One Fee, or No Fee 22 81% 321,534 97%...Microfinance pricing analysis – Malawi – September 2013...

Planet Rating MicroFinance Transparency

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Microfinance pricing analysis

Malawi

Date: September 2013

Please note that all terms that are in italic and underlined

are defined in the glossary.

All data used in this report can be received in Excel

format (available at [email protected])

Executive summary

The institutional level Pricing Transparency Index

ranges from 20 to over 100 in Malawi. The

transparency of prices is the highest for the region

but still leaves much room for improvement.

Approximately 65% of borrowers benefit from loans

priced transparently, receiving microloans from

products that have a Transparency Index of 75/100

or above.

This transparency level is explained by pricing

practices consisting of multiple price components:

64% of borrowers receive loans have an interest rate

calculated using the declining balance method – this

is higher than most other countries in the region;

fees are common, with 84% of borrowers paying at

least one fee in addition to the interest rate; and

75% of borrowers must also purchase insurance with

their loan. In addition, 46% of borrowers must

provide compulsory deposits in order to access their

loan.

MWK USD Number Percent

<50,000 <$128 58 136% 57,462 17%

50,001 to

150,000

$129 to

$38563 101% 35,319 11%

150,001 to

250,000

$386 to

$64171 81% 67,174 20%

250,001 to

350,000

$898 to

$1,15458 123% 67,090 20%

350,001 to

450,000

$1,155 to

$1,28289 69% 59,850 18%

>450,000 >$1,282 66 89% 45,735 14%

Number Percent Number Percent

4 15% 1,691 1%

8 30% 80,758 24%

2 7% 35,585 11%

13 48% 214,596 65%

27 332,630

Number Percent Number Percent

10 37% 212,227 64%

22 81% 321,534 97%

15 56% 84,379 25%

4 15% 179,335 54%

Between 51 and 75

Between 76 and 100

Total

Data from 10 institutions, with 27 credit products and 332,630 active clients.

Calculations based on 124 loan samples. Older data is used for institutions that did not

provide refreshed data.

Transparent Pricing

Practices

Products Clients

Declining Balance Interest

One Fee, or No Fee

No Compulsory Insurance

Required

No Compulsory Deposit

Required

Products ClientsProduct Transparency

Index Levels

Between 0 and 25

Between 26 and 50

Loan Amounts Transparency

Index

Avg Full

APRClients

mailto:[email protected]

Microfinance pricing analysis – Malawi – September 2013

www.planetrating.com / www.mftransparency.org 2

Context: Overall transparency of microfinance in Malawi

Overall, transparent practice of microfinance in Malawi is mixed. Nine of Malawi’s eleven microfinance institutions provided

pricing data to MFTransparency in 2013, and ten institutions did within the past two years. One of the eleven MFIs submitted

data to the MIX Market in the past year, and three more did within the past two years. Only two MFIs in Malawi have been

rated, neither of which were rated in the past two years.

Note: This table includes all institutions who submitted data to MFTransparency, submitted data to the MIX in 2010 or later with greater than

a one diamond rating, or did both. Institutions that may have been rated but did not disclose their data to either MFTransparency or MIX are

not included.

Note: Pride-MWI did not submit data to MFTransparency but disclosed to the MIX within the past 2.5 years. The Institutional Transparency

Index is the weighted average of the Product Transparency Indices for that Institution.

Age of Data

< 1 year 9 82% 332,630 97% 1 9% 51,308 15% 0 0% 0 0%

1-2 years 0 0% 0 0% 3 27% 79,571 23% 0 0% 0 0%

2-4 years 1 9% 540 0% 3 27% 38,347 11% 1 9% 48,013 14%

> 4 years 0 0% 0 0% 0 0% 0 0% 1 9% 51,308 15%

Never 1 9% 8,500 2% 4 36% 172,444 50% 9 82% 242,349 71%

Totals 11 341,670 11 341,670 11 341,670

MFT MIX RatingsBorrowersMFIs Borrowers MFIs Borrowers MFIs

Number % MFT MIX Ratings 2012 2013 Change

1 MARDEF 166,575 49% NGO 0.9 N/A N/A N/A 41 100 59

2 OIBM 51,308 15% Bank 0.9 0.5 5.0 3 40 65 25

3 CUMO 48,013 14% NGO 0.9 1.5 4.0 4 51 44 -7

4 FINCA 29,847 9% NGO 0.9 2.5 N/A 3 47 85 38

5 MLF MWI 22,768 7% NGO 0.9 1.5 N/A 4 35 41 6

6 FITSE 8,790 3% NGO 0.8 1.5 N/A 1 81 44 -37

7 PRIDE-MWI 8,500 2% NBFI N/A 2.5 N/A 1 N/A .

8 FINCOOP 3,731 1% Coop 0.8 N/A N/A N/A 60 20 -40

9 CCODE 1,598 0% NGO 0.9 N/A N/A N/A 113 .

10 NBS 540 0% Bank 2.8 N/A N/A N/A 63 .

11 MRFC 0 0% NBFI 0.9 2.5 N/A 1 75 N/A .

Name of MFITransparency IndexNumber Clients Age of Data (yrs) MIX

Diamonds

Institution

Type



Product pricing practices in Malawi

With 65% of borrowers receiving a loan with a good Transparency Index (between 76 and 100), overall pricing transparency in

Malawi is the highest in the region, as calculated by MFTransparency:

36% of borrowers receive loans where interest is calculated using a flat interest method, one of the lowest percentages in

the region.

