Posts Tagged ‘Policy for Transparency’

New Resources from African Microfinance Transparency Leadership Forum

Thursday, January 12th, 2012

In October 2011, MFTransparency hosted the African Microfinance Pricing Transparency Leadership Forum in Nairobi, Kenya. This was the first event of its kind, bringing together policymakers, regulators, networks and a host of industry experts to discuss issues related to pricing transparency in African microfinance markets. More than 120 people comprised this carefully selected participant group, representing 24 different African countries. Attendees included policymakers, regulators and networks organized into teams representing their respective countries.

MFTransparency is pleased to share a body of articles and tools arising from this unique three day event, designed to condense the main learnings for sharing throughout the industry and also to support regulators and policymakers as they begin to take the next steps toward transparent pricing. 
 

MFTransparency African Microfinance Pricing Transparency Leadership Forum Report now available. Giving an overview of the event, the insights and the outcomes, a full report and a summary report are now available to download. To download the Full Forum Report click here. To download the Summary Forum Report click here.

MFTransparency is the leading provider of educational materials on pricing in the microfinance industry.

We are committed to providing an array of resources to enable industry stakeholders to better understand and implement responsible pricing and adopt more transparent practices. In addition to the event report MFTransparency is excited to announce a series of new resources from the African Microfinance Transparency Leadership Forum.

View our complete Resources library here, and our Policy for Transparency resources here.
 

Resources from the African Microfinance Transparency Leadership Forum:

Discussion Insights: Challenges and Solutions

This resource presents some of the main challenges, questions and solutions arising from the presentations, panels, roundtable discussions and delegate meetings centered around three core themes: pricing calculation, standards for reporting and client financial education.

Read this new article here

Financial Education: Heard at the Forum 

Client financial education was one of three core themes discussed at the African Microfinance Pricing Transparency Leadership Forum. This resource frames the discussion of client financial education, and extract insights on some of the most complex questions raised about this cornerstone of transparency.

Read this new article here

The Debate Over Official Pricing Disclosure Formulas 

Training sessions given by MFTransparency launched an ongoing debate among participants about what an official pricing disclosure formula should include. This resource provides insights from this debate, highlighting the most essential issues to be addressed to establish widespread agreement on this critical element of pricing disclosure policy.

Read this new article here

Stakeholder Roles and Responsibilities 

This resource provides an overview of some of the potential roles participants discussed for different stakeholder groups in the microfinance industry, as well as the relationships between them, in terms of facilitating transparent pricing.

Read this new article here

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Philippine Regulation on Pricing Transparency

Monday, December 19th, 2011

by Laila Q. Deles

In July 2011, the Bangko Sentral ng Pilipinas (BSP) released Circular 730: Updated Guidelines on the Truth in Lending Act to Enhance Pricing Transparency.  Among the salient points found in the Circular are the following:

  • Prescribed uniform method of computing interest based onoutstanding balance of a loan at the beginning of an interest period and that interest on installment are calculated on the outstanding balance at the beginning of each installment period
  • Such method of computing interest must be consistently reflected in loan-related documents and marketing materials
  • A simplified Disclosure Statement format, which contains the following minimum information– Total amount to be financed; Finance charges; Net proceeds of the loan; and Percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate or an EIR.

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New MFTransparency Case Study: Outlawing Flat Interest in Cambodia

Thursday, November 17th, 2011

MFTransparency is excited to announce a series of new resources, now available on our website in the Resources section.

This week’s featured new resource:

MFTransparency Case Study: Outlawing Flat Interest in Cambodia

By now you have read the article “Flat vs Declining Balance Interest: What is the Difference?” and you are wondering how you can make the switch from the flat balance method of calculating interest to the declining balance method. This case study will show you how the Cambodian microfinance market as a whole took this important step towards transparency, due to a bold policy move by the National Bank of Cambodia in 2001. Policymakers and institutions alike, this is an important resource for those wondering what the experience of transitioning to declining balance rates might be like in your own market.

Read this new article here

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Forúm de Líderes Africanos: Acerca da Divulgação de Informação Padronizada do Preçário de Créditos

Friday, November 11th, 2011

por Hélia Nsthandoca

English

Durante o Forúm de Líderes Africanos para a Transparência de Preços nas Microfinanças, realizado no mês de Outubro em Nairobi, participei numa mesa redonda onde se discutia acerca da padronização da documentação do preçário dos créditos.

Nesta mesa redonda estiveram participantes de alguns países nomeadamente Guiné-Bissau, Liberia, Moçambique e Ruanda, também participou nesta mesa redonda pessoal da UNCDF.
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New Interview with an Industry Leader – Now Live

Thursday, November 10th, 2011

MFTransparency is excited to announce a series of new resources, now available on our website in the Resources section.

This week’s featured new resource:

MFTransparency Discussion Corner: Reserve Bank of Malawi on Pricing Disclosure

The Reserve Bank of Malawi (RBM) is setting an example for regulators of microfinance markets across Africa by leading an effort to require pricing disclosure for all microfinance institutions (MFIs) in Malawi. MFTransparency interviewed Lanjes Sinoya, Principal Examiner at the Reserve Bank of Malawi, about the pricing disclosure and client protection aspects of the bill. Read this interview for an inside look at the process of institutionalizing responsible practice through policy.

