Price Transparency in Microfinance: How Much Does a Loan Really Cost?

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Date Published: 
Nov 2013
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Featuring the most important resources and initiatives of MFTransparency’

When considering buying a product or service, it is only fair to expect that one is told and is fully aware of the true cost before making a decision. Microfinance clients deserve to know the true prices of the products offered to them, just like any other consumer. Lack of full transparency has not only damaged the public image of the industry, but has encouraged political and regulatory reactions, such as interest rate caps, that have reduced the availability of credit to the poor. Pricing transparency is a topic of great interest for different industry stakeholders and is an essential pre-requisite of consumer protection, social performance and responsible microfinance. Thanks to global efforts, most notably the ones promoted by MFTransparency and the Smart Campaign at the Center for Financial Inclusion, transparency in pricing is now the expectation of MFIs committed to consumer protection all over the world. 

In addition, a wealth of tools are available to practitioners and other industry stakeholders on the MFTransparency website to make accurate and full disclosure a reality. With MFTransparency's fifth anniversary, we are featuring some of their most important resources and initiatives. 

Country Pricing Reports

Within the past year alone, MFTransparency has published updated prices for nine countries and innovative Country Pricing Reports for five countries - Uganda, Rwanda, Tanzania, Malawi, and Ghana. These reports provide in-depth analysis of new loan pricing data, drawing out key themes, features and trends in each country'€™s microfinance pricing.  

Tools for Practitioners

Truth in Lending Tables (TILT): This new database developed by MFTransparency contains multi-year pricing data for hundreds of institutions and will enable multi-dimensional analysis to better understand correlations between pricing and other loan term factors such as loan term, loan use, etc. as well as track changes in pricing over time through trend data available for a range of countries. 

Pricing Transparency Index: This is MFTransparency'€™s scale for rating the level of transparency of a price at a range of levels:€“ country, institution, product and loan. The more transparent the price, the higher the score, with 100 being a perfect score. 

Tools for Policy Makers

The Microfinance Transparent Pricing Supervision (TraPS) Handbook: Developed jointly by Planet Rating and MFTransparency, this this resource was developed to provide policy makers with policy recommendations on pricing transparency issues, however a wide range of industry stakeholders will also find it useful.

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