Guide / Toolkit

Loan Agreement for Small Business Clients (JSC MFO Crystal)

Moving towards transparency by using simple language in loan contracts

This loan contract of JSC Microfinance Organization Crystal, Georgia, demonstrates the importance of using simple, easy to understand language. As per Smart Campaign’s Client Protection Principle 2, financial institutions must transparently and adequately disclose the pricing, terms, and conditions of financial products. Transparency includes clear communication with clients at every service point.

One such service point is the signing of the loan contract. Clients can become confused by the legal and financial jargon often used in loan contracts. To adequately protect clients, institutions must design and use plain language loan contracts that:

  • Offer a clear description of terms, conditions, interest rate, and fees;
  • Include an amortization schedule that separates principal, interest, fees, and defines the amount, number and due dates of instalment payments;
  • Use clear and simple language that will not confuse or mislead the customer;
  • Do not use fine print or legal jargon that is not commonly understood;
  • Are appropriate to the financial literacy of the intended user.

In this context, JSC Microfinance Organization Crystal shared its plain language loan contract with The Smart Campaign. The contract is succinct, written in plain language, and uses very little jargon.

About this Publication

By JSC Microfinance Organization Crystal
Published