Cambodia Pricing Transparency Data
Coverage of over 95% of the Cambodia microfinance market!
The Cambodia microfinance industry is known for its commitment to transparency in financial reporting, and the industry has now strongly embraced the practice of transparent pricing.We have overwhelming, rapid participation from across the Cambodian industry in the pricing transparency event we facilitated in September. The Cambodia Microfinance Association (CMA) was a wonderful host, and the National Bank of Cambodia (NBC) graciously inaugurated our conference.
Click here for a graph and the data tables that go with it.
What is new in this week’s data?
If you’ve looked at the Bosnia and Herzegovina (BiH) data, you’ll notice a few differences in the Cambodia data:
The Cambodia data is “stacked” vertically, while the BiH data is more distributed.
This is a result of a modification in our data collection methodology. With our revised methodology used in Cambodia, MFTransparency requests loan samples of nearly the same loan amounts from each product of each MFI. The more random loan amounts received in BiH resulted in a fuller distribution of data, but it made it harder to compare the prices of different loan products. If one loan product has a loan sample of 2,000 and another product has a loan sample of 3,000, it is not clear if those products would have different prices at the same loan amount. The stacked approach methodology asks for loan samples of 2,500 of each product so that the loans can be more closely compared. (And don’t forget that you can use the filters to the right of the graph to deepen the product comparison even more. For example, you can filter to look at working capital loans of 2,500.)
The Cambodia data has products in different loan currencies. The BiH loan products were all in the Convertible Mark (KM) currency of BiH. Thus, all products appeared on one graph. In Cambodia, however, the MFIs loan in three different currencies – Cambodian Riel, US$, and Thai Bhat. Even though loan amounts (the x-axis) could be converted using current exchange rates, the product price (the y-axis) cannot be converted because the exchange rates are not known into the future. Therefore, we provide product pricing using currency-specific graphs. You’ll find a dropdown list that allows you to switch currencies and display the products of one currency at a time.
Cambodia Data Discussion
Since this is the first time we are able to see comparable data on prices for microfinance loans in an entire country, the results sometimes lead us to questions about how the market developed and why the pricing structure is the way it is. The data on Cambodia provide a good example. Here are some of the salient features of the Cambodia market that we have learned as we have been collecting this data:
- The Central Bank outlaws the charging of flat interest rates, so all microfinance providers charge interest on the declining balance of the loan.
- Most microlenders in Cambodia make a majority of their loans in rural areas.
- Most microlenders do not charge fees. As expected, those few that do have higher average APRs.
- About half of the lenders make loans in two currencies, US Dollars and Cambodian Riel. A few also make loans in Thai Baht.
- The oldest of the MFIs reporting to us was established in 1991.
- All of the MFIs reporting to us are registered as private, for profit companies, though many of these are owned by NGOs.
- The price curve is almost a flat line. The average price changes less than 6 percentage points from a $50 loan to a $2,000 loan.
Below are the questions that we are asking that we would like to hear your comments on. We would especially like to hear from the Cambodian MFIs that participated in this exercise.
- Why do you think the curve is so flat in Cambodia?
- What factors in the development of microfinance in Cambodia has led to a market where almost everyone charges similar prices in similar ways?
- What impact do you think the outlawing of flat interest rates has had on the pricing structure in Cambodia?