale use of declining balance methodologies. Some of Ethiopia’s largest institutions, representing a significant portion of the market share, use declining balance interest rate for the price calculation of all of their products, and have been doing so for many years using manual amortization tables to ensure the highest level of transparency for clients.
• Ethiopian microfinance institutions have moved away from traditional group lending methodologies. Nearly 65% of the lending methodologies cited within our dataset were for individual loans, with 35% using group loan methodologies. This focus on individual lending shows Ethiopia’s institutions are catering for the cash flow and credit needs of their clients individually rather than as a homogenous group.
• Ethiopian microfinance institutions are charging some of the lowest interest rates in Africa. It is striking that some of these institutions can charge these low prices whilst maintaining sustainability. This has been achieved largely through the low cost of operations. However, challenges facing the industry such as high inflation, increasing competition and the professionalization of the industry will see a growing need for more sophisticated pricing techniques. MFTransparency’s research will be valuable in helping Ethiopia’s institutions price their products appropriately.

Participation of microfinance institutions in our Transparent Pricing Initiatives is voluntary, and involves microfinance institutions working with us to thoroughly assess their product pricing and client documentation. Institutions representing 96% of the market (by active borrower numbers) participated by voluntarily submitting their data, indicating how highly valued transparency is within the Ethiopia’s microfinance industry.  We wish to express our thanks to Ethiopia’s microfinance institutions and staff for their support and efforts to provide all the necessary information, in some cases from remote branches.

Whilst social performance and client protection is verbally supported in the Ethiopian microfinance sector, the work of MFTransparency, and various other organizations in the field of consumer protection, aims to enable Ethiopia’s microfinance institutions to catalyze this endorsement into concrete impact. One of the challenges we noticed in Ethiopia was the lack of clear client documentation given by some institutions to their clients. Our website provides resources offering solid solutions to this, enabling institutions to communicate the true cost of their loans more transparently with clients. Our tools are also available to all institutions to help them calculate their loan prices, allowing them to set a product pricing strategy that both upholds the sector’s social mission and encourage the industry’s sustainability. We are excited to see how the microfinance sector in Ethiopia will develop and evolve over the coming years, and in turn how the rest of the industry can learn from some of the impressive examples of transparent pricing practices seen by Ethiopia.

MFTransparency is pleased to share a body of articles and tools arising from this unique three day event, designed to condense the main learnings for sharing throughout the industry and also to support regulators and policymakers as they begin to take the next steps toward transparent pricing. 
 

MFTransparency is the leading provider of educational materials on pricing in the microfinance industry.

We are committed to providing an array of resources to enable industry stakeholders to better understand and implement responsible pricing and adopt more transparent practices. In addition to the event report MFTransparency is excited to announce a series of new resources from the African Microfinance Transparency Leadership Forum.

View our complete Resources library here, and our Policy for Transparency resources here.
 

 
From the blog:

• Responsible Finance: Regulators agree on the fundamental questions to be answered, click here.
• African Policy Makers Outline the Way Forward in Transparent Pricing, click here.
• Discussion at the African Leadership Forum: Standardized Disclosure of Loan Pricing, click here.

Event materials:

• Presentations from Day One of the African Microfinance Pricing Transparency Leadership Forum, click here.
• Presentations from Day Two of the African Microfinance Pricing Transparency Leadership Forum, click here.

 
The African Microfinance Pricing Transparency Leadership Forum was hosted by MFTransparency in partnership with Steering Committee members from Agence Française de Développement (AFD), African Microfinance Network (AFMIN), Consultative Group to Assist the Poor (CGAP) and the United Nations Capital Development Fund (UNCDF), with support from Luxembourg Cooperation. MFTransparency would like to extend a special thank you to lead donor AFD and supporting donors Luxembourg Cooperation and UNCDF.

During the past few months, we, at MFTransparency, have been offering direct trainings and technical assistance to MFIs participating in The Transparent Pricing Initiative in West Africa. Following the data collection and analysis phase, all institutions that completed the data submission process were contacted one by one in order to preview their Taux Effectif Global [1] (TEG), the formula used by BCEAO to calculate effective interest rates in the WAEMU region. This process sparked many questions from institutions and generated interest in better understanding the calculation method we used. To best address these questions, we offered the possibility for MFI staff (management, field and branch level) to be trained on the following topics:

• Transparent pricing calculation: throughout the project in West Africa, we noticed that the TEG calculation was a challenge for many institutions. For some, the difference between their nominal rate and the TEG was also not clear.
• Pricing strategies: this session highlighted the importance of a product’s cost structure in price setting.
• Transparency in loan documentation aimed at enhancing communication of prices to borrowers.

Trainings were tailored according to each institution’s context and needs. A total of 35 institutions of Benin, Burkina Faso, Mali, Senegal and Togo benefited from these trainings and technical assistance sessions at no financial cost.

One common concern of most institutions was the fear of appearing more expensive if they disclose their TEG to their clients. Not everyone was aware that it is already required by the regulation [2] in the West African Economic and Monetary Union. Overall, these training sessions generated interesting debates and discussions among the participants and at the same time, allowed a better understanding of pricing from the borrower’s perspective. For most of the attendees, it was the first time for them to discuss the topic of pricing transparency in relation to their institution’s practices.

Some significant changes have been reported by MFIs as a result of these training activities. To name a few, one Senegalese institution, Mutuelle d’Epargne et de Crédit de la Zone de Yoff (MECZY), reported to have made the decision to switch from the flat to the declining balance method for calculating the interest rate of its loan products. Other institutions in the process of adopting a new management information system (MIS) requested MFTransparency’s input to improve the template of the repayment schedules they provide to borrowers. Such concrete improvements in transparent pricing practices at the institutional level, both in terms of pricing setting and disclosure, are welcome and encouraged.

