Principle # 4 – Responsible

Pricing

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1. Client protection principles

2. Principle #4 in practice

3. Participant feedback

4. Tools for improving practice

5. Conclusion and call to action

Agenda

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1. Appropriate product design and delivery

2. Prevention of over-indebtedness

3. Transparency

4. Responsible pricing

5. Fair and respectful treatment of clients

6. Privacy of client data

7. Mechanisms for complaint resolution

Client Protection Principles

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1. Client protection principles

2. Principle #4 in practice

3. Participant feedback

4. Tools for improving practice

5. Conclusion and call to action

Agenda

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Responsible Pricing

The Principle in Practice:

Pricing, terms, and conditions are set in a way that is both affordable to clients and sustainable for the financial institution.

Consider this:

Financial sustainability is required to continue serving clients, but is not an end in itself.

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Price competitively

Earn reasonable return

Use profits to benefit clients

Set prices that are not subsidized, are market oriented, and competitive within the country context.

Earn a rate of return that supports operations and growth, and does not deviate significantly from peers.

Invest a portion of the profits to increase value to clients, such as lowering interest rates or adding or improving products and services.

The Principle in Practice

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Do not pass inefficiencies to the client

Set reasonable fees

Compare efficiency to similar competitors and do not transfer inefficiencies to clients.

Do not charge excessive penalties /fees for pre-payment, account closure or other services. For example, fees should not unreasonably compound debt nor prevent a client from changing providers.

The Principle in Practice

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Three important steps for responsible pricing

Formalize pricing procedures for each product.

Compare prices with similar competitors.

Manage profitability targets and offer better value for the money

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1. Client protection principles

2. Principle #4 in practice

3. Participant feedback

4. Tools for improving practice

5. Conclusion and call to action

Agenda

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Feedback from Participants

Have you received training from your institution that highlights responsible pricing?

What effect does the competitiveness of the local microfinance market have on pricing?

Have you seen examples of irresponsible pricing?

What pricing procedures do MFIs commonly use?

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1. Client protection principles

2. Irresponsible pricing

3. Principle #4 in practice

4. Participant feedback

5. Tools for improving practice

6. Conclusion and call to action

Agenda

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Technical Tools

Getting Started Questionnaire: Self Assessment for MFIsCalculating Transparent Prices (MFTransparency)Putting Transparency into Practice: Communicating About Pricing Responsible Pricing State of PracticeTechnical Guide for Investors

Samples and Case Studies

Client Welcome KitLoan Agreement for Small Business Clients from CrystalLoan Contract Summary Handout from MiBancoTransparent & Responsible Pricing at Mi-Bospo

Tools available from the Smart Campaign

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1. Client protection principles

2. Irresponsible pricing

3. Principle #4 in practice

4. Participant feedback

5. Tools for improving practice

6. Conclusion and call to action

Agenda

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Pricing, terms, and conditions must be responsible—affordable to the client, sustainable to the institution.Earning returns is the means to an end (serving clients in the long-term), and not an end unto itself.The Smart Campaign offers tools to help practitioners improve their practices in this area.

Summary

Call to Action: What next steps can your institution take to make sure that your prices are affordable to clients and sustainable for the institution?

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