A Conversation with Katya Collao Grandi, Head of Corporate Social Responsibility, and Andrés Urquidi Selich, National Commercial Manager of Banco FIE
LANCASTER, PA, USA & LA PAZ, BOLIVIA, August 18, 2010 — MFTransparency and its strategic partners, the local microfinance networks ASOFIN and FINRURAL launched the Transparent Pricing Initiative in Bolivia in May this year, with two workshops in La Paz and Santa Cruz de la Sierra. The Initiative is sponsored by the Ford Foundation and MicroNed with the objective to promote fair and transparent pricing in the microfinance industry.
MFTransparency spoke with Katya Collao Grandi, Head of Corporate Social Responsibility and Andrés Urquidi Sleich, National Commercial Manager of Banco FIE about the current situation regarding pricing transparency in Bolivia, Banco FIE’s Code of Ethics and social commitment, as well as the benefits and challenges of MFTransparency’s Transparent Pricing Initiative in Bolivia. Banco FIE is a member of ASOFIN and is the second largest MFI in terms of scale in Bolivia with a Gross Loan Portfolio of Bs. 2,356,822,084 (approx. US$ 328,367,000) and a total of 132,839 active clients.
MFTransparency: Pricing transparency is an important element which has been incorporated into Banco FIE’s Code of Ethics. Would you like to share some of the most noteworthy examples of how your institution has taken the practice and implementation of pricing transparency beyond current codes and regulations?
Banco FIE: We have established pricing transparency as a core value and principle in our Code of Ethics as well as in practice. We charge a common interest rate at a national level, be it in urban, semi-urban or rural branches, despite the fact that in the latter our costs are higher. We have always charged interests on declining balances and have never charged for forms or any additional items. Currently, for loans we only charge interest rates and there is no commission. A copy of the contract attached to the repayment schedule is delivered to the client. Contracts are always in readable print, written in language that clients can understand. Clients are informed of prices before disbursement. Special conditions agreed upon with funders are communicated to clients in a transparent manner, without our institution assuming any of the advantages obtained by them.
MFTransparency: What is your assessment of the current situation regarding pricing transparency in the microfinance industry in Bolivia?
Banco FIE: We believe that entities under the control of ASFI, the Bolivian supervisory authority, should comply with current regulation which demands transparent prices. Therefore, on the whole, they are transparent. However, we are not aware of the situation regarding non-regulated entities, some of which even charge flat rates.
MFTransparency: What, in your opinion, is the greatest benefit of this Initiative, both for your institution and for the Bolivian microfinance industry as a whole?
Banco FIE: The main beneficiaries will be the clients, who will be able to take on loans after effectively contrasting information, from transparent entities. This will motivate MFIs to become transparent and to implement policies and procedures to move in this direction.
MFTransparency: Which challenges do you foresee for the Transparent Pricing Initiative in Bolivia? For which reasons and how can these challenges be overcome?
Banco FIE: The main challenges are: ensuring that the majority of non-regulated entities report, and that the information provided by these is adequately verified. Another challenge will be managing to include information from commercial banks which are also involved in microfinance. It will also be important to review the advertising practices carried out by certain institutions. An example would be commercials which read “the lowest rate in the market” or a prospectus which shows a very small interest rate above small print specifying that such a rate is only for Year 1 and that after that point, the rate will be variable. These challenges will be overcome by generating awareness among clients that transparency is a crucial factor in decision-making regarding the choice of institution.
MFTransparency: What would be your advice for MFTransparency to be successful in its efforts in Bolivia?
Banco FIE: We would advise to develop, among financial institutions, an awareness of the value and advantages of transparency and among clients, an understanding of the meaning and value of transparency, so that they eventually may become the primary watchdogs of the sector in this regard.
MFTransparency: Will your institution submit data to MFTransparency´s Transparent Pricing Initiative?
Banco FIE: Yes. We have already provided MFTransparency with our information.
MFTransparency: What would you recommend that we do to get the majority of the industry involved in this Initiative?
Banco FIE: We would suggest an outreach campaign via the national press and possibly in billboards, explaining the importance of transparency and a list of those institutions which are transparent. We would also suggest coordinating your activities with national regulatory bodies, thus assisting their efforts to consolidate their oversight of this area.