—

[1] The TEG mirrors the Annual Percentage Rate formula including interest payments and fees used by MFTransparency. It does not consider the effect of compounding interest.

[2] Article 60 of the Microfinance law states the obligation of transparency in financial services pricing. In addition, Articles 23, 31 and 33 of BCEAO Decision 397/12/2010 respectively restate the obligation of pricing transparency and pricing disclosure toward clients.

by Laila Q. Deles

In July 2011, the Bangko Sentral ng Pilipinas (BSP) released Circular 730: Updated Guidelines on the Truth in Lending Act to Enhance Pricing Transparency.  Among the salient points found in the Circular are the following:

• Prescribed uniform method of computing interest based onoutstanding balance of a loan at the beginning of an interest period and that interest on installment are calculated on the outstanding balance at the beginning of each installment period
• Such method of computing interest must be consistently reflected in loan-related documents and marketing materials
• A simplified Disclosure Statement format, which contains the following minimum information– Total amount to be financed; Finance charges; Net proceeds of the loan; and Percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate or an EIR.

The above circular covers all loan products, including small and micro-loans.  Furthermore, BSP also issued a Memorandum showing examples of effective interest rate calculation models (Memorandum no. 40)

Initially, the policies were said to cover only banks, which is the legal entity covered by BSP.  This presented some complications for the microfinance industry, since non-government organizations and cooperatives would not be subject to the same standards.  In this regard, the Securities and Exchange Commission (SEC), which covers MFI-NGOs, released a similar Memorandum Circular (No. 07, dated 15 September 2011) directing all lending and financing companies to adopt BSP Circular No. 730.  Likewise, the Insurance Commission published Circular Letter No. 31-2011 on 5 October 2011 prescribing rules and regulations on loans and receivables addressed to all insurance/reinsurance companies and mutual benefit associations.   The Cooperative Development Authority is expected to follow suit soon. BSP is expected to come out with guidelines on sanctions and penalties for non-compliance for both banks and non-banks.  These developments will facilitate a level playing field among various credit granting institutions.

Simultaneous implementation across different credit-granting authorities is expected by July 2012, giving MFIs twelve (12) months to prepare from date of issuance of the Circular.  Most likely, this means changing the prices they communicate to clients to a higher figure (from 2.5% per month, flat interest rate to 150% EIR).  Such transition must be supported with appropriate financial education to properly explain to borrowers (and greater public) what these “new prices” mean.    No doubt, a lot of work has to be done, not only among microfinance practitioners, but also among networks, funders and other support institutions.

While the new regulation presents the industry with several challenges, stakeholders also recognize that it is a necessary step to move Philippine microfinance in the right direction.  Working together, greater transparency will be able to “facilitate healthy competition, intensify consumer protection and promote financial inclusion towards a more robust financial system catering to the needs of every Filipino.”[1]

“If you want people to eat less popcorn, the solution is pretty simple: Give them smaller buckets.”

~ Chip and Dan Heath

American psychologists Chip and Dan Heath presented a framework for behavior change interventions in their 2010 book Switch that includes a rationale for changing the environment or situation in which a problem occurs in order to help solve the problem (“shaping the path”). In the case of pricing transparency, regulators and networks can work to shape the path for clients and MFIs by providing simple, standardized, accessible “buckets” that contain understandable information about how much credit really costs.

MicroFinance Transparency[1] is in the process of developing financial education materials to promote pricing transparency in Rwanda and Malawi.  During the African Microfinance Pricing Transparency Leadership Forum last October 5-7, the role of “shaping the path” in financial literacy initiatives was highlighted. In order for consumers to truly understand the cost of their credit and to make informed decisions, a number of country-wide strategies are necessary.

Luckily, in the case of pricing transparency, MFTransparency has already broken ground on a number of concrete activities that can be put in place by networks and encouraged by regulators. These actions, when administered in conjunction with other interventions that focus on MFIs and clients (such as face-to-face training, radio programs, and print materials), will provide the environmental or situational change necessary to clear out some of the obstacles on consumers’ paths to better, more informed decisions about credit.

Require the use of APR/EIR by lending institutions. This recommendation is likely to be controversial and I expect push-back from MFIs when I state that this is my opinion. However, the needs assessment for the financial education made it absolutely clear that clients currently look at the publicized interest rate (i.e. 2.5% per month, 3.0% per month) in the same way that a credit-card-carrying global northerner looks at his or her APR or EIR. Americans, Canadians and Europeans are given the chance to compare the APR or EIR of different credit card companies, use it as a benchmark for the cost of their credit, and try to choose the lowest rate for which they qualify. If clients are already looking at their interest rates in this way, but erroneously, why not give them a more accurate and trustworthy tool?

Simplify information on loan terms for clients. APR or EIR is part of the simplification process, but clients also need to know all their terms and conditions in order to make good choices for them. A simple tool, such as the document in Figure 1, could be used to communicate loan terms to clients and be given to them as a resource. (This could be used even in the absence of APR or EIR requirements in a country – a good first step towards full transparency.)

Fig. 1: Hypothetical Loan Term Pamphlet, created by 17Triggers for MFTransparency

Publicize interest rates using APR or EIR. I was impressed with the way that Bank of Zambia is already doing this.  APRs are published in newspapers accompanied by examples to help clients compare the costs of loans at different institutions. By putting this information in a public place and making it accessible to borrowers and potential borrowers, the Bank of Zambia is making it possible for Zambians to make more informed decisions and is helping to shape the path.