84% of borrowers pay fees in addition to the interest rate

46% of borrowers must provide compulsory deposits in order to receive a loan, a relatively low percentage for the region.

75% of borrowers must buy insurance with their loan, a relatively high percentage

Price Components, MalawiTotals for this data analysis 27 332,630

Interest Method

Declining Balance 10 37% 212,227 64%

Flat 17 63% 120,403 36%

Interest Rate

Same rate for all loans for the product 22 81% 251,308 76%

Different rates for different loans 5 19% 81,322 24%

Fees

No fees charged 9 33% 51,992 16%

1 Fee charged 13 48% 269,542 81%

2 Fees charged 5 19% 11,096 3%

3 or more fees charged 0 0% 0 0%

Insurance

No Insurance required 15 56% 84,379 25%

1 Insurance required 12 44% 248,251 75%

2 or more insurance products required 0 0% 0 0%

Compulsory Deposit

No Compulsory Deposit required 4 15% 179,335 54%

Upfront Compulsory Deposit only 22 81% 153,241 46%

Ongoing Compulsory Deposits only 0 0% 0 0%

Upfront & Ongoing Deposits required 1 4% 54 0%

Price Structure Including

… one price component 0 0% 0 0%

… two price components 10 29% 37,126 10%

… three price components 8 23% 241,454 63%

… four price components 9 26% 54,050 14%

… charging all four and using flat interest 8 23% 51,744 13%

Products….

… charging Flat or UpFront Int 17 63% 120,403 36%

… charging Fees 18 67% 280,638 84%

… charging Insurance 12 44% 248,251 75%

… requring Compulsory Deposit 23 85% 153,295 46%

Product Transparency Index

Between 0 and 25 4 15% 1,691 1%

Between 26 and 50 8 30% 80,758 24%

Between 51 and 75 2 7% 35,585 11%

Between 76 and 100 13 48% 214,596 65%

Pricing and Transparency by Loan Amount Transp FullAPR Clients % Clients

MWK <50,000 58 136% 57,555 17%

MWK 50,001 to 150,000 63 101% 35,376 11%

MWK 150,001 to 250,000 71 81% 67,283 20%

MWK 250,001 to 350,000 58 123% 67,199 20%

MWK 350,001 to 450,000 89 69% 59,947 18%

MWK >450,000 66 89% 45,809 14%

Note: Presenting data on 27 products, Filtered to: Exclude products with less than 50 clients,

Products Clients



Pricing transparency by institution

The transparency level of microfinance institutions in Malawi is ranked in the following four categories. Their Transparency Index

results from specific pricing practices detailed below:

Good transparency (76<TI<100): Three institutions have a high Transparency Index, with CCODE actually exceeding the

theoretically perfect score of 100. This is due to a unique practice in which they charge a low declining balance interest rate

and also rebate a portion of the interest back to the borrower in the first month. This results in a calculated interest rate

that is lower than the advertised nominal rate. MARDEF also has an average TI of 100, but the individual sample TI’s vary,

with some being lower than 100 and others being higher than 100. FINCA also has a high transparency score and recorded

one of the most improved transparency scores.

Average transparency (51<TI<75): Two Institutions fall in this range – OIBM and NBS. OIBM is an interesting case in that

two products have high transparency indices, because they use declining balance interest, and two products have

transparency indices below 50, because they use flat interest. This provides a useful demonstration of how even the same

institution can charge interest two different ways on their products, leading almost certainly to confusion for the borrower

when they see the stated interest rates inside the institution. NBS was the only institution to not provide refreshed pricing

data in 2013, a factor important to note when comparing NBS data to the other MFIs.

Poor transparency (26<TI<50): Three institutions have poor transparency indices. FITSE has a relatively high 20%

compulsory deposit, combined with flat interest and two upfront fees. CUMO has flat interest ranging from 54% to 72% for

the same product, with fees, mandatory insurance, and also requiring a small compulsory deposit. MLF MWI has flat

interest, with no fees or insurance, but with a large compulsory deposit.

Very poor transparency (0<TI<25): Only one institution falls in this group. FINCOOP’s six products all have flat interest, all

have additional fees, all require insurance, and all require compulsory deposits, ranging as high as 50% on four of the

products. This level of compulsory deposit is extremely rare, and results in a dramatic increase in the true price. For

example, a typical sample of their Mpaba loan has an APR (int + fee + ins) of 88%, but when the impact of the 50%

compulsory deposit is included, the Full APR (int + fee + ins + dep) increases to 297%. Further explanation on the impact of

compulsory deposits on the true price of a loan is available at www.mftransparency.org.

Note: Active loan products are defined as loan products accessed by more than 50 borrowers. Low volume products (accessed by less than 50

borrowers) are not included in the pricing analysis. The Institutional Transparency Index is the weighted average of the Product Transparency

Indices for that Institution.

