Microfinance Horizon

Author: Chuck Waterfield (CEO & President MFTransparency)

Conclusion:

As shown, microfinance prices are exceedingly difficult to understand and can result in prices that are far higher than they appear. As a result, consumers make poor choices. In fact, all stakeholders involved in microfinance make worse choices than they would if they had accurate pricing information. Truth-In-Lending legislation helps to correct this problem, but in most of the countries where microfinance is practiced, such laws are absent. This is why we in the microfinance industry have decided to start actively working at pricing transparency and the education of the public about the true cost of borrowing. MFTransparency’s work is based on this dual approach of educating stakeholders on issues of transparency as well as publishing the true costs of microfinance products in a clear, consistent fashion to create an enabling environment for transparency. If this critical issue is not addressed, clients are left vulnerable to finance institutions that expand their lending to the poor at deceptively advertised interest rates. In some cases, these institutions generate large profits off of the very poor while hiding behind the good image created by the microfinance industry over the past 30 years.

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