Figure 2: Loan Pricing Calculation Example presented at the ARE by the Bank of Zambia

Educate clients about where to find information on credit and how to interpret it. Using APR or EIR (or a comparative convention) could potentially be a great confusion to clients, if they are not educated prior to and during a change in how interest rates are published. Going from a world in which they are used to seeing “2.5%” and “3.5%” as publicized interest rates to a world in which they see “35%” or “50%” would require a campaign to help them understand that nothing is changing except the way in which the costs are communicated to them. Our needs assessment showed that clients, while they do not fully understand interest or total cost currently, still pay attention to and are sensitive to a rise in interest rates.

Some caveats to keep in mind

• Change at the national level takes time. MFTransparency is developing financial education materials that can be adapted if and when a regulator wants to make the move towards more transparency, whether that is in the near or more distant future.
• Cost is not always the most important consideration for borrowers. When we publicize and educate on interest rates, we expect some borrowers to make different decisions. However, our needs assessment made clear that sometimes the repayment period, repayment schedule, or wait time for the loan trump cost for borrowers. The important thing is to give borrowers the necessary information to be able to make informed and beneficial financial decisions for their own households.
• There is likely to be push-back from financial institutions. As Dr. David Baguma noted during the African Microfinance Pricing Transparency Leadership Forum, “Suppliers (of credit) don’t want to talk about transparency – they cannot take the lead. They will never want to be transparent. The indirect benefits of not being transparent are too strong.” In the short-term, convincing any but the most socially-minded financial institutions to use the MFTransparency package may be difficult. This makes sense. What supplier will want to teach clients to go to a cheaper lender? However, as Dr. Baguma noted, eventually financial institutions may find that “an informed client is a loyal client,” and in the long-term transparency is beneficial to the suppliers and the entire industry.

MFTranpsarency will pilot its financial education program in Malawi and Rwanda in January and February of 2012, putting some of the assumptions above to the test. Hopefully, it  will be able to find the right size of “bucket” for credit clients.

MFTransparency is the leading provider of educational materials on pricing in the microfinance industry.

In addition to transparent microloan pricing data, we are committed to providing an array of resources to enable industry stakeholders to better understand and implement this data in adopting more transparent practices. In the coming weeks we will announce several exciting new resources. Please look for these announcements in your inbox and on the MFTransparency website. Feel free to contact us with questions and feedback at resources@mftransparency.org

View our complete Resources library here

por Hélia Nsthandoca

English

Durante o Forúm de Líderes Africanos para a Transparência de Preços nas Microfinanças, realizado no mês de Outubro em Nairobi, participei numa mesa redonda onde se discutia acerca da padronização da documentação do preçário dos créditos.

Nesta mesa redonda estiveram participantes de alguns países nomeadamente Guiné-Bissau, Liberia, Moçambique e Ruanda, também participou nesta mesa redonda pessoal da UNCDF.

Todos os participantes concordaram que nos países respectivos existiam de certa forma a obrigatoriedade de exposição de forma visível o preçário dos productos de crédito por parte das Intituições de Microfinanças, porém não existe uma linguagem comum ao  divulgar esses preços, e contudo os mecanismos legais da divulgação do preçário nem sempre é eficiente.

Por outra parte discutiu-se bastante acerca do que a informação padronizada deveria conter, um dos pontos  mais controversos foi a inclusão ou não de custos atribuidos a terceiros tais como seguros e impostos, pois se bem que na realidade muitas vezes o proprio cliente paga por estes custos, estes valores cobrados não constituem  fonte de receita para a instituição de Microfinanças, portanto neste aspecto não se chegou a acordo algum acerca de  se estes componentes de custos deveriam ou não ser inclusos nos documentos de divulgação do preçário, pois enquanto que alguns participantes defendiam a sua inclusão outros defendiam a não inclusão,por estes não constituirem fonte de receita para a IMF.

Um aspecto no qual todos participantes desta mesa redonda concordaram foi que existe um grande benefício na divulgação efectiva do preçário, porque contribue a uma maior inclusão pois os clientes podem:

• Decidir melhor porque eles têm mais opções de escolha ao saber quanto cobra exactamente cada instituição;
• Notar que os preços irão decrescer devido ao aumento da competição;

E finalmente o sector das Microfinanças vai beneficiar porque vai transmitir aos clientes mais confiança devido a transparência e consequentemente será sustentável porque se fortifica.

Discussion at the African Leadership Forum: Standardized Disclosure of Loan Pricing

by Hélia Nsthandoca

During the African Microfinance Pricing Transparency Leadership Forum, held in Nairobi in October, I participated in a roundtable where we discussed the standardization of documentation about the pricing of microloans.

Participants in this roundtable were from several countries including Guinea-Bissau, Liberia, Mozambique and Rwanda. The discussion included policymakers and regulators, as well as UNCDF staff.

All participants explained that in their countries there are some requirements for pricing disclosure. This is most commonly done as a visible display of the pricing of loan products in microfinance institutions’ (MFIs’) offices. However, in most cases there is no standard language to disseminate this information. Although this disclosure is legally required, without standards its effectiveness is significantly limited.

In addition to ways of communicating prices, we also discussed the contents of disclosure standards in depth. One of the most controversial elements was the question of inclusion or exclusion of costs paid by the MFI to third parties that borrowers are required to pay. Examples of this include insurance and taxes. Although in fact many times the customer pays these costs from their own pocket, these ​​are not a source of revenue for the microfinance institution. For this reason many MFIs and other industry stakeholders believe that microfinance institutions should not be required to disclose these costs along with other pricing elements.

