Ten Steps to Pricing Transparency

Published on July 27, 2012

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Languages available: English

Follow these ten easy steps to get you started in understanding and applying transparent pricing. Support the industry’s continued advance on the development of responsible microfinance by endorsing and promoting pricing transparency.

Endorse Pricing Transparency:

STEP 1: Sign up – Fill in the MFTransparency Endorsement Form and send to MFTransparency

Study Pricing Transparency:

STEP 2: Understand why – short article on The Need for Transparency,What the World is Saying about Transparency & presentation on The Need for Pricing Transparency in Microfinance
STEP 3: Understand the math – Understanding APR Calculations, Flat vs. Declining Balance Interest Rates – What is the Difference?, and the Excel-based pricing tool.
STEP 4: Learn from other MFIs – Pricing Certification Report: Grameen Bank, The Challenge of Understanding Pricing of Microloans (Compartamos-Mexico), and Standardized Loan Documentation in Bosnia and Hertzegovina

Apply Pricing Transparency:

STEP 5: Analyze your prices – apply the Calculating Transparent Prices Tool to understand the true price paid by consumers of each loan product offered by your MFI.
STEP 6: Costing excersize – conduct a product-by-product costing exercise to identify major cost drivers. Use MFTransparency’s Calculating Transparent Prices Tool to analyze the effects of different pricing decisions, such as a change in rates versus fees.
STEP 7: Review your loan documentation – ensure your loan documentation clearly communicates all loan attributes and all fees paid by the borrower. Use MFTransparency’s Model Repayment Schedule as an example of best practice.

Promote Pricing Transparency:

STEP 8: Educate others – communicate to your clients and staff the factors involved in loan pricing, helping them make better informed decisions. MFTransparency’s consumer pricing education resources can assist with this.
STEP 9: Contact your regulator – use MFTransparency’s resources for policymakers to ensure your regulator is aware of the role they can play in pricing transparency, and of policy makers‘ actions around the world.
STEP 10: Certify your pricing publicly – This usually occurs when MFTransparency surveys your country, but you can request an individual certification from MFTransparency