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Uganda Data Launch
Hosted by
MFTransparency and AMFIU
Webinar July 27, 2011
Promo-ng Transparent Pricing in the Microfinance Industry
enabling APR & EIR Program
� enabling Africa to Price Responsibly and Educate on Interest Rates
� Sponsored by the MasterCard FoundaFon
� Eight countries in 18 months: Malawi, Uganda, Rwanda, Ghana, South Africa, Tanzania, Zambia, Mozambique
Transparent Pricing Ini;a;ve in Uganda
� Uganda is the second country in the enabling APR & EIR Program to be selected for the Transparent Pricing Ini-a-ve.
� MFTransparency conducted a transparency workshop in Kampala on December 3rd, 2010 to launch the Uganda Ini-a-ve.
� The enabling Africa to Price Responsibly & Educate on Interest Rates Program is a client protecFon effort of unprecedented scale in Africa, covering Malawi, Uganda, Rwanda, Ghana, Tanzania, Zambia, South Africa and Mozambique.
� This iniFaFve includes three major components: the collecFon and publicaFon of pricing data, training on pricing transparency, and the development and disseminaFon of educaFonal materials.
Transparent Pricing Ini;a;ve in Uganda
The enabling APR & EIR Program is sponsored by:
Thank you to our local partner in Uganda:
AMFIU: Opening Remarks
Par;cipa;ng Ins;tu;ons
Transparent Pricing Ini;a;ve in Uganda Par;cipa;ng MFIs APAS Financial Services
BRAC Uganda Microfinance
Centenary Rural Development Bank
Ebirungi Birugomutuutu SACCO
Equity Bank
Five Talents Uganda
Gatsby Microfinance
Habitat for Humanity Uganda
Hofokam
KACITA CooperaFve Financial
Madfa SACCO
Par;cipa;ng MFIs Micro Enterprise Development Network
Opportunity Uganda
Rural Credit Finance Company
Rushere SACCO
SAO – Kampala SACCO
Silver Upholders
The Hunger Project Uganda
UGAFODE Microfinance
Uganda Finance Trust
Wakiso Self Help SACCO
Y-‐Save SACCO
Type of Ins;tu;on (22 Ins;tu;ons)
31.8%
45.5%
22.7% Coop
Privately-‐owned for profit
NGO
Regulated vs. Unregulated
22.7%
77.3%
Regulated
Unregulated
• 5 insFtuFons regulated, 17 insFtuFons unregulated
Product Pricing Analysis
Loan Purpose (59 products)
10.6% 7.1% 9.4%
15.3%
43.5%
14.1%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Housing Emergency Consumer EducaFon Business Any Purpose
Percen
tage of P
urpo
ses
Purpose as a Percentage of Purposes
Eligibility
15.0%
18.8%
57.5%
8.8%
Product Eligibility
Must be a salaried worker
Must own a home
Must run a business
Specific age group (youth, elderly)
5%
95%
Gender Focus
Women only
Either
Lending Methodology
61.1% 23.6%
15.3%
Individual
Solidarity
Village Banking
Other Services Offered
34.4%
20.8%
15.2%
14.4%
12.8%
2.4%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Credit EducaFon
Credit Insurance
Group MeeFngs
Business Training
TA Visits to Workplace
Other Training
Percentage of services offered
Other Services Offered with Loan Product
Repayment Frequency
17.7%
5.1%
63.3%
12.7%
1.3% 0%
10%
20%
30%
40%
50%
60%
70%
Weekly Every 2 weeks Monthly Quarterly Single end payment
Percentage of frequencies
Repayment Frequency
Reasons for Varia;ons in Price � 16 products have a range of interest rates
4.5%
27.3%
27.3% 9.1%
31.8%
Branch office locaFon
Client profile/Client risk
Length of Fme as client
Loan size
Other
Interest Calcula;on Method
22.8%
77.2%
Declining Balance
Flat
Fees & Insurance � All products (100%) have a fee � 36% of all fees are for the purpose of insurance
64%
36%
Fee & Insurance
Other Type of Fees
Insurance
100%
0%
Products with a Fee
Fee
No Fee
Fees & Insurance
95.3%
4.7%
Disbursement vs. Ongoing Fees
Disbursement
Ongoing 7.43%
92.57%
Disclosed on Repayment Schedule
Disclosed
Not disclosed
Compulsory Savings � 33 products out of 59 require compulsory savings � Of the 33 products that require savings, 2 disclosed the amount of compulsory savings on the repayment schedule
� For 11 products, borrowers control savings internally
40.7%
15.3%
44.1%
Compulsory Savings
Required for all loans
Required for some loans
Never required
36.4%
30.3%
33.3%
Compulsory Savings by Type of Ins;tu;on
Coop
NGO
Privately-‐owned for profit
Pricing Calcula;ons
Interest Rate Calcula;ons
Interest Fees Insurance Security Deposit
APR (Interest + Fees + Insurance) X X X
APR (Including Security Deposit) X X X X
EIR (Interest + Fees + Insurance) X X X
EIR (Including Security Deposit) X X X X
APR Ranges by Ins;tu;on Type
52.1% 52.5% 48.6%
0%
50%
100%
150%
200%
Co-‐op NGO Privately-‐owned For-‐Profit
APR by Ins;tu;on Type (Weighted Average, Minimum and Maximum)
APR (Int + Fees + Insurance)
APR Ranges by Loan Purpose
Business Housing Emergency Consumer EducaFon Any Purpose Minimum APR 19% 19% 49% 27% 19% 26% Maximum APR 161% 161% 157% 109% 161% 157% Weighted Average APR 58% 41% 73% 55% 54% 46%
58% 41%
73% 55% 54% 46%
0% 20% 40% 60% 80%
100% 120% 140% 160% 180%