On this point no agreement was reached as to whether these costs should or should not be included in the documents disclosing pricing. While some participants defended their inclusion others maintained the position that since MFIs do not generate revenue from these charges they should not be portrayed in the same light as other pricing elements. MFTransparency’s official position on this question is that all charges paid by clients should be included in loan documents and other pricing disclosure formats. The price should be communicated from the perspective of the borrower not the institution, based on the interpretation of price as all costs involved in accessing credit.

Despite their disagreement about the particular pricing elements to be included, all participants in the discussion were able to agree that on a fundamental level pricing disclosure can contribute to greater financial inclusion for three main reasons:

• It allows clients to make better decisions about borrowing, based on full knowledge of the prices of loan products.
• Over time pricing disclosure will facilitate increased competition that will ultimately lead to decreased prices.

Perhaps the greatest underlying argument for pricing disclosure is that it is a valuable component to building confidence in the microfinance industry. If clients can choose products based on prices then they have more confidence in their institutions which increases loyalty, and client loyalty improves institutions’ sustainability, strengthening the sector as a whole.  This was one of many conversations at the African Microfinance Pricing Transparency Leadership Forum to delve into these complex questions and articulate the importance of pricing transparency as part of the overall development of the microfinance industry.

MFTransparency is the leading provider of educational materials on pricing in the microfinance industry.

In addition to transparent microloan pricing data, we are committed to providing an array of resources to enable industry stakeholders to better understand and implement this data in adopting more transparent practices. In the coming weeks we will announce several exciting new resources. Please look for these announcements in your inbox and on the MFTransparency website. Feel free to contact us with questions and feedback at resources@mftransparency.org

View our complete Resources library here

by Joseph Kiirya

A few weeks ago I was lucky enough to participate in the African Microfinance Pricing Transparency Leadership Forum in Nairobi, Kenya hosted by MicroFinance Transparency. This forum brought together policymakers, regulators, consumer advocacy associations, networks and industry actors from over 20 African countries. It was a three day-event that brought to light many of the issues surrounding pricing in microfinance, disclosure issues and the way forward if we are to achieve satisfactory levels of responsible practice in the microfinance industry.

Of particular interest in the discussions at the forum were the fundamental questions that all different stakeholders will have to address so as to achieve what most delegates called “acceptable levels of responsible finance”. During one of the lunch breaks I shared with representatives from Zambia, Ethiopia and Liberia, there was agreement that transparency is a pre-condition for responsible pricing/finance because it enables clients to understand and compare products and providers. However, for institutional players in the microfinance sector to become more responsible in their practices, two fundamental questions have to be asked and answered: How? and Why?

Speaking to the “how” question, one participant called it “doing well while doing good”, to mean that microfinance services providers should price their products and services in a way that contributes to the long-term financial health of their clients while meeting their own needs for financial sustainability. I listened to stories and experiences from different countries that generally confirmed that the microfinance service delivery mechanisms have been changing in almost all regions over time, from money lenders to subsidized credit and later to greater emphasis on the double bottom line approach.

However, discussions among the policymakers especially pointed to the fact that now, more than ever, there is greater institutional tendency to a single bottom line approach. In other words, the tendency towards the temptation of institutions wanting to maximize profit by charging high prices on their products and services. Even if considering only the financial bottom line, regulators agreed that policy should encourage service providers to strive to achieve efficiencies that allow prices to be as affordable as possible while delivering high quality products to clients.

Is the microfinance industry experiencing widespread mission drift? As one participant rightly put it, financial service providers have a responsibility to take into consideration the client’s ability to pay while also examining their operational efficiency and profit levels. Microfinance is a rare industry with nearly 100% of clients at the bottom of the income distribution pyramid and therefore careful attention is required. But why should financial institutions be responsible in their practices? The quickest answer would be why should they not be? It is part of the social mission of most institutions, and when working with the poor there is an important imbalance of power to keep in mind. The temptation of large profits can lead some to irresponsible practice and irresponsible practice leads to client abuse, not to mention unsustainable markets.

Policy is an important tool for managing this balance. Through the Forum, different regulators shared the policies they have in place for facilitating responsible practice. For example, the Zambia delegation discussed their Banking and Financial Services (Cost of Borrowing) Regulations, issued in 1996, which provide a regulatory framework aimed at promoting transparency in the pricing of loan products and protecting the public from exploitation by lenders who might use obscure loan pricing practices. This regulation requires lenders to disclose the cost of borrowing to the client, at or before the time at which a loan is made. This disclosure largely takes two forms. The first is a written statement (specific loan terms and conditions) to the customer and/or a notice displayed in each of the lender’s branches (stating general loan terms and conditions). The cost of borrowing regulation also requires the lender to disclose the manner of calculating the cost of borrowing and expressing it as an effective annual percentage rate. It was also interesting to note that apart from requiring lenders to disclose the cost of borrowing to borrowers, the Bank of Zambia has  been publishing the comparative cost of borrowing in newspapers of general circulation in Zambia. I was grateful that the Zambia representatives shared their experience in implementing this policy, as it provided substance for discussion with other country delegations, in comparing their own experiences and suggesting alternatives or ways that this policy could be expanded even further.

Like in Zambia, all regulators of African microfinance markets should commit to building strong and transparent microfinance markets. More mature markets are taking a bold look at how to restructure policies to encourage responsible finance. In the context of the African markets, the obligation of stakeholders inside microfinance should be to self-regulate the industry and promote responsible practice. In addition, the regulators should play a big role in setting up and implementing formal regulations that helps maintain the balance of power between institutions and their clients. This will protect the poor and the industry as a whole.

