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New Pricing Data Revealed

Published on January 31, 2014

We are pleased to announce the launch of the new pricing data covering the Pakistan microfinance market. It is the ninth country dataset to be presented on MFTransparency’s new Pricing Data Platform. The new Pricing Data Platform displays complete and comparable data on the interest rates and fees charged to Pakistan microfinance clients. Click here to see the new pricing data for Pakistan:

 

The new Pakistan pricing data will result in increased knowledge of pricing within the Pakistan’s microfinance industry and a better understanding of pricing trends over time. As a prerequisite for responsible pricing and a key element of consumer protection, transparent pricing leads to better-informed decisions by all industry stakeholders.

The Transparent Pricing Initiative in Pakistan was launched in 2013 in partnership with the Pakistan Microfinance Network.

2 Comments

  1. Marcia Huntley says:

    I would like to know how, with the high interest rates charged, poor borrowers can repay KIVA, for example, with such a low rate of default–less than 2%.
    I would like my lending to become aligned with those lending institutions that “pass the test” of being transparent and not-for-profit. Are there any and how can I access a list of those?

    • Chuck Waterfield says:

      Hello Marcia,

      I can give a very brief start-of-an-answer, but unfortunately this is not yet a straight-foward task in microfinance. Some key points:

      Loan loss is not the most significant factor in costs (and therefore pricing). Loan loss may be 2%, but operating costs are higher AND MORE VARIABLE. The curve you see in our logo is due to this. Kiva, and other social funders, may be funding a loan of $1000 for a year, and the MFI spends $200 to manage that loan. So the operating cost ratio is 20% ($200/$1000). That’s already bigger than the 2%. Add financial costs of maybe 10%, and the total costs are 32% and you have a price somewhere over 32%.

      But KIVA funders like those smaller loans… so you look for the $500 loan. The MFI spends the same amount to visit the client, monitor the loan, and do any additional training that may be bundled with the loan. The Operating Cost Ratio is now 40% (200/500), and the break even price is now 52%. And a $250 loan will pressure the MFI to be more efficient, spend less on the loan, do less training, and get the cost down to $150. But 150/250 is 60%, and the breakeven price is now 72%. We see these prices (and much higher prices) in microfinance, as you can find on our website.

      One point I stress always is “High prices don’t always mean high profits. Pricing off-of-the-curve means there are likely high profits.” No simple correlation between prices and profits.

      And on a second point, there is no real correlation between “not-for-profits” and low profits. There are many NGOs in microfinance making very large profits… millions of dollars per year. And there are for-profits that – by- choice – make moderate profits. But the industry doesn’t yet have a measure for evaluating “balanced profit”. You will find numerous presentations and videos on our website here where I advocate that we define “how much profit is too much profit”, but there has been little (actual, that is more arguably “zero”) progress on this issue.

      So… no list for you to access. However, there will be some approaches that will be published in the next few months, and I hope you and others find these useful for making some sense of the opaque microfinance industry and be able to better identify those MFIs who are implementing more balanced practices.

      Chuck Waterfield
      CEO, MFTransparency

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