Ghana Data Launch
Hosted by
MFTransparency
December 21st , 2011
Promoting Transparent Pricing in the Microfinance Industry
enabling APR & EIR Program
enabling Africa to Price Responsibly and Educate on Interest Rates
Sponsored by the MasterCard Foundation
Eight countries in 20 months: Malawi, Uganda,
Rwanda, Ghana, South Africa*, Tanzania, Zambia, Mozambique
*Data collection efforts in SA were suspended and other activities are being implemented
Ghana is the fourth country in the enabling APR & EIR Program
Transparency workshops in Accra on February 25th and Tamale on February 28th, 2011 to launch the Ghana Initiative.
This initiative includes the collection and publication of pricing data *
*Due to the severe delays in collecting data in Ghana, the training components are suspended until further
notice. We are exploring options to make sure the training is offered by other organization but nothing has been finalized
Transparent Pricing Initiative in Ghana
Transparent Pricing Initiative in Ghana
The enabling APR & EIR Program is sponsored by:
Thank you to our local partner in Ghana:
Transparent Pricing Initiative in Ghana Participating MFIs
Calvary Enterprise Development Foundation
CashPhase Ghana Limited
Cedi Finance Foundation
Christian Rural Aid Network (CRAN) Community Aid for Sustainable Development(CASUD)
Daasgift Quality Foundation
East Mamprusi Community Bank
E-LIFE Development Agency (ELDA)
EMPRETEC Ghana Foundation
Grameen Ghana
Participating MFIs
African Gate Financial Support
Ahantaman Rural Bank Limited
AIDEZ Small Project International (ASPI)
ASA Initiative
ASA-Ghana Association of Progressive Entrepreneurs in Development (APED)
Atwima Kwanwoma Rural Bank
Baobab Financial Services Limited
BestFUND
Bonzali Rural Bank
Transparent Pricing Initiative in Ghana Participating MFIs
Nwabiagya Rural Bank Limited Opportunity International Savings & Loans Ltd.
ProCredit Savings & Loans Company Ltd.
Rich Step Investment
Sekam Trust International
Simli Pong
Sinapi Aba Trust
Tamale Community Credit Union
The Bridge Financial Services Limited
Union Rural Bank Limited
Participating MFIs
Initiative Development-Ghana
Innovative Finance
Kraban Support Foundation
Kumanwuman Rural Bank Limited
Lower Pra Rural Bank Limited
Maata-N-Tudu Association
Mail Finance
Markaz Al Bishara Markaz Community Cooperative Credit Union
MicrofinPlus Ghana
Type of Institution (40 Institutions)
7.50%
25.00%
7.50%
52.50%
7.50%
Type of Institution
Coop
Privately-owned for-profit
Publicly-trade for-profit
NGO
Other
Regulated vs. Unregulated
• Twenty three of the forty participating institutions are regulated
57.50%
42.50%
Regulated vs Unregulated
Regulated
Unregulated
Loan Purpose (114 products)
17%
6% 6%
13%
51%
7%
0%
10%
20%
30%
40%
50%
60%
Housing Emergency Consumer Education Business AnyPurpose
Pe
rce
nta
ge o
f P
urp
ose
s
Purpose as a Percentage of Purposes
Eligibility
18% 1%
81%
Gender Focus (Eligibility)
Women only
Men only
Either
8.45%
14.08%
70.42%
7.04%
Product Eligibility
Must be asalariedworkerMust own ahome
Must run abusiness
Specific agegroup (youth,elderly)
Other Services Offered
22.51%
24.08%
23.04%
10.99%
11.52%
7.85%
0% 5% 10% 15% 20% 25% 30%
Credit Education
Credit Insurance
Group Meetings
Business Training
TA Visits to Workplace
Other Training
Percentage of services offered
Other Services Offered with Loan Product
Repayment Frequency
2%
44%
3%
18%
25%
7%
1% 0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Daily Monthly Quarterly Every 2weeks
Weekly Single endpayment
Irregularpayments
Percentage of frequencies
Repayment Frequency
Reasons for Variations in Price
46 products have a range of interest rates
4.35%
13.04%
10.87%
30.43% 13.04%
8.70%
19.57%
Interest Difference Reasons
Branch office location
Client profile/Client risk
Length of time as client
Loan size
Purpose of loan
Collateral
Other
Fees & Insurance
103 products (90%) have a fee
16% of all fees are for the purpose of insurance
90%
10%
Products with a Fee
Fee
No Fee 84%
16%
Fee & Insurance
OtherType ofFees
Insurance
Fees & Insurance
93%
7%
Does the product have a fee or insurance charge?