One of the most resounding themes I heard at the African Microfinance Pricing Transparency Leadership Forum was the concept that responsible finance will call for wider collaboration among consumers of credit, microfinance institutions, funders, donors and the policymakers and regulators. Let’s start with the education of all stakeholders, especially the MFIs and the regulators. This should be coupled with financial education programs for the consumers of credit. Efforts to educate and facilitate discussion will create an enabling environment for a healthy microfinance industry. So as to distinguish responsible practice from ordinary practice, we will need to develop excellent codes of conduct for providers of credit, elicit outright commitments to transparent pricing and put in place standards to ensure a consistent double bottom line approach to measuring social performance. All stakeholders in the industry, from regulators to MFTransparency ourselves, have a role to play in this process.

MFTransparency is the leading provider of educational materials on pricing in the microfinance industry.

Hélia Dezimahata Lory Nsthandoca e Victor Valido Vilela

English

Este blog apresenta a Iniciativa para Preços Transparentes em Moçambique, o último país do Programa enabling APR & EIR, desde o seu lançamento até o estágio atual do processo de colecta de dados.

O lançamento da Iniciativa para Preços Transparentes em Moçambique teve lugar no dia 23 de Agosto de 2011 em Maputo. Durante este evento, Alexandra Fiorillo, Vice Presidente & COO da MicroFinance Transparency, apresentou uma palestra técnica sobre a fixação de preços transparentes como elemento fundamental para a competitividade da indústria e da protecção dos clientes. A seguir apresentou a  MFTransparency e em particular as ferramentas de cálculo de preços que desenvolvemos. Trinta representantes de diversas instituições de microfinanças participaram no evento, assim como representantes da DNPDR (Direcção Nacional de Promoção de Desenvolvimento Rural, do Ministério de Administração Estatal) e do fundo governamental FARE (Fundo de Apoio à Reabilitação da Economia).

Para implementar a Iniciativa para Preços Transparentes em Moçambique, MFTransparency trabalha em parceria com a AMOMIF (Associação Moçambicana de Operadores de Microfinanças), a DNPDR e a UNCDF.  Tanto DNPDR como a UNCDF interessam-se sobremaneira da questão da protecão do consumidor e da educação financeira aspectos estes que se conjungam com os objectivos da MFTransparency. O Director Executivo da AMOMIF o Sr. Ricardo Taca explicou naquela ocasião aos participantes no seminário inaugural que a Iniciativa complementa o esforço do Governo de Moçambique para melhorar o accesso aos serviços financeiros. A promoção da transparência melhora os serviços aos consumidores e a confiança no sector. Em tanto que plataforma de troca de informações, AMOMIF identifica-se com este projecto. Entusiasma-nos trabalhar com um parceiro tão comprometido e influente.

A convidada de honra do evento inaugural foi a Sra. Ana Maria da C. Salvador, Directora Executiva da FDM (Fundação de Desenvolvimento da Mulher) e membro do conselho de direcção da AMOMIF. No seu discurso inaugural, enfatizou que a garantia de sobrevivência das instituições de microfinanças depende de sua preocupação com os clientes que servem. A sra. Da C. Salvador acredita que a Iniciativa para Preços Transparentes em Moçambique fortalecerá as prácticas de protecção dos clientes e contribuirá a garantir o futuro do sector das Microfinanças em Moçambique.

Após o discurso inaugural e as palestras técnicas, os participantes discutiram da questão da transparência no mercado de microfinanças moçambicano. Em particular, debateram sobre questão da dificuldade do acesso á informação no mercado moçambicano e como as diversas partes interessadas podem contribuir à solução. Diferentes opções incluem encorajar o sector das Microfinanças a reportar a plataformas de informação como MFTransparency e o MIX Market, e criar estratégias nacionais sectoriais que incluam todos as partes interessadas.

Depois do sucesso deste seminário inaugural, a MFTransparency começou o processo de colecta de dados acerca da tarificação dos  preços de microcréditos fornecidos à mutuários moçambicanos.

Após o lançamento desta iniciativa, notamos que as instituições aderiram em massa, mostrando assim um comprometimento com a questão da trasparencia dos preços no sector, estamos portanto numa fase avançada de processamento dos dados relativos ao preçário graças também a todas instituições participantes.

No inicio deste mes de Outubro, uma delegação moçambicana composta por representantes do DNPDR, UNCDF e da MFTransparency em Moçambique participou no Forum dos Líderes Africanos Para a Fixação de Preços Transparentes nas Microfinanças que teve lugar em Nairobi. Este foi o primeiro evento do gênero, que reuniu decisores políticos, reguladores, redes e uma série de especialistas do sector para discutir questões relacionadas com a transparência de preços nos mercados de microfinanças Africano. Mais de 120 pessoas compunham este grupo de participantes cuidadosamente selecionados, representando 24 diferentes países Africanos.

Por favor, leia este blog nas nas próximas semanas para mais atualizações sobre o projeto.

A Iniciativa para Preços Transparentes em Moçambique faz parte do Programa enabling APR & EIR (“Permitir que a África defina preços responsáveis & Educar sobre a Taxa de Juros”) que inclui o Malawi, Uganda, Ruanda, Gana, Tanzânia e Zâmbia.

Facilitating Transparent Pricing in the Mozambican Microfinance Industry

by Hélia Dezimahata Lory Nsthandoca e Victor Valido Vilela

This blog post provides an overview of the Transparent Pricing Initiative in Mozambique, final country in the enabling APR & EIR Program, from its launch to its current stage in the data collection process.