Name Institution TI Rank Number Rank Amt (USD) Rank Amt (USD) Rank#

Active

Loan

Samples

Age Data

(mon)

Country Totals 341,670 $18,211,654 $53 28

1 CCODE 113 1 1,598 9 $154,067 10 $402 10 4 12 11

2 MARDEF 100 2 166,575 1 $2,550,582 3 $15 3 1 4 11

3 FINCA 85 3 29,847 4 $3,752,103 2 $126 7 3 18 11

4 OIBM 65 4 51,308 2 $6,507,423 1 $175 8 4 19 11

5 NBS 63 5 540 10 $512,821 8 $974 11 1 3 34

6 FITSE 44 6 8,790 6 $649,408 6 $74 6 4 15 9

7 CUMO 44 7 48,013 3 $593,957 7 $12 2 2 8 11

8 MLF MWI 41 8 22,768 5 $1,556,644 5 $70 4 3 12 11

9 FINCOOP 20 9 3,731 8 $267,983 9 $73 5 6 33 9

10 MRFC N/A - 0 11 $0 11 $0 1 0 0 11

11 PRIDE-MWI N/A - 8,500 7 $1,666,667 4 $196 9 N/A - No Data

Institution

Data

Status

Total MF

Clients

Total MF

Portfolio

Avg Loan

Balance

Loan

Products

Transparency

Index



Transparency and loan amount

The first in the pair of graphs below presents the prices quoted to borrowers in Malawi, in terms of the nominal interest rate.

The second graph presents the prices paid by borrowers, using Full APR. The full APR includes all fees (both upfront and

ongoing), insurances, taxes and compulsory deposits paid by the borrower. The trend on the first graph shows that the quoted

interest rate increases as loan amounts decrease, increasing from 30% to 60-90%. Because of the relatively high pricing

transparency in Malawi, this is a much more noticeable price increase than in other countries in the region. The second graph is

therefore not dramatically different in shape, but the prices are higher, with prices on the smallest loans being in the 100% to

175% price range.



Transparency and full cost

The graph below indicates a strong association between a loan product’s price and its level of pricing transparency. As Full APR

increases, the corresponding Transparency Index value decreases.

The higher the price of a loan, the greater the likelihood is of those pricing being hidden through non-transparent interest rate

calculation methods and by the addition of costs in other ways, such as fees. To put it another way, a product generating

income of 30% for the institution has a quoted interest rate of close to 30%, is often calculated as declining balance, and has a

Transparency Index of close to 100. A product generating 55% of income has a quoted rate of 30% but is calculated as flat, and

has a Transparency Index of 50. A product generating 80% may have 30% flat interest, some fees and a compulsory deposit,

resulting in a Transparency Index of 37.

Some examples in Malawi include:

CUMO’s Masika product has a quoted interest rate ranging between 4.5% and 6.0% per month, is calculated “flat”, has

a 3% upfront fee, compulsory insurance costing 2% upfront, and a relatively small compulsory deposit of 5%. The Full

APR of these loans average 125%, and when compared to the annualized nominal rate of 54%, yields a TI of 43.

FINCA’s Village Banking product has a Full APR somewhat lower, averaging 107%. However, the product is advertised

at 7.0% to 7.5% declining balance interest, no fees, a smaller 0.5% compulsory insurance, and 10% compulsory deposit.

The annualized quoted rate of 84% compared to the true price of 107% gives a much higher Transparency Index of 79.

MARDEF’s Group loan demonstrates yet more complexity. The product is advertised at an interest rate of 28% per

year, and it is calculated on declining balance. Due to the existence of long grace periods where interest is not charged

for the additional days, however, the product yields an APR (interest only) averaging only 25%. The product has an

upfront fee of 2.4%, compulsory insurance of 0.5% upfront, and no compulsory deposit. When the fees and insurance

are added in, the resulting Full APR is 28%, resulting in a product with a Transparency Index of 100%, even though it has

fees and insurance.

The Pricing Transparency Index is MFTransparency’s scale for rating the level of transparency of

a price. The Index can be applied at a range of levels – country, institution, product and

loan. The Index shows the percentage of the loan price that is communicated by the lender’s

nominal interest rate to the borrower. The higher the Pricing Transparency Index rating equals

the more transparent the price, with a perfect score being 100.

Quoted nominal interest rate 25%

Example: ------------------------------------------ x 100 = -------------- x 100 = 33

Full APR (int + fee + ins + dep) 75%



Loan characteristics: Loan size

Microloans in Malawi are defined as loans under MLK 500,000. The data presented here

shows a clear correlation between the size of the loan and its price. The graph presents

loans grouped by size. The size of each data point relates to the number of borrowers who

have a loan of that product in that size. The larger the data point the higher the number of

borrowers who have that loan. A large range in prices is seen in smaller loan amounts

(50% - 300%), while larger loan amounts show less variation (10% - 100%).

The size of each data point relates to the number of borrowers who have a loan of that product in that size. The

larger the data point the higher the number of borrowers who have that loan.

Loan characteristics: Loan term

Most microloans in Malawi have a loan term less than 12 months. Prices fall as the loan

term increases, consistent with the comparatively lower operating cost ratio for longer

loans. Similarly to the effect of loan size, the graph below indicates that loans with shorter

loan terms have a much wider range of Full APRs when compared to longer term loans.

The Transparency Index shown in the tables for both loan size and loan term shows that

the higher the Full APR of the loan, the less transparently the loan is priced. Larger loans

and longer loans are priced more transparently and have lower prices.

