> Posted by Beth Rhyne
Everyone agrees that microfinance products should be priced responsibly. Coming up with a standard of what can be considered “responsible” is unfortunately much more difficult. As a tool to spark in-depth discussion on this topical issue, The Smart Campaign is releasing: “Responsible Pricing: The State of the Practice”, a draft discussion paper prepared by Larry Reed with assistance from MicroFinance Transparency.
The paper investigates the main approaches to defining and/or achieving responsible pricing, including RoE limitations, interest caps, comparative transparency, and promoting competition. Prices are influenced by a wide range of factors such as country context, loan size, profit levels, efficiency and outreach, all of which must be taken into account before determining whether an MFI prices responsibly. One thing is clear, however. A comparative transparency approach – providing full information about institutions in their own market context – can allow observers to apply their own judgments. While not setting a standard per se, comparative transparency can pave the way to benchmark practitioners according to relevant dimensions and spotlight those who appear out of line.
The Smart Campaign encourages discussion throughout the industry on this issue, and urges you to find or create forums for talking about it with your colleagues. We would also like to hear from you!! Share your comments now in the space below or send an email to email@example.com.