The launch of the Transparent Pricing Initiative in Mozambique took place on the 23rd of August in Maputo. At this event, Alexandra Fiorillo, COO of MicroFinance Transparency, provided training on transparent pricing as a key element for competitiveness in the industry and consumer protection. Ms. Fiorillo also presented MFTransparency’s work around the world and the pricing calculation tools we have developed. Thirty representatives from a diverse range of microfinance institutions attended the event, as well as representatives of the Ministry of State’s DNPDR (National Direction of Rural Development Promotion) and the government’s FARE (Economic Rehabilitation Support Fund).

In order to implement the Transparent Pricing Initiative in Mozambique, MFTransparency is working in partnership with AMOMIF (Mozambican Association of Microfinance Operators), DNPDR and the UNCDF. Both the UNCDF and DNPDR are particularly interested in the aspects of consumer protection and financial education and how these are addressed by MFTransparency’s work. At the launch workshop, AMOMIF’s Executive Director Ricardo Taca explained to participants how the Initiative complements the efforts of the Government of Mozambique to improve access to financial services by promoting transparency and therefore improved consumer services and confidence in the sector. Seeing itself as a platform for the exchange of information, AMOMIF identifies at its core with this project. We are excited to be working with such a committed and influential local partner.

The Guest of Honour at the event was Ana Maria da C. Salvador, Executive Director of FDM (Women Development Fund) and member of AMOMIF’s board. In her inaugural address, Ms. Salvador highlighted the fact that the survival of microfinance institutions depends on their genuine concern with the clients they serve. She stated her belief that the Transparent Pricing Initiative in Mozambique will strengthen consumer protection practices and contribute to guaranteeing the future of the industry in Mozambique.

Following the opening speaker and training sessions, attendees of the workshop engaged in discussion on the issue of transparency in the Mozambican microfinance market. Participants in particular discussed the issue of limited access to information in the Mozambican market and how different stakeholders could contribute to solving it. Different options include reporting to information platforms such as MFTransparency and the MIX Market, and establishing national sector strategies inclusive of all stakeholders.

After this successful launch event, MFTransparency began the process of collecting pricing data for microloans sold to Mozambican borrowers. Microfinance institutions in Mozambique have joined en masse, demonstrating a strong commitment to the issue of transparent pricing in the industry. Our team on the ground is now at an advanced stage of processing the pricing data we have received, with continued close collaboration with our partners and all participating institutions.

Earlier this month, a Mozambican delegation composed of representatives of the DNPDR, UNCDF and the MFTransparency team in Mozambique participated in the African Microfinance Pricing Transparency Leadership Forum held in Nairobi. The team brought deep experience and knowledge to the forum, representing the experience of the Mozambican market in a series of lively and productive roundtable discussion. The Mozambique team had especially fruitful meetings with the teams from Guinea Bissau and also representatives from the MIX Market, both outlining valuable next steps for promoting the practice of pricing disclosure and transparent reporting in the Mozambican microfinance market.

Please check back in the coming weeks for more updates on the progress of the project. We are looking forward to sharing the data, insights and recommendations we have developed in this project with our colleagues in Mozambique as well as the international microfinance industry.

The Transparent Pricing Initiative in Mozambique is part of the enabling APR & EIR Program which also includes Malawi, Uganda, Rwanda, Ghana, Tanzania and Zambia.

MFTransparency is the leading provider of educational materials on pricing in the microfinance industry.

by Jordan Filko

Earlier this month MFTransparency hosted the African Microfinance Pricing Transparency Leadership Forum in Nairobi Kenya. This was the first event of its kind, bringing together policymakers, regulators, networks and a host of industry experts to discuss issues related to pricing transparency in African microfinance markets. More than 120 people comprised this carefully selected participant group, representing 24 different African countries. MFTransparency compiled country teams that would be able to achieve the two main objectives:

• Represent the experience of their country in developing a regulatory framework for pricing disclosure in the microfinance market, so that other countries could learn from it
• Synthesize the learnings of the forum into an actionable strategy for facilitating pricing disclosure in their home country microfinance market

Toward this end, it was important for us to include not only the regulator perspective but also that of the industry (through network representatives) and clients (through consumer protection agencies) as well, with industry experts on hand to provide technical backing to discussions and planning sessions.

These teams underwent a full three-day agenda with vigor. On the first day MFTransparency CEO Chuck Waterfield and COO Alexandra Fiorillo guided the group through a day-long training series designed to reinforce the principles underlying pricing transparency, discuss approaches to calculating transparent prices and share examples of effective policy that MFTransparency has observed in our work around the world. Day 2 started off with a riveting inaugural speech by Professor Njuguna Ndung’u, Governor of the Central Bank of Kenya. The day proceeded with themed workshops and round table discussions centered around the topics of pricing calculation, standards for reporting and spilling over into a third day with financial education. On the final day of the event participants also had the opportunity to hold strategic planning meetings, within their own country teams, directly with other country teams and in consultation with industry policy experts and technical assistance providers.

Not only was this the first event to bring together this unique combination of individuals, it also took a decidedly different approach from many industry conferences. While the trainings of Day 1 of the event served to ground participant discussions in a common level of technical understanding, the sessions that followed all heavily emphasized attendee participation and discussion. While MFTransparency is privileged enough to speak to policymakers and regulators in countries across Africa, we observed that these individuals do not often have an opportunity to speak with each other. In fact, some country teams commented that they do not even have so much time to see colleagues from their own country working in other institutions as they did at the Forum in Nairobi. The majority of time at this event was therefore spent in roundtable discussions, which proved to be quite lively and even heated on certain issues! Some topics, such as ideas for pricing disclosure formulas, stirred up questions and debates, while others, such as requirements for financial institutions to report on pricing, allowed some participants to present their particular approach and others to share their challenges and concerns and seek advice from their counterparts in other countries.

