I was recently having a debate with some friends about which is best for Africa’s development: trade or aid. This is an ongoing debate in different forums on the continent where arguments for both positions are presented. When it comes to microfinance in general, the debate is more akin to social vs commercial, or profit vs nonprofit. In discussing microfinance in Africa specifically, it can be interesting to phrase this debate in the aid vs trade framework.
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Posts Tagged ‘Need for Transparency’
Aid vs Trade: A Solution for Microfinance in Africa?
Tuesday, December 21st, 2010A Powerful NGO Model Everyone Should Know About
Thursday, October 21st, 2010I recently came across an article in the online Harvard Business Review titled “The Most Powerful Green NGO You’ve Never Heard Of.” The title itself was enough to pique my interest but most exciting was to learn about the parallels that exist between MFTransparency’s business model and that of the Carbon Disclosure Project (CDP). The article states, “the UK nonprofit began in 2000 with a simple idea: ask the world’s largest companies to publicly share information about their carbon emissions and the actions they’re taking to manage them.”
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Transparency is key to positive MFI branding
Tuesday, October 19th, 2010Every business has a brand, whether intentionally shaped or left to the active observations and imaginations of customers and peers. It’s easy to figure out what attributes you’ve assigned a business (its “brand”), just list the first three words that come to mind when you consider a company name.
As microfinance vendors proliferate in local markets, every MFI wants to be the first choice of potential borrowers. A strong brand, with transparent pricing practices and healthy communication of those prices as part of its vital core, can provide an advantage in an increasingly competitive marketplace.
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Response to Nyasa Times Article: “Stop stealing from the poor”
Friday, October 1st, 2010by Jordan Filko
On August 31, 2010 MicroFinance Transparency hosted a workshop in Lilongwe, Malawi, in partnership with the Malawi Microfinance Network (MAMN) to launch the Transparent Pricing Initiative in Malawi. In this workshop, MicroFinance Transparency Vice President Alexandra Fiorillo offered a range of local industry stakeholders training on the calculation of microfinance interest rates and various methods of implementing transparent pricing.
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Agree or Disagree: Profit Margins in Microfinance Should be Limited
Friday, October 1st, 2010by Jordan Filko
The Microfinance Club of New York (MFCNY) and ACCION USA recently co-hosted the first event in a series of debates on current issues in the microfinance industry. This debate addressed the question of whether profit margins in microfinance should be limited. MFTransparency CEO & President Chuck Waterfield and Grameen Foundation Vice President for Microfinance Camilla Nestor argued on the side in favor of limiting profit. Michael Edberg, Director of Investments for MicroVest, and Brian Cox, CEO of MFX Solutions, argued against limiting profits. Jacob Haar of Minlam Asset Management served as the skillful moderator of this heated debate.
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Transparency, India, Gandhi, and the Seven Deadly Social Sins
Thursday, March 11th, 2010A few weeks ago I made an unplanned and very interesting trip to India. MFTransparency had no plans of working in India this year, but a broad group of stakeholders in the India microfinance industry had been discussing the need for pricing transparency and then invited us to come and meet with them. We met and heard them describe their desire to transition to transparent prices and their need to have our team help to facilitate that transition. We connected quickly, brought together by shared commitment to treat people fairly. Plans for implementation are now moving forward rapidly.
When beginning dialogue about pricing transparency in a given country, our experience in the past year has been consistently positive. The need to correct this problem is evident in most countries, but working with the national industry to determine the steps forward has moved especially fast in India. MFIs in India are currently making a strong effort to independently practice pricing transparency .
I was both intrigued and inspired by this. And though my trip was just a few days long, I did find opportunity to go and visit Gandhi’s memorial. I’ve always been greatly inspired by Gandhi’s views of how we should live and how we should address the problems we confront in the world, but I had never had opportunity to visit his memorial. Many people were congregated around Gandhi’s memorial, mostly Indians and many of them children, all expressing their solemn respect.
Indian Interest Rate Caps and Transparency
Friday, February 19th, 2010by Noah Simpson
According to a recent report by MicroCapital, a new bill introduced in the Indian parliament would remove the existing cap on microloan interest rates. This has important implications for transparency, and provides a unique opportunity to examine the effects of rate caps on microfinance.
Setting an interest rate cap has been advocated as a means of client protection, but often it can end up harming those it seeks to protect. Due to the higher interest rates that are traditionally associated with smaller loans, the poorest clients who seek these loans often are left without access to credit when interest rate caps are implemented. This is because the smallest microloans become less appealing to MFIs seeking financial sustainability. In other words, MFIs have trouble affording smaller loans when the cap on rates is set below the interest rate needed to make those loan products sustainable. Efficiency and market penetration have been shown to decrease in the presence of loan rate caps (see a presentation by CGAP’s Richard Rosenberg on this topic here), and the poorest people bare the brunt of this problem. In addition, pricing often becomes less transparent in the presence of these caps because MFIs often add-on additional fees and charges to attempt to achieve sustainable products. Thus, despite noble intentions interest rate caps contribute to unhealthy microfinance markets.
The 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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