Disbursement
Ongoing
20.87%
79.13%
Fees/Insurance Disclosed on Repayment Schedule
Disclosed
Notdisclosed
Compulsory Savings 73 products out of 114 require compulsory savings
Of the 73 products that require savings, 10 disclosed the amount of compulsory savings on the repayment schedule
For 9 products, borrowers control savings internally
60%
4%
36%
Compulsory Savings
Required forall loans
Required forsome loans
Neverrequired
5.48%
49.32% 24.66%
10.96%
9.59%
Compulsory Savings by Type of Institution
Coop
NGO
Privately-ownedfor profitOther
Publicly-tradedfor profit
Interest Rate Calculations
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 Institution Type APR (Int + Fees + Ins)
224.08%
82.13% 79.72% 67.46%
85.54%
0.00%
50.00%
100.00%
150.00%
200.00%
250.00%
300.00%
Co-op NGO Privately-ownedFor-Profit
Publically-tradedfor-Profit
Other
APR by Institution Type (Weighted Average, Minimum and Maximum)
APR Ranges by Product Purpose APR (Int + Fees + Ins)
Business Housing Emergency Consumer EducationAny
Purpose
Minimum APR 0.0% 33.1% 43.0% 33.1% 29.2% 33.1%
Maximum APR 268.2% 207.8% 164.5% 207.8% 207.8% 276.5%
Weighted Average APR 88.7% 74.2% 66.8% 72.5% 92.0% 71.8%
0.0%
50.0%
100.0%
150.0%
200.0%
250.0%
300.0%
AP
R (
Int
+ Fe
es +
Insu
ran
ce)
APR by Product Purpose
APR Ranges by Geographic Focus APR (Int + Fees + Ins)
Rural Urban Both
Minimum 18.6% 0.0% 50.1%
Maximum 174.1% 276.5% 207.8%
Weighted Average APR 86.1% 103.3% 71.7%
86.1% 103.3%
71.7%
0.0%
50.0%
100.0%
150.0%
200.0%
250.0%
300.0%
AP
R (
Int
+ F
ees
+ In
sura
nce
)
APR by Geographic Focus
Summary Institution cost structure: Every institution 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.
Limitations of portfolio yield: If we do not analyze costs and prices on a product-by-product basis, our overall portfolio yield may be positive, but some individual products not profitable. This can cause sustainability problems in the future.
Remember: Each product is unique and requires a distinct pricing strategy.
Loan Documentation: Considerations
• 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 perspective
•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 calculation and loan documentation system
•Standardization allows for comparison across competing loan offers from the perspective of the client
Standardization
Example from the ground..
•A scenario where an MFI had quoted a flat interest rate of x% on all loans
• In practice , as seen on the actual repayment schedule for some loans, the MFI was charging the client only half of what was quoted in the loan contract
•50% loss in revenue for the MFI
• Impacts future sustainability of the MFI
•Differential treatment of clients : some are charged lower than others for the same product
Miscalculation of interest rates
• Investment in sound Management Information Systems (MIS)
• Investment in staff training to ensure that the correct amounts are reflected on repayment schedules
Recommendations
General Recommendations Loan documentation
• Communicate as much information on both repayment schedule and contract
Interest rate calculation method
• Switch from flat to declining balance to enhance transparency
Client Protection Principles
• Implement principles of the Smart Campaign to improve transparency and strengthen social mission
MFTransparency is currently piloting
a in and
The educational 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.
Ways to Get Involved Endorse MFTransparency. More than 870 individuals and
organizations have signified their support in principle of MFTransparency's mission by becoming an endorser. Add your name to the list: http://www.mftransparency.org/endorsements/form/
Educate about transparent pricing. MFTransparency develops and disseminates educational 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.
Participate in country projects. We work with government agencies, networks, associations, donors, investors, academics and other stakeholders in every project country and always welcome new partnerships. MFIs can also actively participate by submitting their data when MFTransparency launches the Transparent Pricing Initiative in their country.