Rwanda  Data  Launch  

 Hosted  by    

MFTransparency  and  AMIR          

Webinar  September  27th,  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  FoundaEon  

 �  Eight  countries  in  18  months:  Malawi,  Uganda,  Rwanda,  Ghana,  South  Africa,  Tanzania,  Zambia,  Mozambique  

Transparent  Pricing  Ini;a;ve    in  Rwanda  

�  Rwanda  is  the  third  country  in  the  enabling  APR  &  EIR  Program  

�  Transparency  workshop  in  Kigali  on  December  10th,  2010  to  launch  the  Rwanda  Ini-a-ve.  

�  This  iniEaEve  includes  three  major  components:    ◦  CollecEon  and  publicaEon  of  pricing  data  ◦  Training  on  pricing  transparency  ◦  Development  and  disseminaEon  of  educaEonal  materials  

Transparent  Pricing  Ini;a;ve  in  Rwanda  

The  enabling  APR  &  EIR  Program  is  sponsored  by:  

Thank  you  to  our  local  partner  in  Rwanda:  

AMIR  Opening  Remarks  

Par;cipa;ng  Ins;tu;ons  

Ins;tu;ons  Par;cipantes  

Transparent  Pricing  Ini;a;ve  in  Rwanda  

Par;cipa;ng  MFIs  Rwanda  Microfinance  Limited  

Union  des  CLECAM  Wisigara  

Umutanguha  Union  of  Savings  and  Credit  CooperaEves  (UCU)  

Urwego  Opportunity  Bank  

Vision  Finance  Company  S.A  

Zigama  Credit  and  Savings  Society  

Par;cipa;ng  MFIs  Amasezerano  Community  Bank    

COOPEC  Comicoka  

COOPEC  Zamuka  

COOPEDU  

COOJAD  

Duterimbere  –  IMF  

Goshen  Finance  S.A    

IMF  Inkingi  

Type  of  Ins;tu;on    (14  Ins;tu;ons)  

21%  

36%  7%  

36%  

CoOp  

NGO  

Other  

Privately-­‐owned  'For-­‐Profit'  

Regulated  vs.  Unregulated  •  All  14  insEtuEons  are  regulated  

100%  

0%  

Regulated  

Unregulated  

Product  Pricing  Analysis  

Loan  Purpose    (63  products)  

42%  

9%  11%   12%  

7%  

18%  

0%  

5%  

10%  

15%  

20%  

25%  

30%  

35%  

40%  

45%  

Business   Housing   Emergency   Consumer   EducaEon   Any  Purpose  

Percen

tage  of  P

urpo

ses  

Purpose  as  a  Percentage  of  Purposes  

Loan  Purpose    (63  products)  

73%  

10%   13%  5%  

0%  

10%  

20%  

30%  

40%  

50%  

60%  

70%  

80%  

1   2   3   >3  

Percen

tage  of  P

rodu

cts  

Number  of  Product  Purposes  

Number  of  Purposes  per  Product  

Eligibility  

18%  

78%  

Product  Eligibility  

Must  be  a  salaried  worker  

Must  own  a  home  

Must  run  a  business  

3%  3%  

94%  

Gender  Focus  (Eligibility)  

Women  only  

Men  only  

Either  

Lending  Methodology  

66%  

30%  

4%  

Individual  

Solidarity  

Village  Banking  

Other  Services  Offered  

34%  

21%  

10%  

23%  

9%  

3%  

0%   5%   10%   15%   20%   25%   30%   35%   40%  

Credit  EducaEon  

Credit  Insurance  

Group  MeeEngs  

Business  Training  

TA  Visits  to  Workplace  

Other  Training  

Percentage  of  services  offered  

Other  Services  Offered  with  Loan  Product  

Repayment  Frequency  

13%  7%  

56%  

13%   11%  

0%  

10%  

20%  

30%  

40%  

50%  

60%  

Weekly   Every  2  weeks   Monthly   Quarterly   Single  end  payment  

Percentage  of  frequencies  

Reasons  for  Varia;ons  in  Price  �  16  products  have  a  range  of  interest  rates  

10%  

12%  

17%  

12%  15%  

10%  

24%  

Branch  office  locaEon  

Client  profile/Client  risk  

Length  of  Eme  as  client  

Loan  size  

Purpose  

Collateral  

Other  

Interest  Calcula;on  Method  

49%  51%  

Declining  Balance  

Flat  

Fees  &  Insurance  �  60  products  (95%)  have  a  fee  �  28%  of  all  fees  are  for  the  purpose  of  insurance  

95%  

5%  

Products  with  a  Fee  

Fee  

No  Fee  

72%  

28%  

Fee  &  Insurance  

Other  Type  of  Fees  

Insurance  

Fees  &  Insurance  

10%  

90%  

Fees  Disclosed  on  Repayment  Schedule    

Disclosed  

Not  disclosed  

100%  

0%  

Disbursement  vs  Ongoing  

Disbursement  

Ongoing  

External  Insurance  -­‐  Fee  Parameters  

•  Out  of  32  products  with  insurance  charges,  20  are  charges  paid  to  insurance  companies  using  a  matrix  of  determinants  to  calculate  the  amount  paid  by  each  borrower  