Loan Amt

Ranges1:<50,000 2:<150,000 3:<250,000 4:<350,000 5:<450,000 6:>450,001 By Segment

# Samples 60 25 11 12 4 12

Avg Price 136% 101% 81% 123% 69% 89%

Transp Index 58 63 71 58 89 66

Loan Term 1:<=4m2:>4 and

<=8m

3:>8 and

<=12m

4:>12 and

<=18m

5:>18 and

<=24m6:>24m By Segment

# Samples 19 64 22 4 12 3

Avg Price 184% 115% 132% 83% 16% 41%

Transp Index 39 63 47 71 109 110



Loan characteristics: Matrix of price by loan size and loan term

The matrix presents the prices (Full APR) calculated using original loan documentation

representing real loans given to actual borrowers in Malawi. The higher the price, the

darker the shading is. In Malawi, the highest prices are seen on the top left of the matrix

(smallest loans, shortest terms), and the lowest on the bottom right (largest loans, longest

terms). This reflects the fact that the pricing of products partially depends on their level of

operating expenses and that the operating expense ratio increases dramatically for

smaller loans and for shorter loans.

There are some exceptions to the gradation trend of prices relative to loan amount and

term. In uncommon combinations, the price shown may be taken from samples from a

single product, as is the case here for the 6-9 month loan term. In this instance, the

average price of this loan category drops because that one product has a relatively low

price. As the category average is not calculated from a range of products this trend cannot

be considered representative.

Loan characteristics: Loan purpose

The vast majority of microloan products on offer in Malawi are designed for business

purposes, with over 70% of total loan products designed for business specifically. Loans

designed for general consumption, housing, education, and emergency purposes are very

rare, although many loans designed for business may in practice be used for a wide array

of purposes. The most expensive loans are aimed at emergency, any-purpose, and

multiple-purpose loans. Housing loans presented the lowest priced loan by purpose, most

likely due to the long term nature of the loan.

MWK USD <6 6-9 9-12 12-18 >18 All terms

<50,000 <$128 157% 64% 164% . 11% 140%

50,001 to 150,000 $129 to $385 122% . 200% . 21% 101%

150,001 to 250,000 $386 to $641 95% . 61% . . 78%

250,001 to 350,000 $898 to $1,154 118% . 103% . . 103%

350,001 to 450,000 $1,155 to $1,282 71% . . . . 69%

>450,000 >$1,282 82% . 93% 102% . 89%

All amounts 140% 71% 124% 83% 23% 117%

Loan Amounts Loan Terms (in months) Purpose 1:Business 2:Housing 3:Consumer 4:Emergency5:Any

Purpose

6:Mult

PurposeBy Segment

# Samples 88 3 0 4 17 6

Avg Price 97% 11% . 305% 178% 254%

Transp Index 65 110 . 12 49 13



MFI characteristics: Loan portfolio scale

The majority of samples collected in Malawi were from institutions with a total portfolio

of less than 1 million USD, with only one institution (OIBM) with a portfolio scale larger

than 5 million USD. The data below shows a dramatic decrease in prices between the first

portfolio-scale range and the following ones, with only a modest systematic drop in the

average price for each segment. This could be attributed to efficiency gains created by the

larger institutions and the resultant lower operating costs being passed onto the borrower

in the form of reduced prices, however only one institution has a total portfolio of less

than 0.5 million USD so this conclusion is difficult to draw.

MFI characteristics: Institution type

The majority of samples collected were from non-governmental organizations (NGOs),

which are typically non-profit making and non-regulated. Cooperatives and banks form a

smaller segment of the Malawian microfinance market. The highest range of prices is

from FINCOOP, the only cooperative in the Malawi dataset. The Full APR is relatively high

because of the very large 50% compulsory deposit required on several of their loan

products. The two Banks (OIBM and NBS) have average prices and Transparency Indexes

similar to the NGOs. In other countries, banks generally have larger loan amounts than

NGOs, resulting in lower prices than NGOs. In this case, the banks are working in the same

market as the NGOs.

Portfolio Scale 1:<$0.5M 2:<$1.0M 3:<$3.0M 4:<$5.0M 5:<$10.0M 6:>$10.0M By Segment

# Samples 33 38 16 18 19 0

Avg Price 232% 64% 91% 83% 72% .

Transp Index 18 79 68 91 74 .

Inst Type 1:NGO 2:Coop 3:Bank 4:Rural Bank 5:NBFI 6:Other By Segment

# Samples 69 33 22 0 0 0

Avg Price 76% 232% 68% . . .

Transp Index 80 18 72 . . .



Pricing trends in Malawi

A detailed table on pricing trends of each product is included in Appendix 3. Additional details are available by

requesting the full TILT tables from MFTransparency at [email protected] . A close study of this table, along

with other data and information presented in this report, illustrates why any general conclusions about pricing trends

must be done with great care. It is far from easy to determine “Are prices going up or down in Malawi?” or “Did the

true price of this product really change?” The main reasons for this include:

Range in prices and the Spread Index: A product rarely has “one true price”. Prices of a product will vary due

to the composition of the pricing components and how they interact with loan amount, loan term, grace

periods, and other factors. The only loan product that has one universal Full APR is a loan with a declining

balance interest rate and no other charges. Every other price factor complicates the price, sometimes quite

dramatically. Examining the Pricing Table (Appendix 2) shows that the products in Malawi do not have very

wide ranges in the Full APRs of the samples, relative to the spreads in other countries in the region. The

Spread Index columns in that table are a valuable indication of how reliable the average price is for describing

all loans in that product. For example, MARDEF’s Group Loan has sample prices range from 25% to 31%,

showing a Spread Index of 25 (calculated as (31-25) / 25).

