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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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Prices and Profits: Who Watches Which, and How do they Relate? Chuck Waterfield SPTF Conference

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Prices and profits who watches which and how do they relate chuck waterfield sptf conference

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


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Price

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Price

Transparent

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Price

Transparent

Efficiency & Competition

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Price

Transparent

TextbookFiction

Efficiency & Competition

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Hidden

Price

Transparent

TextbookFiction

Efficiency & Competition

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Hidden

Deception

Price

Transparent

TextbookFiction

Efficiency & Competition

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Deception

Price

Transparent

TextbookFiction

Efficiency & Competition

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Deception

Price

Transparent

TextbookFiction

Efficiency & Competition

Different

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Cost and Price of a $300 loan is very different than for a $1000 loan


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

High Prices do not necessarily mean High Profits


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Deception

Price

Transparent

TextbookFiction

Controlled Confusion

Efficiency & Competition

Efficiency & Confusion

Different

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Deception

Price

Transparent

TextbookFiction

Controlled Confusion

Efficiency & Competition

Efficiency & Confusion

Different

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Typical Price Curve from MFT


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Market Conditions and Profit Sources

Hidden

Smoke & Mirrors

Chaos

Deception

Mass confusion

Price

Transparent

TextbookFiction

Controlled Confusion

Efficiency & Competition

Efficiency & Confusion

Different

Identical

Product


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

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


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

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


Defining a responsible price

Defining a Responsible Price


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Defining a Responsible Price


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Defining a Responsible Price


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Defining a Responsible Price


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


Prices and profits who watches which and how do they relate chuck waterfield sptf conference

Promoting Transparent Pricing

in the Microfinance Industry

MicroFinance Transparency is an NGO registered in the USA


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