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Promoting Transparent Pricing in the Microfinance Industry. Prices and Profits: Who Watches Which, and How do they Relate? Chuck Waterfield SPTF Conference Panama June 2013. Prices or Profits?. Fair prices and Fair Profits… which drives which?

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slide1

Promoting Transparent Pricing in the Microfinance Industry

Prices and Profits: Who Watches Which, and How do they Relate?

Chuck Waterfield

SPTF Conference

Panama

June 2013

prices or profits
Prices or Profits?
  • Fair prices and Fair Profits… which drives which?
  • Can you have fair prices and unfair profits? Or unfair prices and fair profits?
  • Which aspect do clients and MFIs focus on?
  • Which should we focus on when determining responsible practice?
double bottom line there is a balance between business and client
Double Bottom Line –There is a balance between business and client

Client

MFI

Ideally, we seek a “win-win” in which both the client and the MFI benefit

double bottom line there is a balance between business and client1
Double Bottom Line –There is a balance between business and client

Client

MFI

Adequate PROFIT

Affordable PRICE

Ideally, we seek a “win-win” in which both the client and the MFI benefit

double bottom line there is a balance between business and client2
Double Bottom Line –There is a balance between business and client

Client

MFI

Adequate PROFIT

Affordable PRICE

Costs

Price

Ideally, we seek a “win-win” in which both the client and the MFI benefit

double bottom line there is a balance between business and client3
Double Bottom Line –There is a balance between business and client

Client

MFI

Adequate PROFIT

Affordable PRICE

In Microfinance, neither of these are easy to understand! The depend on the PRODUCT

Costs

Price

Ideally, we seek a “win-win” in which both the client and the MFI benefit

slide8

Market Conditions and Profit Sources

Price

Transparent

Identical

Product

slide11

Market Conditions and Profit Sources

Price

Transparent

Efficiency & Competition

Identical

Product

slide12

Market Conditions and Profit Sources

Price

Transparent

TextbookFiction

Efficiency & Competition

Identical

Product

slide13

Market Conditions and Profit Sources

Hidden

Price

Transparent

TextbookFiction

Efficiency & Competition

Identical

Product

slide16

Market Conditions and Profit Sources

Hidden

Deception

Price

Transparent

TextbookFiction

Efficiency & Competition

Identical

Product

slide17

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Deception

Price

Transparent

TextbookFiction

Efficiency & Competition

Identical

Product

slide18

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Deception

Price

Transparent

TextbookFiction

Efficiency & Competition

Different

Identical

Product

slide22

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Deception

Price

Transparent

TextbookFiction

Controlled Confusion

Efficiency & Competition

Efficiency & Confusion

Different

Identical

Product

slide23

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Deception

Price

Transparent

TextbookFiction

Controlled Confusion

Efficiency & Competition

Efficiency & Confusion

Different

Identical

Product

slide27

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Chaos

Deception

Mass confusion

Price

Transparent

TextbookFiction

Controlled Confusion

Efficiency & Competition

Efficiency & Confusion

Different

Identical

Product

slide28

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Chaos

REALITY

Deception

Mass confusion

Price

Transparent

TextbookFiction

Controlled Confusion

Efficiency & Competition

Efficiency & Confusion

Different

Identical

Product

slide29

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Chaos

REALITY

Deception

Mass confusion

Price

Transparent

TextbookFiction

Controlled Confusion

Efficiency & Competition

Efficiency & Confusion

OPTIMAL

GOAL

Different

Identical

Product

double bottom line there is a balance between business and client4
Double Bottom Line –There is a balance between business and client

Client

MFI

Adequate PROFIT

Affordable PRICE

Responsible Profit Targets

Transparent Pricing

moving forward
Moving Forward
  • Transparent Pricing
    • Insist on transparent pricing of all responsible MFIs
    • Urge regulators to require transparent pricing of all lenders
    • Continue to study and learn from true prices
  • Responsible Profit Targets
    • Determine thresholds for responsible profit
    • Make the system simple, requiring little more than financial statements
    • Use as an initial hurdle for additional certification of responsible practice
slide36

Promoting Transparent Pricing

in the Microfinance Industry

MicroFinance Transparency is an NGO registered in the USA

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