Launch of the Transparent Pricing Initiative in Zambia and Tanzania
Earlier this month we launched the Transparent Pricing Initiative in Zambia and Tanzania with training workshops in Lusaka and Dar es Salaam. In just the first few weeks of these projects we have already learned a lot about the pricing practices in these markets and the role that MFTransparency can play in providing institutions with technical skills for implementing more transparent pricing.
Three of the major components that the Initiative in Zambia and Tanzania will focus on are: the collection and publication of pricing data, training on pricing transparency and the development and dissemination of educational materials. Financial institutions in both Zambia and Tanzania have expressed an overwhelmingly strong interest in technical assistance and training, the most enthusiastic response we have received so far in the enabling APR & EIR Program. In particular, these institutions are eager to receive training in costing, how to determine the break-even point on a product by product basis and how to price each product competitively. Several institutions explained that up to now they have simply adopted the same pricing practices as their competitors. Others have not analyzed their cost structure and adjusted their prices in the past several years. It was easy to see how institutions will be able to immediately implement learnings from the training we offered in each country.
Our launch workshops also initiated dialogue and raised awareness on the importance of pricing microloan products based on the unique cost structure of the individual institution. Discussion at the workshop focused on the importance of analyzing prices by product as opposed to overall portfolio yield. For example, while an institution’s portfolio yield might be positive, if one or several products are not profitable the indicator can be misleading. This may not present a problem today, but if the “loser product” is among the fastest growing products, the institution could soon face financial difficulties. We will dive deeper into technical topics such as this in our upcoming training sessions.
Another topic of particular interest is financial literacy and transparent communication to clients. At MFTransparency, we are currently implementing a pilot financial literacy program in Malawi and Rwanda. We expect to have the first training materials tested and ready for broader implementation in the next couple of months and will then work with our in-country partners to adapt them to the local context of Zambia and Tanzania as well. In two to three months we will then travel to Zambia and Tanzania to provide tailored training to local financial institutions on the aforementioned topics and present these new financial literacy materials.
As always, our first activity in this Initiative is data collection. Over the coming weeks I will be based in Zambia to assist local institutions in the data submission process, while my colleague Joseph Kiirya will stay in Tanzania and lead the data collection activity over there. We are excited about the great level of support and interest among industry stakeholders in both countries and look forward to our continued collaboration!
Re: Economic Pricing and Sustainability of MFIs
This inititative by MF transparency would not have come at better time than this to responded to the needs of MFIs especially on the strategies to ensure sustainability and continued existence of most MFIs in Zambia. Indeed, most MFIs have not been pricing their products rationally. My experience in this sector showed that they literally followed the tradition of ” follow the leader pricing mechanism ” without each examining individual cost structures and performance of each loan product The launch of the transparent pricing initiative is more than welcome as it will assist alot of MFI to enhance its profitability and answers the going concern question that most are faced with. Sometimes the pricing has be dictated by funders who might not be their all the time. In certain cases, pricing has been borrowed rather than developed factoring in the cost structures of respective MFIs.