New & Noteworthy
Responsible Pricing: The State of the Practice
A draft discussion paper of The Smart Campaign
"In December 2009, The Smart Campaign amended its Client Protection Principle, “Transparent Pricing” to become “Transparent and Responsible Pricing.” The principle states that pricing should be “both affordable to clients and sustainable for financial institutions.” This formulation emphasizes that low prices are good for clients, while allowing for the practical realities entailed in the provision of small loans and low-value savings accounts.In amending the principle, the Campaign affirms the importance of responsible pricing while recognizing that the current state of the practice does not now provide clear guidance or standards to define it.
In order to move in the direction of clearer guidance, the Campaign prepared this discussion paper. It examines the full range of approaches to responsible pricing of loans, from promoting competition, to return on equity limitations, to interest rate caps, to comparative transparency. These approaches are discussed in the context of the cost curves developed by MicroFinance Transparency, which plot detailed information on pricing, terms and conditions among all the (participating) lenders in a country..."
Download the full paper here.