Inconsistent loan sample attributes: The graphs in this analysis report show the prices of every loan sample,

but the tables summarize these prices into the average Full APRs. Comparing the average Full APR price of a

product over time to identify change can potentially give inaccurate conclusions. The loan samples used for

pricing calculations in the first round of data are not always identical to those used for the second round of

analysis, varying in both loan amount and loan term amongst other attributes. Pricing components are

sensitive to these loan sample attributes; for example, a large upfront fee will have more impact on shorter

term loans than longer term ones resulting in a higher APR on shorter loans. A drop in the average Full APR

seen in the tables may be due to a difference in attributes of the loan samples used for the pricing calculations

in each year rather than due to a drop in prices. The most precise means of determining change in prices

would be to take exactly the same loan, with exactly the same repayment schedule and calculate the Full APR

last year and this year, and then to repeat that process with more samples. In actuality, if pricing conditions

changed, it may well be that some loans have a lower price while some loans have a higher price within the

same loan product. These are the realities when loan prices are not based solely on declining balance interest.

Increasing loan sizes over time: An MFI may leave the price components of a product unchanged but shift

toward gradually larger loan sizes, resulting in a lower Full APR. This is a common occurrence over time; a fact

documented in other MFTransparency resources that disprove arguments that MFIs have lower efficiency

ratios over time solely due to increased scale and increased competition. Drops in efficiency ratios (and

sometimes accompanying drops in portfolio yield) are usually the result of increases in average loan balance.

Click here for more information on this.

The problem with averages: As highlighted above, determining the price change of a single product is

complex, and when extrapolating to analyze the price changes of an MFI with multiple products, or price

changes within an entire country, one encounters a large number of complex assumptions that must be taken

into consideration.

The same issues with Full APR also hold true for determining the average Transparency Index of a product and of an

institution’s blend of products. Those products with a high Spread Index have a wide range of prices and have a

correspondingly wide range of Transparency Indices. MFTransparency is currently investigating adapting the

Transparency Index accordingly in the future to provide a more accurate indicator of the range of transparency of a true

microloan price.


http://www.mftransparency.org/wp-content/uploads/2013/04/MFT-PRES-607-EN-Utrecht-NPM-Pricing-and-Profits-Part-2-2013-02.pdf.)



Appendix 1: List of participating institutions

Totals Less Than 50,001 150,001 250,001 350,001 More than

Age (mon) Amt (USD) # 50,000 150,000 250,000 350,000 450,000 450,000 Inst Dist Country Dist

Country Total $53 Clients 333,170 57,555 35,376 67,283 67,199 59,947 45,809

Products: 28 Avg Price 116% 136% 101% 81% 123% 69% 89%

Transp Ind 58 63 71 58 89 66# samples 124 60 25 11 12 4 12

1 MARDEF $15 (3) Clients 166,575 33,315 49,973 49,973 33,315

Products: 1 Avg Price 28% . 30% . 26% . 25%# samples 4 0 2 0 1 0 1

2 OIBM $175 (8) Clients 51,308 355 2,680 13,741 14,807 8,167 6,312

Products: 4 Avg Price 72% 78% 79% 73% 39% 67% 73%# samples 19 3 3 5 1 2 5

3 CUMO $12 (2) Clients 48,013 19,679 14,167 14,167

Products: 2 Avg Price 108% 103% 125% 125% . . .# samples 8 6 1 1 0 0 0

4 FINCA $126 (7) Clients 29,847 11,716 8,954 5,304 1,826 1,603 222

Products: 3 Avg Price 83% 94% 84% 86% 79% 71% 69%# samples 18 5 3 3 3 2 2

5 MLF MWI $70 (4) Clients 22,768 19,887 2,846 36

Products: 3 Avg Price 112% 107% 121% 107% . . .# samples 12 7 4 1 0 0 0

6 FITSE $74 (6) Clients 8,790 2,644 5,233 481 411 22

Products: 4 Avg Price 87% 85% 90% . 91% . 93%# samples 15 10 3 0 1 0 1

7 PRIDE-MWI $196 (9) Clients 8,500

Products: N/A Avg Price . . . . . . .# samples 0 0 0 0 0 0 0

8 FINCOOP $73 (5) Clients 3,731 2,429 745 186 129 129 93

Products: 6 Avg Price 232% 245% 212% . 209% . 206%# samples 33 21 5 0 5 0 2

9 CCODE $402 (10) Clients 1,598 847 752

Products: 4 Avg Price 12% 13% 11% . . . .# samples 12 8 4 0 0 0 0

10 NBS $974 (11) Clients 540 54 54 54 108

Products: 1 Avg Price 38% . . 38% 38% . 38%# samples 3 0 0 1 1 0 1

11 MRFC $0 (1) Clients 0

Products: 0 Avg Price . . . . . . .# samples 0 0 0 0 0 0 0

8

32

9

9

8

9

8

9

7

N/A

7

Data

StatusInstitution

Client Distribution by Loan Amount (Nat'l Currency)

Price by

Loan

Amount

Client Distribution

Avg Loan Bal (Rank)

Number Prods



Appendix 2: Pricing per product

Note: this table is a summary of pricing data collected for each MFI for all loans products provided to more than 50 borrowers. For access to all data, please email [email protected]. Abbreviations: “up” stands for up-front;

“on” stands for “on-going”.