Perhaps the most important sessions of the event were those that lead participants to consider the concrete next steps in their own process for building transparent markets. By Day 3 of the event participants were fueled with examples and ideas to discuss, knew which countries they were most keen to learn from and aware of which industry experts may be able to offer them the technical support they need. The agenda therefore allotted valuable time for developing action plans, which were afterwards shared among the group as a whole. This Forum was a beginning, getting a process started that each country team will fulfill in their own market in their own unique way.

For some, the idea of three days of discussion of pricing disclosure among regulators may not exactly sound enthralling, but this Forum was genuinely one of the liveliest industry events I have witnessed. Observing the discussions, with active participation from all attendees, new ideas circulating in a constant flow and knowledgeable industry leaders having it out about some of the most contested topics in microfinance, was truly exciting. To me, a few core ideas defined this event:

• Exchange of experience is essential to effective practice. As important as it is to become an expert in whatever specific geographic or topical area of the industry that you inhabit, it is equally vital to learn from your peers in other areas. I believe the process of many participants was injected with new life as a result of conversations they had at this event.
• Creativity and innovation are inherent to building transparent markets. Microfinance is a unique industry with a unique set of stakeholders, and policymakers in Africa understand that to effectively regulate for transparency they have to get creative. The discussions at the Leadership Forum flowed freely outside of the norms of financial regulation, asked the hard questions, suggested active steps and showed willingness to experiment with new approaches.
• All members of the ecosystem are engaged. At the Forum I learned about many partnerships taking place between different regulatory bodies as well as networks, consumer protection agencies and other industry support organizations. The most intelligent policy is only as effective as its implementation, and African microfinance industry stakeholders are working closely to put in place policy that is practical and benefits the industry as a whole.
• Africa is setting an example for the rest of the industry. The regulators of African microfinance markets are committed to building strong, transparent microfinance markets. More mature markets are taking a bold look at how to restructure policies to incentivize pricing disclosure, and more nascent markets are incorporating pricing transparency into the core of their policy frameworks as they are developed.

In the coming weeks, we at MFTransparency are looking forward to continuing many of the interesting conversations started at the African Microfinance Pricing Transparency Leadership Forum. To fuel this process, we have uploaded all the presentations and resources distributed at the event here. We are also working on a body of articles and tools designed to condense the main learnings of the event for sharing throughout the industry and also to support regulators and policymakers as they begin to take the next steps toward transparent pricing that they identified at the event. We have heard from many participants who are already beginning to implement their action plans, and we’re excited to follow their progress as pioneers in responsible microfinance.

Thank you to our Steering Committee (comprised of representatives of Agence Franҫaise de Développement (AFD), UNCDF, CGAP and the African Microfinance Network (AFMIN)), the funders of the event (AFD, Luxembourg Cooperation and UNCDF), our speakers, moderators and discussion facilitators and all the participants for their contributions to making the Forum a truly valuable platform for discussion and planning.

Read about the African Microfinance Pricing Transparency Leadership Forum on the Center for Financial Inclusion Blog

by Jessica Massie and Dasha Kuts

MFTransparency‘s financial education team in Rwanda has been learning a lot about the client perspective as we complete the first phase of our financial education pilot program. Through interviews and focus groups, we are learning directly from clients about the experience of making borrowing decisions based on price, and learning about what approaches to education are effective and which may be less effective.

Financial education is a key component of the enabling Africa to Price Responsibly & Education on Interest Rates Program (enabling APR & EIR Program) that was launched in May 2010 and is currently being implemented by MFTransparency in eight countries in Africa. To inform the design of a financial education program to support the enabling APR & EIR Program, MFTransparency conducted an extensive needs assessment in Rwanda and Malawi. Focus Group Discussions (FGDs) were an important qualitative component of the needs assessment process. In both countries MFTransparency conducted total of 12 FGDs that captured responses from clients of the following financial institutions: Duterimbere (Huye and Kigali), Rwanda Microfinance Limited (Kigali and Muhanga) and Urwego Opportunity Bank (Kigali and Bugesera). The FGDs were led Marcienne Umubyeyi, with Rachael Kayitesi as assistant moderator.

Marcienne Umubyeyi:

DFID Financial Sector Deepening Project Uganda & Association of Microfinance Institutions of Uganda (AMFIU)

by Dasha Kuts

Dasha Kuts is an Intern with MFTransparency’s Financial Education Program. She is also a Financial Service Expert for the International Resource Group, working on the USAID-funded Microlinks website.

MFTransparency has been instrumental in developing useful tools and processes to improve financial education and consumer protection in the microfinance sector. Recently, I got involved with the Financial Education Program that is being conducted by MFTransparency in Rwanda and Malawi.

This program is focused on developing a set of financial education materials addressing clients’ ability to make decisions about borrowing based on the prices of microloans. Working on this program sparked my interest in the subject of financial education more  broadly, as well as led me to think about how similar initiatives can be implemented in Eastern Europe, and the state of financial education in Russia in particular. I came across a very interesting project that is being implemented now by the World Bank along with the Eurasian Development Bank and the Russian Ministry of Finance. This project highlights the need to improve financial education in Russia through increased regional and federal cooperation. I wrote a blog post on the Microlinks website that summarizes this new program as well as discusses some interesting findings provided by the Russian Microfinance Center.