Read this new article here

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Responsible microfinance: Regulators agree on the fundamental questions to be answered

Friday, November 4th, 2011

by Joseph Kiirya

A few weeks ago I was lucky enough to participate in the African Microfinance Pricing Transparency Leadership Forum in Nairobi, Kenya hosted by MicroFinance Transparency. This forum brought together policymakers, regulators, consumer advocacy associations, networks and industry actors from over 20 African countries. It was a three day-event that brought to light many of the issues surrounding pricing in microfinance, disclosure issues and the way forward if we are to achieve satisfactory levels of responsible practice in the microfinance industry.
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African Policymakers Outline the Way Forward in Transparent Pricing

Monday, October 24th, 2011

by Jordan Filko

Earlier this month MFTransparency hosted the African Microfinance Pricing Transparency Leadership Forum in Nairobi Kenya. This was the first event of its kind, bringing together policymakers, regulators, networks and a host of industry experts to discuss issues related to pricing transparency in African microfinance markets. More than 120 people comprised this carefully selected participant group, representing 24 different African countries. MFTransparency compiled country teams that would be able to achieve the two main objectives:
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Colombia is Moving Toward Pricing Transparency, But Still Has Room to Improve

Thursday, August 25th, 2011

by Alexandra Fiorillo

This post was originally published on the Center for Financial Inclusion Blog.

Policymakers in Colombia have been cautiously moving toward a transparency-based approach to pricing for microfinance, reducing their traditional reliance on interest rate caps.  Important legislation in 2009 and 2010 appears to be having a positive effect, as Asobancaria, the Colombian Banking Association, asserts in a recent article. Asobancaria notes that since the changes, the number of microcredit loans offered continues to increase.

We at MFTransparency are also pleased with the initial results. We urge the government to  focus on simple, straight-forward regulation to ensure that financial service providers understand and apply the law in a clear and consistent manner.
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Usury Rates in Colombia

Thursday, January 27th, 2011

by Alex Perez

MFTransparency’Transparent Pricing Initiative in Colombia is meeting with great success, 22 MFIs having already submitted their data and 4 more currently underway with the data collection process.
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The Transparent Pricing Initiative in West Africa: The perfect fit at the right time

Thursday, September 16th, 2010

by Mélina Djre

“MFTransparency’s Transparent Pricing Initiative comes at the right time.” That’s the sentence we have heard most frequently during our meetings with MFIs, networks and especially regulators. This is both positive and stimulating for our work in West Africa.
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Bolivia Transparency Part 3: Transparency in Loan Contracts & Publicity

Thursday, June 24th, 2010

by Jessica Haeussler

Today, I’d like to continue my previous post on interest rate disclosure to clients and the general public, and share some insights on transparency in loan contracts and publicity.

While interest rates are freely negotiated between both parties, the loan contracts have to include several pricing details. As a minimum requirement, the contract has to specify the:

  • loan amount
  • details of all financial charges
  • whether the interest rate is fixed or variable and its value at disbursement
  • the periodic interest rate and the corresponding annual rate (TEAC)
  • the method used to calculate the balances of the financial operation, as well as the calculation method of any financial charges
  • the amount of credit service charge and cumulative total of payments, as well as the penal interest to be applied in case of default
  • any insurance fees if applicable
  • The contract also has to include the corresponding repayment schedule.
  • In the case of variable interest rates, the loan contract must specify the variation and how the reference rate will be applied.

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Bolivia Transparency Part 2: Interest Rate Disclosure to Clients & the Public

Wednesday, June 23rd, 2010

by Jessica Haeussler

There are several positive mechanisms in place to facilitate interest rate disclosure to microfinance clients and the general public. Our recent trip to Bolivia was a wonderful opportunity to see firsthand how a range of legal requirements play out in practice.

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Ecuadorian Innovations in Regulating Pricing Transparency

Monday, May 17th, 2010

by Jessica Haeussler

As I mentioned in my last blog post, I would like to share some insights on Ecuador’s regulatory framework for the microfinance sector and advances in the area of transparency.

Regulations that Support Transparency in Pricing

Ecuador’s regulatory framework already includes several mechanisms for facilitating transparency in pricing. For instance, financial institutions can only charge interest on the remaining balance of a loan, which effectively outlaws flat interest rates. Moreover, regulated institutions are no longer allowed to charge fees. Both these aspects make loan pricing more transparent, allowing borrowers to better understand what they are paying and to compare between the different products available to them. In all marketing materials, financial institutions are required to specify the nominal and effective annual interest rate, the frequency of interest payments and the loan term (Regulación No. 153 del Directorio del Banco Central del Ecuador). The regulation also establishes that all product documentation has to clearly specify the loan amount, term, payment frequency and the nominal and effective annual interest rate. The formulas to calculate these figures are defined  in the regulation as well.

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Indian Interest Rate Caps and Transparency

Friday, February 19th, 2010

by 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.

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