Institution Product NumClients % Tot Avg Bal Amt (Min) Amt (Max) Min & Max Avg APR Spread Transp Ind Current Descrip Current Description

CUMO Fumba 790 2% $39 10,000 50,000 80%-80% 80% 0 75 60.0%, Flat 3% up 2.00% up 5.0% up

CUMO Masika 47,223 98% $12 2,000 200,000 125%-125% 125% 0 43 54.0%-72.0%, Flat 3% up 2.00% up 5.0% up

FINCOOP Mpamba 584 16% $150 6,000 1,500,000 188%-297% 254% 58 13 32.0%-42.0%, Flat 3% up 2.00% up 50.0% up

FINCOOP Mwai wa Mayi 1,240 33% $26 5,000 500,000 177%-178% 178% 0 25 45.0%, Flat 3% up 2.00% up 33.3% up

FINCOOP Phindu 800 21% $44 5,000 500,000 176%-180% 178% 2 25 45.0%, Flat 3% up 2.00% up 33.3% up

FINCOOP Pompopompo 122 3% $29 1,120 30,000 298%-308% 305% 3 12 36.0%, Flat 3% up 2.00% up 50.0% up

FINCOOP Umphawi 423 11% $93 5,000 1,500,000 234%-304% 271% 30 16 42.0%, Flat 3% up 2.00% up 50.0% up

FINCOOP Payroll 562 15% $124 5,000 1,500,000 223%-291% 237% 31 16 38.0%, Flat 3% up 2.00% up 50.0% up

FITSE Agric 1 115 1% $61 5,000 100,000 64%-70% 66% 10 82 54.0%, Flat 3% up 500 up None 20.0% up

FITSE Agric 2 829 9% $117 5,000 200,000 63%-79% 69% 26 78 54.0%, Flat 3% up 500 up None 20.0% up

FITSE Business 2 7,792 89% $66 5,000 300,000 113%-140% 121% 24 40 48.0%, Flat 3% up 500 up None 20.0% up

FITSE Business 3 54 1% $573 5,000 2,000,000 91%-93% 92% 2 45 42.0%, Flat 3.50% up 500 up None 10.0% up 10% on

FINCA Idv Business 2,221 7% $355 50,000 4,500,000 63%-71% 67% 13 89 60.0%-67.2%, Decl 1.50% up None None

FINCA Village Bkg 20,635 69% $91 5,000 400,000 100%-118% 107% 18 79 84.0%-90.0%, Decl None 0.50% up 10.0% up

FINCA Small Grp 6,991 23% $156 40,000 500,000 74%-77% 75% 5 104 78.0%, Decl None 0.50% up None

MARDEF Group 166,575 100% $15 150,000 500,000 25%-31% 28% 25 100 28.0%, Decl 2.40% up 0.50% up None

MLF MWI Bridging 355 2% $279 65,000 180,000 107%-108% 107% 0 45 48.0%, Flat None None 20.0% up

MLF MWI Irrigation 1,425 6% $82 18,000 80,000 46%-84% 69% 82 83 57.0%, Flat None None 10.0%-20.0% up

MLF MWI Standard 20,988 92% $64 18,000 80,000 148%-167% 159% 13 38 60.0%, Flat None None 10.0%-20.0% up

NBS SME 540 100% $950 200,000 1,500,000 38%-38% 38% 1 63 24.0%-36.0%, Decl 1%-3% up None None

OIBM Agriculture 10,659 21% $178 200,000 50,000,000 39%-39% 39% 1 95 37.0%-40.0%, Decl 2% up None 15.0% up

OIBM Maziko 34,795 68% $47 140,000 2,800,000 91%-94% 93% 4 53 48.8%, Flat 3.50% up None 15.0% up

OIBM Mzati 2,306 4% $724 50,000 1,000,000 92%-145% 106% 57 40 42.0%, Flat 3.50% up 250 up 937.80 up 15.0% up

OIBM Payroll 3,548 7% $371 15,000 4,000,000 35%-46% 41% 32 110 45.0%, Decl 3% up None None

CCODE Business 139 9% $17 10,000 10,000 17%-17% 17% 0 143 24.0%, Decl None None 10.0% up

CCODE Home 334 21% $12 20,000 20,000 11%-11% 11% 0 110 12.0%, Decl None None 10.0% up

CCODE Sanitation 870 54% $153 40,000 100,000 11%-11% 11% 0 110 12.0%, Decl None None 10.0% up

CCODE Water 255 16% $58 18,000 120,000 11%-11% 11% 1 109 12.0%, Decl None None 10.0% up

Target Group Loan Amounts FeesNominal Interest RatePricing (FullAPR)Inst & Product Insurance Compulsory Deposit




Appendix 3: Pricing trend

Note: this table is a summary of pricing data collected for each MFI for all loans products provided to more than 50 borrowers. The data is presented only for products for which data is available during the first and the second data

collections. For access to all data, please email [email protected]. Abbreviations: “up” stands for up-front; “on” stands for “on-going”.

