MFTransparency v. MIX Market
by Jordan Filko
In a recent post on his Open Book Blog, David Roodman discusses the difference between the pricing information provided by MFTransparency and the MIX Market. This is essentially the difference between portfolio yield, used by the MIX as a proxy for price, and the product-specific pricing information published by MFTransparency. The full post is available here.
In this post Roodman discusses the advantages of using portfolio yield vs product-specific prices as a measure of the cost of borrowing in microfinance. He concludes that while portfolio yield is useful as a proxy, there is additional information revealed by product-specific pricing data. He averages prices across institutions and countries, finding that on the whole portfolio yield suggests lower prices than Annual Percentage Rate (APR) by product.
Roodman observes that these two pricing measures are relatively closely correlated across countries but noticeably more varied within countries and across institutions. It is this in-country pricing variation that he pinpoints as the value of MFTransparency’s dataset. We at MFTransparency share this emphasis. While we are working to develop an industry-wide database of prices, and to observe trends across countries, our focus is on creating a picture of pricing dynamics in each country market.
The data we display on our website is organized by country, beginning with a graph of all the prices we have collected for that market. This is our graph for India, as an example:
Below this graph is a list of the institutions who submitted data in India, and to the right is a list of materials that help provide context to the data through analysis, descriptive information and broader research about the environment for microfinance in India. By clicking the green “View Interactive Graph” button visitors can access the full dataset by institution and product as well as filter the full country graph by a number of data points including institution type, interest rate and loan amount.
MFTransparency’s approach is founded on the belief that data must be accompanied by education, and presenting the prices we collect separately by country is an important part of this. With the innumerable factors that contribute to determining the prices of microloans, they must be considered within the context of their market to be fully understood. Without understanding the dynamics of each market, there is little value in comparing the price of a microloan offered in Malawi to one offered in Azerbaijan. Further, by working country by country MFTransparency is able to tailor our educational programs more closely to the specific needs and interests of different stakeholders in a given market.
MFTransparency also uses portfolio yield figures in our trainings, particularly where we do not yet have product-level pricing information. While this is useful information to start with, we hope that the addition of the pricing data we gather will help flesh out the industry understanding of pricing, allowing for more informed decisions by a range of stakeholders.