•  Determinants  of  insurance  charge  to  borrowers:  o  Loan  amount  o  Loan  term  o  Age  of  borrower  

Compulsory  Savings  �  40  products  out  of  63  require  compulsory  savings  �  Of  the  40  products  that  require  savings,  13  disclosed  the  amount  of  compulsory  savings  on  the  repayment  schedule  

�  For  4  products,  borrowers  control  savings  internally  

54%  36%  

10%  

Compulsory  Savings  

Required  for  all  loans    

Never  required  

Required  for  some  loans  

22%  

37%  

33%  

8%  

Compulsory  Savings  according  to  Type  of  Ins;tu;on  

Coop  

NGO  

Privately-­‐owned  for  profit  

Other  

Pricing  Calcula;ons  

Interest  Rate  Calcula;ons  

    Interest   Fees   Insurance   Taxes  Security  Deposit  

APR  (Interest  +  Fees  +  Insurance)   X   X   X      

APR  (Including  Taxes  &  Security  Deposit)  

X   X   X   X   X  

EIR  (Interest  +  Fees  +  Insurance)   X   X   X      

EIR  (Including  Taxes  &  Security  Deposit)  

X   X   X   X   X  

APR  Ranges  by  Ins;tu;on  Type  APR  (Int  +  Fees  +  Ins)  

19%  

60%  

27%  

56%  

00%  

20%  

40%  

60%  

80%  

100%  

120%  

140%  

160%  

CoOp   NGO   Other   Privately-­‐owned  For-­‐Profit  

APR  by  Ins;tu;on  Type    (Weighted  Average,  Minimum  and  Maximum)  

APR  Ranges  by  Product  Purpose  APR  (Int  +  Fees  +  Ins)  

Business   Housing   Emergency  

Consumer  

EducaEon  

Any  Purpose  

Minimum  APR   10%   13%   13%   13%   13%   13%  Maximum  APR   155%   102%   155%   155%   72%   111%  Weighted  Average  APR   39%   16%   24%   25%   21%   21%  

39%  16%   24%   25%   21%   21%  

00%  20%  40%  60%  80%  

100%  120%  140%  160%  

APR  (In

t  +  Fees  +

 Insurance)  

APR  by  Product  Purpose  

APR  Ranges  by  Geographic  Focus  APR  (Int  +  Fees  +  Ins)  

Both  (50/50)   Rural   Urban  Minimum   13%   10%   15%  Maximum   102%   130%   155%  Weighted  Average  APR   63%   23%   56%  

63%  

23%  

56%  

00%  20%  40%  60%  80%  

100%  120%  140%  160%  

APR  (In

t  +  Fees  +

 Insurance)  

APR  by  Geographic  Focus  

MFTransparency  Interac;ve  Price  Graphs  

 MFTransparency  

Graphiques  Interac;fs  de  Tarifs  

Price  Graphs  APR  (Int  +  Fees  +  Insurance)  

 Graphiques  Tarifaires  

TIA  (Int  +  Frais  +  Assurance)  

Products  with  >  50  Ac;ve  Borrowers      

Products  with  >  50  Ac;ve  Borrowers    Loan  Amount  <  2,000,000  RWF  

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  insEtuEon  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  pornolio  yield  may  be  posiEve,  but  some  individual  products  not  profitable.  This  can  cause  sustainability  problems  in  the  future.  

�  Remember:  Each  product  is  unique  and  requires  a  disEnct  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  perspecEve  

• 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  calculaEon  and  loan  documentaEon  system  

• StandardizaEon  allows  for  comparison  across  compeEng  loan  offers  from  the  perspecEve  of  the  client  

StandardizaEon  

Resources:  Recommended  Repayment  Schedule  Template  

General  Recommenda;ons  Loan  documentaEon  

• Communicate  as  much  informaEon  on  both  repayment  schedule  and  contract  

Interest  rate  calculaEon  method  

•  Switch  from  flat  to  declining  balance  to  enhance  transparency  

Technical  assistance    

MFTransparency  is  happy  to  provide  assistance  to  implement  these  changes  

MFTransparency  is  currently  pilo;ng    

a      in    and  

The  educaEonal  resources  we  will  develop  for  Malawi  and  Rwanda  will  also  be  adapted  to  the  unique  context  of  other  countries

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  870  individuals  and  organizaEons  have  signified  their  support  in  principle  of  MFTransparency's  mission  by  becoming  an  endorser.  Add  your  name  to  the  list:  hrp://www.msransparency.org/endorsements/form/  

�  Educate  about  transparent  pricing.  MFTransparency  develops  and  disseminates  educaEonal  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,  associaEons,  donors,  investors,  academics  and  other  stakeholders  in  every  project  country  and  always  welcome  new  partnerships.  MFIs  can  also  acEvely  parEcipate  by  submitng  their  data  when  MFTransparency  launches  the  Transparent  Pricing  Ini-a-ve  in  their  country.  

     

Promo;ng  Transparent  Pricing    in  the  Microfinance  Industry