Posts Tagged ‘Regulation’

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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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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MFTransparency on Oikocredit, CGAP and Opportunity International

Friday, August 19th, 2011

by Jordan Filko

MFTransparency authors have had great opportunities lately to guest blog for some leading industry organizations, including Oikocredit USA and CGAP. We are excited to share the concepts that we train industry leaders around the world in through these new channels. The following is an overview of two guest posts we’ve recently published.
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Études de cas: plafonnement des taux d’intérêt dans les pays de l’UEMOA

Friday, May 13th, 2011

by Bachir Amadou

In English

La méthodologie de MFTransparency est une combinaison de collecte de données tarifaires et de diffusion ainsi que l’enseignement et la formation. Dans le cadre de notre série croissante de matériel pédagogique, nous travaillons sur le développement d’une série d’études de cas pour mettre en évidence des exemples intéressants de pratiques et politiques de tarification que nous observons dans le monde.
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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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MFTransparency en MicAméricas-BID

Monday, December 20th, 2010

por Andres Hammer

Como mencionamos en una de nuestras últimas entradas al blog, MFTransparency en Foromic, MFT tuvo la oportunidad de participar en el  Foro de la Microempresa (Foromic) organizado por el BIDFOMIN en Uruguay a principios del mes de Octubre. A raíz de nuestra participación y del encuentro entre Christian Atance de MicAméricas con Chuck Waterfield en Montevideo y con Alexandra Fiorillo en Washington D.C. durante la conferencia SEEP, son publicados bajo la sección de “Protección al Consumidor”  dos artículos sobre el trabajo de nuestra organización y la importancia de la transparencia de precios en la microfinanzas.
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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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Microfinance in India: A Colorful Market in a Colorful Country

Tuesday, August 10th, 2010

by Ruchita Sharma

Working on the Transparent Pricing Initiative in India is a very different experience as compared to any of MFTransparency’s other country initiatives. The microfinance market in India is unique in many ways related to outreach, products and practices that all affect pricing. In this post I will introduce you to some of the factors that give this colorful market its character.
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Bolivia Transparency Part 4: How MFTransparency’s Pricing Data Complements Current Regulation

Friday, June 25th, 2010

by Jessica Haeussler

In my series of Bolivia posts so far, I have shared insights on several positive aspects of pricing transparency in the Bolivian microfinance industry. In today’s post, I’d like to highlight how MFTransparency’s pricing data will complement the Bolivian microfinance regulation and transparency efforts already underway.

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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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Bolivia Transparency Part 1: Pricing Strategies & Challenges

Monday, June 21st, 2010

by Jessica Haeussler

As promised in my last blog post on the Bolivia launch, I’d like to share some insights on the regulatory framework in Bolivia and outstanding transparency efforts we learned about during our initial trip to Bolivia where we recently launched the Transparent Pricing Initiative. Over the next few days I’ll be providing a series of posts to tell you a bit about what we’ve discovered. In this first part, I’ll focus on pricing strategies in Bolivia as well as challenges associated with current pricing practices and general challenges currently perceived in the local microfinance community.

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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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Mobile Banking and the Future of Transparency

Tuesday, March 9th, 2010

by Noah Simpson

Mobile banking is defining modern microfinance. Within the space of a few short years it has exploded to become a hot-button issue in the microfinance community, especially because of its potential to reach the unbanked. CGAP’s Technology Blog has covered the emergence of branchless banking extensively, and several of its recent posts have been written on the topic. In view of mobile banking’s extensive influence, it seems fitting to reflect upon the benefits and challenges it holds for consumer protection in general and for transparency in particular.

On many levels, mobile banking is great for consumers. It is allowing many traditionally unbanked people to have remote access to banking services and puts some power in the hands of the consumer. Additionally, when middlemen are taken out of the picture there is less fraud and mishandling of money. Finally, and perhaps most importantly, mobile banking tends to be cheaper than traditional banking. Some barriers exist, such as obtaining a phone in the first place, but banking-capable phones are rapidly dropping in price (e.g. Vodafone’s new phone under $15US, featured in a Technology Blog post). Despite the barriers, the declining costs of mobile banking is allowing greater financial inclusion.

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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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