Discussions Over a Cup of Coffee

> Posted by Sergio Guzmán

sergio-and-clients1“Every client sits at this table with me and has coffee,” said the branch manager of a microfinance institution Bogotá’s neighborhood of Patio Bonito, “from the $1,000 clients to the $35,000 clients.” It was my first field visit, and I was impressed with this branch manager who had been working in the financial industry for more than 28 years.

After a two hour session of learning about the institution’s products and services we set out to the field to see clients. Patio Bonito is adjacent to the city’s largest food wholesaler center, Corabastos, with a large variety of businesses and clients. During my visit, I met clients who borrowed from multiple banks at market rates as well as clients who had been faithful and borrowed exclusively from this Colombian MFI. What surprised, though, me was that none of them knew what interest rates they were paying. None. While the clients knew how much they were supposed to pay each month, they had no knowledge of the total annual cost of their loans.
Patio Bonito is home to branch locations for almost all of Bogotá’s financial institutions. One would think that with so much competition around, the clients could benefit from competing rates and services. Not knowing their interest rates doesn’t necessarily imply that the institution has failed to provide adequate information about costs, but rather displays the clients’ level of financial literacy. Competition alone will certainly not fill the financial-literacy gap clients face—transparency is the other side of the coin here. In fact, transparent and reasonable pricing is one of the six principles espoused by the new Campaign for Client Protection.
Only when clients are empowered to ask questions and demand more from their financial services providers, taking real advantage of the competition that exists, will there truly be improved services overall. Perhaps then, it will be the client who eventually can say, “All of the credit providers have coffee with me at this table.”

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