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Microfinance Transparency recently released an interactive video designed to share information about flat and declining interest rates in an engaging new way. It tells the story of “Chantal” and “Auntie-Need-a-Loan.” Auntie doesn’t read the terms and conditions of her loan. Unfortunately, her carelessness leads her to get tricked by loan predators, pay high fees, miscalculate her interest, and miss her loan payments. The concept was created to help industry stakeholders to convey important pricing transparency and consumer protection messages.
In addition to this animation, “Auntie-Need-a-Loan” will be featured in radio public service announcements, training materials and other print materials throughout Rwanda and Malawi.
Check out the full animation here!
Image credit: 17triggers.com
Have you read?
> Posted by Rosita Najmi, Financial Inclusion Practice, World Bank
“Congratulations,” the young man said, as I entered a favela in Rio. Puzzled, I raised my eyebrows and shrugged my shoulders. “He was congratulating you because you’re a woman.” said the young woman accompanying me on a UNDP assignment. My eyebrows migrated even further north. With a smile, she clarified, “Today is International Day of the Woman.” As we walked on, I turned and yelled over my shoulder with a wave, “Obrigada.”
While I’m passionate about a lot of things, since 2001, I’ve been thinking more about the concept of universal, financial citizenship and the role of women in poverty reduction. I’m sure my colleagues at the World Bank would each have a diversity of views on this topic. However, I think we would all agree upon certain core ingredients, such as (i) access to a suite of quality products and services (including savings, credit, insurance, remittances, payments and beyond), (ii) regulations that ensure consumer protection and transparency, and (iii) individual financial identities and histories that benefit from financial education and security. While this might easily resonate with someone who believes in the larger concept of democratizing development, at this point, you might be asking what “universal” means. That’s where the women (and other vulnerable populations like persons with disabilities, rural populations, and indigenous people) come in. Read the rest of this entry »
> Posted by Beth Rhyne
I had the opportunity last week to inform the philanthropic community about the Smart Campaign through a piece in the Philanthropy News Digest. For those of you who follow the Campaign, the piece may sound familiar. Nevertheless, it’s exciting to be able to get the Smart Campaign message in front of the broad range of people who work in philanthropy.
To read the article, please click here.
> Posted by Siddhartha Chowdri
Over the last couple of months, I’ve noticed this advertisement by the State Bank of India in several newspapers (in many cases on the front page), billboards, and other media throughout the country. Take a minute to try to figure out how much this loan costs and then continue reading. (For those outside India, 1 Lac = 100,000 rupees.)
Over the last four to five years the microfinance industry has been aggressively pushing for greater client protection standards. One place where there has been very specific and measurable improvement is in pricing transparency. This is large part due to the efforts of movements like the Smart Campaign and institutions like MFTransparency.
Although (as many people who work directly with clients know) no matter how well we as institutions disclose and explain prices in standard formats, the only thing that is of concern to the clients is how much they will have to repay on a monthly/weekly basis. Concepts of IRR, APR and time-value of money are not as much of a concern to them as how much money they are going to get and when. Regardless of whether the client is able to understand the full terms of their loan, it is extremely important that those who claim to be in the business of responsible finance stick to their guns and continue promoting full disclosure and transparency. Read the rest of this entry »
> Posted by Leah Wardle
A kid named Boyie is a popular radio disk jockey in Kenya. At 19 years old, he has a nationally syndicated radio show playing daily on 21 stations and half of Kenya’s mostly low-income youth say they’ve listened to him. He’s so popular that he also stars in his own monthly comic book series, Shujaaz (“Heroes”), read by about 10 million people in the past 20 months. The ladies love him and the guys copy his dreadlocks. But someone else answers his calls, texts, and Facebook messages (which flood in by the thousands), because Boyie is a cartoon character.
A cartoon character can be more powerful than a real person when it comes to influencing the thoughts and behavior of Kenyan youth, argues Rob Burnet, director of Well Told Story, the Kenyan communications company behind Boyie and Shujaaz. He and his team are using virtual characters to reach Kenyan teenagers through comic books, radio shows, and virtual media with messages of social change. Their methods may hold creative new ideas for microfinance practitioners looking to connect with clients.
It’s something else to witness the compelling struggle of a teenage head-of-household, living in a slum, facing multiple challenges and pleading siblings, yet still setting aside a little bit each week. Now tell the story with colorful images and dramatic plots that resonate with the experience of the audience, and deliver through easily available media, and they readily absorb the messages as they follow the lives of the quirky characters.