APR (In
t + Fees +
Insurance) APR by Product Purpose
APR Ranges by Rural/Urban
Rural Urban Both Minimum 27% 19% 23% Maximum 154% 161% 119% Weighted Average APR 51% 73% 40%
50.7% 72.6%
40.4%
00% 20% 40% 60% 80%
100% 120% 140% 160% 180% 200%
APR (In
t + Fees +
Insurance) APR by Geographic Focus
MFTransparency Interac;ve Price Graphs
Filter Graphs: Loan Size
Filter Graphs: Number of Clients
Filter Graphs: Loan Term
Filter Graphs: Loan Purpose
Filter Graphs: Ins;tu;on Type
Filter Graphs: Interest Rate Type
Filter Graphs: Interest Rate Formula
Price Graphs APR (Int + Fees + Insurance)
Products with > 50 Ac;ve Borrowers
Products with > 50 Ac;ve Borrowers Loan Amount < 5,000,000 UGX
Products with > 50 Ac;ve Borrowers Ins;tu;on Type: Privately-‐owned for-‐profit
Products with > 50 Ac;ve Borrowers Ins;tu;on Type: NGO
Products with > 50 Ac;ve Borrowers Ins;tu;on Type: Coopera;ves
Products with > 50 Ac;ve Borrowers Purpose: Business
Products with > 50 Ac;ve Borrowers Purpose: Educa;on
Products with > 50 Ac;ve Borrowers Purpose: Consump;on
Products with > 50 Ac;ve Borrowers Purpose: Housing
Products with > 50 Ac;ve Borrowers Interest Calcula;on Method: Flat
Products with > 50 Ac;ve Borrowers Interest Calcula;on Method: Declining Balance
Summary � Ins;tu;on cost structure: Every insFtuFon has a unique cost structure which requires a unique pricing strategy.
� Product cost structure: Different loan products can have significantly different cost structures. It is therefore necessary to look at each loan product individually when assigning loan prices.
� Limita;ons of porbolio yield: If we do not analyze costs and prices on a product-‐by-‐product basis, our overall poroolio yield may be posiFve, but some individual products not profitable. This can cause sustainability problems in the future.
� Remember: Each product is unique and requires a disFnct pricing strategy.
Recommenda;ons
Loan Documenta;on: Considera;ons
• It is important to always consider the true price of a loan from the point-‐of-‐view of the client
• How much money does a client have to spend in order to access a loan?
Client perspecFve
• Shows the expected cash flow for the client • Should disclose all charges made at disbursement and during the loan term
Repayment schedule
• At the local industry level, lenders and other stakeholders should define a standard interest rate calculaFon and loan documentaFon system
• StandardizaFon allows for comparison across compeFng loan offers from the perspecFve of the client
StandardizaFon
Loan Documenta;on: Case Study Gatsby Micro Finance Ltd – an example of transparent loan documentaFon
Loan Documenta;on: Case Study Gatsby Micro Finance Ltd is commended for the disclosure on its loan documentaFon of: � All charges at applica;on (e.g. registraFon fees, loan commission, applicaFon fees)
� All charges at disbursement ( e.g. registraFon fees, loan commission) � Annual interest rate charged � Interest rate method used � Grace period and interest charged during grace period � Cash flow, differenFaFng between the principle, interest, penalty, total repayment and total balance
Resources: Recommended Repayment Schedule Template
General Recommenda;ons Loan documentaFon
• Communicate as much informaFon on both repayment schedule and contract
Interest rate calculaFon method
• Switch from flat to declining balance to enhance transparency
Technical assistance
MFTransparency is happy to provide assistance to implement these changes
Financial Literacy Program
MFTransparency is currently piloFng a financial literacy program in Malawi and Rwanda.
The educaFonal resources we will develop for Malawi and Rwanda will also be adapted to the unique context of other countries included in the enabling APR & EIR Program.
We collaborate with our local partners to adapt these materials to the local context and implement them successfully.
Ques;ons & Answers
Ways to Get Involved � Endorse MFTransparency. More than 800 individuals and organizaFons have signified their support in principle of MFTransparency's mission by becoming an endorser. Add your name to the list: htp://www.muransparency.org/endorsements/form/
� Educate about transparent pricing. MFTransparency develops and disseminates educaFonal resources covering a range of topics related to transparent pricing. These materials are all available free of charge through the Resources Library on our website.
� Par;cipate in country projects. We work with government agencies, networks, associaFons, donors, investors, academics and other stakeholders in every project country and always welcome new partnerships. MFIs can also acFvely parFcipate by submivng their data when MFTransparency launches the Transparent Pricing Ini-a-ve in their country.
Promo;ng Transparent Pricing in the Microfinance Industry