Institution Product 2012 2013 2012 2013 Change 2012 2013 2012 2013 Change 2012 2013 Change 2012 2013 2012 2013 2012 2013

CUMO Fumba 6,763 790 79 75 -4 0 0 76% 80% 4% 60% FL 60% FL 3% up None 2.00% up N/A 5.0% up

CUMO Masika 32,525 47,223 44 43 -1 2 0 109% 125% 17% 48%-72% FL 54%-72% FL 6% 3% up None 2.00% up 5.0% up 5.0% up

FINCOOP Mpamba 9,968 584 45 13 -33 15 58 70% 254% 184% 32% FL 32%-42% FL / 10% 30% up 3% up None 2.00% up N/A 50.0% up

FINCOOP Mwai wa Mayi 5,989 1,240 50 25 -24 3 0 72% 178% 105% 36% FL 45% FL 9% 30% up 3% up None 2.00% up N/A 33.3% up

FINCOOP Phindu 4,984 800 41 25 -16 13 2 72% 178% 105% 30% FL 45% FL 15% 30% up 3% up None 2.00% up N/A 33.3% up

FINCOOP Pompopompo 665 122 42 12 -30 5 3 87% 305% 218% 36% FL 36% FL 30% up 3% up None 2.00% up N/A 50.0% up

FINCOOP Umphawi . 423 . 16 . . 30 . 271% . 42% FL . 3% up . 2.00% up . 50.0% up

FINCOOP Payroll . 562 . 16 . . 31 . 237% . 38% FL . 3% up . 2.00% up . 50.0% up

FITSE Agric 1 1,035 115 175 82 -93 82 10 27% 66% 38% 48% FL 54% FL 6% 30% up 3% up 500 up None None 20.0% up 20.0% up

FITSE Agric 2 435 829 119 78 -41 7 26 40% 69% 29% 48% FL 54% FL 6% 30% up 3% up 500 up None None 20.0% up 20.0% up

FITSE Business 2 1,100 7,792 37 40 3 0 24 130% 121% -9% 48% FL 48% FL 30% up 3% up 500 up None None 20.0% up 20.0% up

FITSE Business 3 . 54 . 45 . . 2 . 92% . 42% FL . 3.50% up 500 up . None . 10.0% up 10% on

FINCA Idv Business 1,202 2,221 55 89 34 6 13 76% 67% -8% 42% FL 60%-67% DB Method 1,5000 up 1.50% up 1.50% up None None N/A N/A

FINCA Village Bkg 16,129 20,635 47 79 32 25 18 129% 107% -22% 60% FL 84%-90% DB Method None None 0.50% up 10.0% up 10.0% up

FINCA Small Grp . 6,991 . 104 . . 5 . 75% . 78% DB . None . 0.50% up . N/A

MARDEF Group 11,815 166,575 41 100 59 34 25 36% 28% -8% 15% FL 28% DB Method 2.40% up 2.40% up 0.50% up 0.50% up N/A N/A

MLF MWI Bridging 240 355 46 45 -2 0 0 103% 107% 4% 48% FL 48% FL None None None None 20.0% up 20.0% up

MLF MWI Irrigation 1,361 1,425 73 83 10 20 82 78% 69% -10% 57% FL 57% FL None None None None 10.0% up 10.0%-20.0% up

MLF MWI Standard 19,891 20,988 34 38 4 28 13 179% 159% -19% 60% FL 60% FL None None None None 20.0% up 10.0%-20.0% up

NBS SME . 540 . 63 . . 1 . 38% . 24%-36% DB . 1%-3% up . None . N/A

OIBM Agriculture 6,750 10,659 72 95 23 0 1 36% 39% 3% 26%-27% DB 37%-40% DB 11% / 13% 2% up None None 15.0% up 15.0% up

OIBM Maziko 29,921 34,795 45 53 7 7 4 79% 93% 14% 36% FL 49% FL 13% 2.50% up 3.50% up None None 15.0% up 15.0% up

OIBM Mzati 3,878 2,306 26 40 13 124 57 83% 106% 24% 22%-30% FL 42% FL 20% / 12% 2.50% up 2500-14,5000 up 3.50% up 250 up None 937.80 up 15.0% up 15.0% up

OIBM Payroll 6,228 3,548 N/A 110 . . 32 N/A 41% . 25% DB 45% DB 21% 20% up 3% up None None N/A N/A

CCODE Business 399 139 141 143 2 2 0 17% 17% 0% 24% DB 24% DB None None None None N/A 10.0% up

CCODE Home 233 334 74 110 37 7 0 16% 11% -5% 12% DB 12% DB None None None None N/A 10.0% up

CCODE Sanitation 215 870 72 110 38 4 0 17% 11% -6% 12% DB 12% DB None None None None N/A 10.0% up

CCODE Water . 255 . 109 . . 1 . 11% . 12% DB . None . None . 10.0% up

Compulsory Fees Compulsory InsuranceFullAPR (Avg) Quoted Interest RateInst & Product Number of Clients Transparency Index Spread Index Security Dep Description




Glossary

Compulsory Deposit - A requirement for borrowers to set aside

funds as a condition on receiving the loan.

