Comments on: What Does the Data Tell Us? (Part 2) http://www.mftransparency.org/pages/2010/02/15/what-does-the-data-tell-us-part-2/ Promoting Transparent Pricing in the Microfinance Industry Wed, 21 Dec 2011 23:08:25 +0000 hourly 1 http://wordpress.org/?v=3.0.4 By: Rasmus Andersen http://www.mftransparency.org/pages/2010/02/15/what-does-the-data-tell-us-part-2/comment-page-1/#comment-13519 Rasmus Andersen Wed, 21 Dec 2011 23:08:25 +0000 http://www.mftransparency.org/pages/?p=2016#comment-13519 Great article with loads of information. And great example with South Africa. Great article with loads of information. And great example with South Africa.

]]> By: Forbrugslån Uden Sikkerhed http://www.mftransparency.org/pages/2010/02/15/what-does-the-data-tell-us-part-2/comment-page-1/#comment-409 Forbrugslån Uden Sikkerhed Mon, 29 Mar 2010 00:36:05 +0000 http://www.mftransparency.org/pages/?p=2016#comment-409 With loans even though the main objective of taking the loan may have been achieved chances are that between the loan and all the other financial obligations you already have then what is left over is never enough. With loans even though the main objective of taking the loan may have been achieved chances are that between the loan and all the other financial obligations you already have then what is left over is never enough.

]]> By: fl beats http://www.mftransparency.org/pages/2010/02/15/what-does-the-data-tell-us-part-2/comment-page-1/#comment-279 fl beats Sun, 07 Mar 2010 05:20:50 +0000 http://www.mftransparency.org/pages/?p=2016#comment-279 Heya from Spain! I have found your site on google. Good content! Eva F. Dobson x Heya from Spain! I have found your site on google. Good content! Eva F. Dobson x

]]> By: jessica-mft http://www.mftransparency.org/pages/2010/02/15/what-does-the-data-tell-us-part-2/comment-page-1/#comment-139 jessica-mft Wed, 17 Feb 2010 02:08:13 +0000 http://www.mftransparency.org/pages/?p=2016#comment-139 Thanks for your comment! Your example from South Africa is very interesting. We believe pricing transparency is the foundation for healthy free market conditions and informed consumer choice. I agree that there may be other, complementary factors that are necessary to promote the informed decision-making of microfinance clients. One of these factors is certainly financial literacy, as you mentioned. Disclosure of effective interest rates alone may not always be sufficient, as the figure may not be meaningful to clients where financial literacy is a general problem. Similarly to the outcomes of the study you mentioned, in Mexico, where I’m currently based, some industry stakeholders told me clients tend to base their financial decisions on the marketing appeal rather than the CAT, in case the figure is disclosed. Over here, it is generally argued that the reason for this behavior is a lack of financial education and that clients don’t always use comparison tools like the CAT (if available) where they don’t understand the concept. At MFTransparency we take this aspect very seriously and we have defined the development of educational materials for the consumer level as an important priority for 2010-2011. You also mentioned the threat of interest rate ceilings and the adverse effect on access to finance. If policy makers realize that disclosure of APR/EIR coupled with client education promotes healthy market developments, undesirable intervention can be prevented. What’s your perspective on this? Do you agree with this approach? Do you have additional ideas what else might work? Thanks for your comment! Your example from South Africa is very interesting. We believe pricing transparency is the foundation for healthy free market conditions and informed consumer choice. I agree that there may be other, complementary factors that are necessary to promote the informed decision-making of microfinance clients. One of these factors is certainly financial literacy, as you mentioned. Disclosure of effective interest rates alone may not always be sufficient, as the figure may not be meaningful to clients where financial literacy is a general problem. Similarly to the outcomes of the study you mentioned, in Mexico, where I’m currently based, some industry stakeholders told me clients tend to base their financial decisions on the marketing appeal rather than the CAT, in case the figure is disclosed. Over here, it is generally argued that the reason for this behavior is a lack of financial education and that clients don’t always use comparison tools like the CAT (if available) where they don’t understand the concept. At MFTransparency we take this aspect very seriously and we have defined the development of educational materials for the consumer level as an important priority for 2010-2011. You also mentioned the threat of interest rate ceilings and the adverse effect on access to finance. If policy makers realize that disclosure of APR/EIR coupled with client education promotes healthy market developments, undesirable intervention can be prevented.
What’s your perspective on this? Do you agree with this approach? Do you have additional ideas what else might work?

]]> By: jbauchet1 http://www.mftransparency.org/pages/2010/02/15/what-does-the-data-tell-us-part-2/comment-page-1/#comment-129 jbauchet1 Tue, 16 Feb 2010 00:00:55 +0000 http://www.mftransparency.org/pages/?p=2016#comment-129 Your mention of CAT in Mexico is interesting. In South Africa, interest rate disclosure is mandated by law, there exists a national debate about interest rate ceilings, and the Microfinance regulatory council (MFRC) is very aggressive on recording complaints from microfinance clients about interest rates abuse (among other things). Yet, lenders set interest rates very high (in 2004, a leading MF lender charged 11.75% per MONTH, although the lender believed in pricing transparency and did not change any origination fee or other hidden fee). This example needs to be taken cautiously, since an interest rate ceiling has since been imposed; I don't know how much that lender charges now. Transparency by itself also does not necessarily mean that prices go down. Probably financial literacy is a problem (it is lacking worldwide). Borrowers are also sensitive to many cues other than interest rates (see Financial Access Initiative director Dean Karlan's paper titled "What's Advertising Content Worth?" for a study of microfinance borrowers in South Africa: for example, showing a picture of an attractive woman on a flyer increased loan demand by as much as a 25% reduction in the interest rate). Your mention of CAT in Mexico is interesting. In South Africa, interest rate disclosure is mandated by law, there exists a national debate about interest rate ceilings, and the Microfinance regulatory council (MFRC) is very aggressive on recording complaints from microfinance clients about interest rates abuse (among other things). Yet, lenders set interest rates very high (in 2004, a leading MF lender charged 11.75% per MONTH, although the lender believed in pricing transparency and did not change any origination fee or other hidden fee). This example needs to be taken cautiously, since an interest rate ceiling has since been imposed; I don't know how much that lender charges now.

Transparency by itself also does not necessarily mean that prices go down. Probably financial literacy is a problem (it is lacking worldwide). Borrowers are also sensitive to many cues other than interest rates (see Financial Access Initiative director Dean Karlan's paper titled "What's Advertising Content Worth?" for a study of microfinance borrowers in South Africa: for example, showing a picture of an attractive woman on a flyer increased loan demand by as much as a 25% reduction in the interest rate).

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