Microfinance practitioners might take a page from Shujaaz to increase the transparency of financial information for clients. Transparency means providing full information (like detailed product terms and prices) in a way that is meaningful to the client. That means clients can absorb the information because it’s presented in their own language, and they feel comfortable with the medium. To reach this goal, Well Told Story’s model would suggest practitioners ask themselves three important questions: Read the rest of this entry »
> Posted by Leah Wardle
Last week, MFTransparency hosted the first “African Microfinance Pricing Transparency Leadership Forum” in Nairobi. The meeting was one of the more unique and encouraging microfinance events I’ve ever attended. About 130 regulators and policymakers from 24 African countries participated in spirited debate and idea sharing on the controversial issue of pricing transparency, and how to better regulate and support microfinance providers.
The meeting itself was a real success in that turnout was high and discussion was energetic—policymakers from all over Africa care enough about pricing transparency to assemble themselves for three intense days—awesome! But the real triumph was the general agreement that service providers in our industry are not naturally incentivized to be transparent with clients, and regulators and policymakers play a vital role in making sure transparency is a priority.
Policymakers concluded that they:
1. Must create a level playing field in their respective countries, namely through standardized pricing calculation and disclosure requirements. This priority emerged through a discussion of the opaque pricing practices endemic to most countries and how few institutions want to be the first to self-regulate. A minister from the DRC told us about how his government has started requiring microfinance providers to state their prices as both the effective interest rate and the nominal interest rate. Additionally, all microfinance providers must publish these rates in the national newspaper so that consumers can compare prices and providers are incentivized to offer competitive rates. Read the rest of this entry »
> Posted by Alex Fiorillo, COO, MFTransparency
Policymakers in Colombia have been cautiously moving toward a transparency-based approach to pricing for microfinance, reducing their traditional reliance on interest rate caps. Important legislation in 2009 and 2010 appears to be having a positive effect, as Asobancaria, the Colombian Banking Association, asserts in a recent article. Asobancaria notes that since the changes, the number of microcredit loans offered continues to increase.
We at MFTransparency are also pleased with the initial results. We urge the government to focus on simple, straight-forward regulation to ensure that financial service providers understand and apply the law in a clear and consistent manner.
Progress Toward Transparency
The Colombian government took steps to consolidate and enhance consumer protection and pricing transparency in the commercial and microfinance sectors through Law 1328 of 2009. This law sets out strict regulations regarding the minimum information to be provided to prospective borrowers, the prohibition of abusive clauses, and an effective mechanism to deal with complaints. It also provides sanctions for abusive practices. Read the rest of this entry »
> Posted by Beth Rhyne
In the Economist Intelligence Unit’s annual “Microscope” country rankings of the enabling environment for microfinance, the Philippines has been number two for the past two years (behind Peru). But the players in the Philippines microfinance sector, regulators and providers alike, want to be number one. They also want to avoid the kind of crisis that has affected Indian microfinance.
Those considerations prompted the back-to-back seminars I attended in Manila last week. One event, sponsored by the Rural Bankers Association of the Philippines and Microfinance Council of the Philippines, examined the factors leading to the Indian crisis and asked whether the Philippines is vulnerable to the same kind of problems. The second event, sponsored by the Central Bank of the Philippines, asked what was needed to move the Philippines to the top of the Microscope’s chart.
There is little evidence that an immediate crisis might be on the way. According to Ron Chua of the Asian Institute of Management, a long-time analyst of microfinance in the Philippines, the sector has been growing at a rate of about 25 to 35 percent per year – fast but not excessive. And while the range of institutional types makes it hard to count, the total number of clients (somewhere between 2 and 6 million borrowers) does not appear to be creating severe market saturation as yet, though there are pockets that may have high saturation. Read the rest of this entry »
> Posted by Jon Pattee
It is with great sadness that we note the imminent departure of Glenn Beck from Fox News, an exit that may or may not be linked to his show’s crumbling audience share.
We will miss Beck’s chalkdust-fuelled theorizing about “micro financing” as embodied in lines from his show, like this classic:
“[D]o you know who Barack Obama was doing micro financing with? The Ford Foundation. Guess who was also doing micro financing on the Ford Foundation. His dad. Timothy Geithner. Isn’t that — what are the odds? Man, it’s just — it [sic] just becoming a very, very small, small world. Very small.”
Small indeed. Small, and surreal. We will miss the depth of analysis that Beck brought to the debate surrounding microfinance. But we’re comforted to know that others, with similar mental acuity, are surely waiting to hoist his fallen standard.
Image credit: y6y6y6