The work I have done to support MFTransparency‘s project in Malawi and Rwanda has reinforced a fundamental concept to financial education: while it is extremely important to tailor client education programs to the specific context of the region in which they will be used, it is equally important to stay informed about financial education techniques being tested all around the world. As my work progresses I will continue to draw connections between financial education work in Africa and Eastern Europe. There may be more such programs can learn from each other than we might expect.

Follow this link to read the full blog post:

World Bank Signed a Loan Agreement for the Financial Education and Financial Literacy Project in Russia

http://microlinks.kdid.org/learning-marketplace/blogs/world-bank-signed-loan-agreement-financial-education-and-financial-litera

Dasha Kuts
Financial Education Intern
Washington, DC

Dasha recently joined MFTransparency as an intern with the Financial Education Program (part of the broader enabling APR & EIR Program), where Dasha assists in analyzing and compiling data from field research, developing training modules and educational materials for borrowers and reporting on the results of pilot implementation of these materials. In addition, Dasha currently works for the International Resource Group (IRG) as a financial service expert on the USAID-funded Microlinks website, where she creates and updates content related to financial services (microfinance and financial inclusion). In addition Dasha manages monthly seminars (After Hours Seminars and Mobile Financial Services Seminars), where she proposes subjects and speakers, promotes the seminars to the target audience, as well as writes related blog posts and summaries. Prior to joining IRG Dasha pursued her graduate studies in Applied Economics and Finance at Johns Hopkins University (JHU). While at JHU, Dasha worked on various projects for the Russian Microfinance Center, J. E. Austin Associates and World Relief. She has five years of experience in financial consulting; speaks fluent Russian and intermediate French languages.

LANCASTER, PA USA & ADDIS ABABA, ETHIOPIA, September 7, 2011 – On September 20, 2011 MFTransparency and the Association of Ethiopian Microfinance Institutions (AEMFI) will launch the Transparent Pricing Initiative in Ethiopia, funded by MicroNed. The launch will take place in conjunction with the 2011 African Microfinance Conference.

As part of the 5th Annual African Microfinance Conference, hosted by AEMFI, MFTransparency COO Alexandra Fiorillo will make a presentation on pricing transparency and responsible pricing to a range of local industry stakeholders including microfinance institutions, regulators, funders and other support organizations. This session in Addis Ababa will mark the launch of the Transparent Pricing Initiative in Ethiopia, a client protection initiative during which MFTransparency will collect and publish pricing data for microfinance products offered in Ethiopia. Through this Initiative, MFTransparency will facilitate discussion on issues related to social performance and pricing transparency as well as develop and disseminate educational materials for different microfinance stakeholder groups.

The Transparent Pricing Initiative in Ethiopia will also mark the launch of MFTransparency’s 17th country project in Africa. Our work in Africa began in 2009 with the Transparent Pricing Initiative in Kenya, also funded by MicroNed, and has since expanded to Central, West and Southern Africa through the enabling APR & EIR Program and the Transparent Pricing Initiative in West Africa. This project will complement the strong focus of Ethiopian institutions on social performance and build on other client protection initiatives already underway in the country, such as the work of the Smart Campaign and the Social Performance Task Force.

“We are especially excited about the timing of this launch as two of the most important gatherings in the African microfinance industry are also taking place in Ethiopia this year ,” said Alexandra Fiorillo. “This is a great opportunity for AEMFI and the rest of the Ethiopian market to showcase their commitment to social performance and client protection on an international stage.”

The Association of Ethiopian Microfinance Institutions (AEMFI), established in 1999, has been a key driver of the development of the Ethiopian microfinance industry. Since its inception, AEMFI has focused on facilitating the exchange of information and knowledge between actors in the Ethiopian microfinance industry in order to build an environment conducive to the growth of a sustainable sector.

MFTransparency is a global initiative for transparent pricing in the microfinance industry. In each country included in its Global Transparent Pricing Initiative, MFTransparency collects data on the interest, fees and all charges on microfinance loan products in order to calculate the accurate, true price (Effective Interest Rate) on those loans. Its objective is to establish the industry standard for pricing disclosure and facilitate transparent communication between suppliers and consumers of microfinance products.

###

About MFTransparency
MicroFinance Transparency is an international non-governmental organization founded in 2008 with the purpose of facilitating transparent markets through pricing disclosure, education and policy advisory. MFTransparency represents an industry movement toward transparent practices and responsibility. Based in the United States, the group has organized transparent pricing efforts on four continents and nearly 20 countries in Africa. For more information please visit www.mftransparency.org. Grameen Bank’s Dr. Muhammad Yunus and Elizabeth Littlefield, former CEO of CGAP, as well as more than 860 industry professionals and organizations have committed to transparent pricing by endorsing MFTransparency and its initiative. For information on MFTransparency staff, please see Who We Are.

About the Association of Ethiopian Microfinance Institutions (AEMFI)
AEMFI’s vision is to provide value adding services in building an inclusive financial system in Ethiopia by promoting information exchange, facilitating an enabling environment and developing the capacity of the Ethiopian microfinance system sustainably. AEMFI’s membership includes 30 MFIs licensed by the National Bank of Ethiopia and representing a range of organization types offering a variety of services to low-income Ethiopians.
Transparency and social responsiveness are among AEMFI’s core values and their activities include providing its membership with training, research, performance monitoring and technical assistance and networking services. Its main objectives include the promotion of professional standards through training and experience sharing, influencing policy decisions to facilitate the development of a strong microfinance industry and the establishment of local and international partnerships. For more information please visit http://www.aemfi-ethiopia.org/site/.

The Transparent Pricing Initiative in Ethiopia is sponsored by MicroNed

For questions relating to this press release please contact:
Jordan Filko
MFTransparency
+1.973.868.8375
jordan@mftransparency.org