Calculating Transparent Pricing Tool – v3.0
Available DownloadsLanguages available: English
MFTransparency’s very popular “Calculating Transparent Prices” Tool is an Excel-based tool that can be used to analyze the cost of a particular loan product. This tool helps the users understand how various factors influence the total cost of a loan. It also enables cost comparisons between loans with different fee structures. The software is multi-lingual and may be configured on the opening screen.
The three main components of the Calculating Transparent Prices Tool are:
- APR Calculator, Simple Approach: This page serves as a good starting point to learn the basics of pricing factors. By inputting some commonly-used pricing factors, the software shows the APR at several different levels. The APR is the “Annual Percentage Rate”, US standard for transparent pricing. It is the most commonly quoted price in microfinance because it is close to the “portfolio yield” for the product.
- APR / EIR Calculator, Advanced Approach: This next section (pictured below) offers many more input options. It also calculates both the APR and the EIR. The EIR, or “Effective Interest Rate” is the approach used in most countries outside of the US that have legislation on transparent pricing, such as the European Union, Mexico, Peru, and Bosnia.
- Cost Structure Data sheet: The final section of the tool provides several worksheets to help understand the challenge of keeping costs low for micro-loans. It allows the user to enter estimated delivery and maintenance costs for a specified range of loan amounts. This data is used to produce graphs and calculate a breakeven point.
- Exact Pricing: Version 3.0 of the tool includes an additional sheet that is similar to the Advanced Worksheet but includes additional ability for manual-input of all dates and amounts used to generate the true prices. If you have a real loan repayment schedule, this worksheet will calculate the exact price.
Christian M. X. Loupéda, Director – Credit with Education, Freedom from Hunger