Full APR – This is the true price of the loan paid by the

borrower in annualized terms. The full annualized percentage

rate includes the impact of interest, all fees paid by the

borrower (both upfront and ongoing), all compulsory

insurances fees paid, all taxes and all compulsory deposits

(sometimes called “savings”) required from the borrower. Full

APR = interest + fees + insurance + tax + compulsory deposit.

The calculation is done on a discounted cash flow method and

the result is annualized using a nominal annualization process

(e.g., 1%/month x 12 months = 12% per year) rather than by

compounding (e.g., 1% per month -> (1.01)^12 -1 = 12.7%).

Graph legend – the legend at the top of each graph shows the

number of data points present in each category shown on the

graph. The legend changes for each graph. The figure in

parentheses indicates the number of data points for that

category.

Interest rate: declining balance - Interest calculation based on

the outstanding loan balance – the balance of money that

remains with the borrower as the loan is repaid during the loan

term.

Interest rate: flat method - Interest calculation based on the

original loan amount throughout the loan term rather than on

the money the borrower actually has.

Low Volume Product –Products with less than 50 borrowers

are considered as low volume products, and are not included in

the pricing analysis.

Loan Sample – these are examples of real loans given to actual

borrowers. MFTransparency collects loan documentation

(scans/print-outs of repayment schedules and loan contracts)

from the microfinance institutions and uses these to calculate

the price paid by the borrower.

Loan Segmentation – the size ranges used to categorize loans

vary for each country but are consistent within the country.

There are 6 segments of loan size, categorizing loans by their

disbursement amount. For example if the biggest loan is

100,000 then the segments are: 1) loans under 8,000 (8%), 2)

loans between 8% to 30,000 (30%), 3) loans between 30% to

50,000 (50%), 4) loans between 50% to 70,000 (70%), 5) loans

between 70% to 90,000 (90%), and 6) between 90% -105,000.

Microloan – Credit products issued by microfinance institutions

that fall under a specified size limit. Microloans are defined by

their size rather than by other attributes such as loan purpose.

The size limit varies for each country. Where country-specific

legislation does not specify an upper size limit for microloans,

MFTransparency determines a suitable maximum loan size in

conjunction with other industry actors.

MFI (Microfinance Institution) – A financial institution or

microfinance provider that has at least one micro-loan product.

Nominal Interest Rate - The interest rate details as quoted by

the institution to the borrower. This is annualized for the

purposes of the analysis graphs. If a product is advertised with

an interest rate of “from 18% to 22%” then the 18% figure is

used in the calculations.

Participation Rate - The market share (in terms of borrowers)

represented by the institutions that have disclosed their

transparent prices in the respective country.

Product Eligibility - The characteristics that borrowers must

meet in order to be eligible to receive a loan product; for

example, if the loan is available to both males and females, if

they need to be a salaried employee, if they need to be in a

certain age range, etc.

Portfolio Size - An approximation of the outstanding principle

for all outstanding client loans, including current, delinquent

and restructured loans, but not loans that have been written

off or employee loans.

Pricing Transparency Index - A scale for rating the level of

transparency of a true price. The Index can be applied at a

range of levels – country, institution, product and loan. It is

calculated as the nominal annual interest rate divided by the

Full APR of that loan, e.g., a product advertised as 20% interest

rate and with a Full APR of 50% would have a Transparency

Index of 20% / 50% x 100 = 40. A perfect score is 100. For

Institution and Country Indices, MFT generates weighted

averages based on clients in each product.

Product Purpose - The purposes for which the loan product can

be used, for example for business (income generation)

purposes, emergency purposes, consumption, education,

housing, agriculture or multiple purpose loans.

Size of data points (bubbles) – each bubble represents the

price of one loan sample. The size of the data point relates to

the number of borrowers who have a loan at that size. For

countries where MFTransparency does not have borrower-

number data, all data points are presented in uniform size.

Spread Index – Calculates how broad the range of sample

prices are, calculated as (Highest – Lowest) / Lowest x 100. A

small number means a small range of prices for that product.

Total Cost of Credit - Total amount paid by the borrower for

the loan including all fees and other charges from the lender.

Transparent Pricing Initiative – Country-by-country projects

that collect and disclose details of credit products on offer in

each country, with a particular focus on disclosure of the prices

paid by borrowers for these products. Details of these loan

products are voluntarily disclosed by the microfinance

institutions.



Read more on www.planetrating.com

Research papers and microfinance sector

overviews are publicly available,

contributing to the knowledge-sharing

among microfinance practitioners,

researchers and students

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After the initial 24-month validity, rating

reports are made freely available in an

effort to contribute to further transparency

in the microfinance industry.

To download our reports please create a free

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contact us to learn more about Planet Rating’s

subscription service.

[email protected]

Promoting Transparent Pricing in the

Microfinance Industry

Read more on www.mftransparency.org

MicroFinance Transparency (MFTransparency)

facilitates microfinance pricing disclosure, offers

policy advisory services and develops training

and education materials for all market

stakeholders. Representing an industry

movement toward responsible pricing practices,

MFTransparency has worked in 29 countries,

with pricing data submitted voluntarily by over

500 institutions representing loan products sold

to nearly 50 million clients.

Transparent Pricing Data – visit the TILT

(Truth in Lending Tables) Data Platform.

Transparent Pricing Resources – visit the

Resources Library for educational content.

Transparent Pricing Developments - visit

the News & Features section of

MFTransparency’s website.

[email protected]



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