If you have perused our data, you may have noticed the market average curve present on all our country graphs. This curve is so fundamental to MFTransparency that its characteristic downward slope is even represented in our logo. This is the curve relating interest rates to loan size, and it is extremely important in analyzing the price of microloan products. The recent New York Times article highlighted the high price that some MFIs charge in order to reap big financial gains from the poor. But it’s important to have a deeper understanding of this phenomenon: high prices don’t always mean big profits; the reason for high interest rates is more complex than this, as highlighted in this recent blog post from Elisabeth Rhyne at the Center for Financial Inclusion at ACCION International. The curve that MFTransparency uses to analyze loan rates is key in understanding pricing in microfinance. This blog post provides an overview of some of the informational materials that MFTransparency has come up with in order to help others understand pricing in microfinance.
Posts Tagged ‘Cost Curve’
Explaining the Price Curve
Friday, May 14th, 2010The Case for Pricing Transparency
Tuesday, February 9th, 2010We are proud to announce that our very own Jessica Haeussler has an article on pricing transparency published in the most recent MicroBanking Bulletin. Please go here to read it. The MicroBanking Bulletin (MBB) is the “premier benchmarking source for the microfinance industry. The industry commentary, analysis and benchmarks are widely used by investors, donors, MFI managers, and service providers to facilitate greater standardization and a better understanding of developments in the microfinance sector.”
Here is a taste of her article, but please follow this link to see the full text in the Bulletin. You won’t be disappointed:
After decades of innovation and experimentation, microfinance sectors worldwide have achieved impressive successes. The microfinance community has joined efforts to achieve worldwide public recognition of microfinance as an effective and sustainable bottom-up approach to economic empowerment and consumption smoothing. The past years have seen equally strong efforts to provide a business case for microfinance, attract investors and access the global capital markets. As a result, the global microfinance industry has achieved a considerable record of transparency on financial performance. The true price of microcredit products, however, has never been accurately reported. As a double-bottom line industry that emerged to provide a low-cost alternative to the moneylenders, microfinance today is an industry where non-transparent pricing is common. Yet pricing transparency is critical in the market- based economy, as it promotes efficiency, healthy competition, innovation and affordable prices for millions of clients. For financial markets to develop sustainably and prosper, transparency is indispensable.
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