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It’s all about interest rates! You’ve come to the right place to learn more about how interest rates are really calculated and how to understand the difference between quoted prices and transparent prices.
Below you’ll find a list of resources that are useful in understanding interest rates. Look through our compilation of tools, presentations, papers and blog posts. All resources have been coded according to their complexity:
- a green box indicates basic information,
- a yellow box will provide you with a resource that goes beyond the basics, and
- a red box is a comprehensive or advanced article on interest rates.
Use these links to jump directly to what you’re looking for, or simply scroll down to view our full library:
Highlighted Items
Tools
Calculating Transparent Prices (Intermediate Level)
OUR MOST POPULAR RESOURCE! Ever wonder how much you’re paying, or charging, on a given loan? This Excel-based tool allows users to input different loan terms and see how they affect Annual Percentage Rate (APR) and Effective Interest Rate (EIR), total cost of credit, cash flow and repayment schedule. Using an interactive approach, this tool helps illustrate the abstract, often confusing concepts underlying APR and EIR. See more
Putting Transparency Into Practice (Intermediate Level)
Co-published with the Smart Campaign, this tool helps define transparent and responsible pricing and provides several additional resources for MFIs looking to comply with the pricing standards outlined by the Client Protection Principles. This brief document describes how financial service providers can observe the principle of transparency, current resources that exist to help providers understand and communicate their prices to clients, and information on where providers can find more information from MFTransparency and the Smart Campaign.
See more
Papers
Written for the online magazine Digital Development Debates, this article gives an overview of how pricing works in microfinance, why transparent pricing is an important issue and what some industry players are doing to facilitate transparent pricing practices. Download
Understanding APR Calculations (Intermediate Level)
While many may understand the basic concepts behind Annual Percentage Rate (APR), few can explain the calculations used to turn these concepts into a number. This paper proves a step-by-step overview of the process of calculating an APR, including the conceptual significance behind each step. Download
The Challenge of Understanding Pricing of Microloans (Intermediate Level)
This paper uses the example of the price of Banco Compartamos’ loan product to explain how interest rate calculations work and why there is so much confusion over what true prices really are. As the APR has been more frequently discussed in microfinance, despite being less accurate than the EIR, this article explains the APR, leaving a discussion of the EIR for a future article. Download
Presentations and Videos
What is the Interest Rate? (Intro Level)
Why are interest rates higher in microfinance than in the traditional financial sector? Are we operating in an opaque pricing environment? What factors affect the interest rate? And how much are clients really paying? These are some of the questions addressed by a range of stakeholders at the SEEP conference in November 2008. Watch this video
Transparent Pricing in Microfinance (Intro Level) 
This presentation explains how difficult it can be to choose between different loan products and the downward spiral toward non-transparent pricing. Featuring screenshots from the Understanding Interest Rates Tool, this presentation is a good companion to the Excel-based “Understanding Interest Rates” tool.
View this presentation
Annual Percentage Rate vs Total Cost of Credit (Intermediate Level)
This presentation provides an overview of two ways of communicating the price of a loan: Annual Percentage Rate (APR) and Total Cost of Credit (TCC). It explains advanages and disadvantages of each, ultimately illustrating why APR is a more transparent way of communicating the cost of borrowing.
View this presentation
From the Blog
This blog posts highlights some recent updates to the Calculating Transparent Prices Tool. New features include enhanced input flexibility, precision of calculations and the new Transparency Index. For long-time users of this tool and new users alike, reading this post will ensure that you make the most out of this popular resource. Read this post
What is the true cost of a loan? And why isn’t it enough to simply tell the borrower the total cost of the loan? This blog post explains what the true cost to the borrower really means, why the total cost of credit may be misleading and how the APR approach allows you to work with a full understanding of the real cost to the borrower. Read this post
Our mission to provide transparent pricing data puts interest rate calculations at the heart of MFTransparency’s work. This post offers a behind the scenes look at how we calculate the interest rates we publish on our website. Read this post
For the truly technical, this post describes an alternative method to the Excel-based formulas for calculating interest rates. In this post Tim Langeman, our very own Website Manager, explains how calculus and programming can replace Excel in interest rate calculations. Read this post
Useful Links
Check back in the future for links to information on other websites.
Suggestions
If you have suggestions for additional information to post on this page, write to us at resources@mftransparency.org.
Last 3 posts by Jordan Filko
- Resources Library - December 6th, 2011
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