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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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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? • 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 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 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 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 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
Market Conditions and Profit Sources Price Product
Market Conditions and Profit Sources Price Transparent Identical Product
Market Conditions and Profit Sources Price Transparent Efficiency & Competition Identical Product
Market Conditions and Profit Sources Price Transparent TextbookFiction Efficiency & Competition Identical Product
Market Conditions and Profit Sources Hidden Price Transparent TextbookFiction Efficiency & Competition Identical Product
Market Conditions and Profit Sources Hidden Deception Price Transparent TextbookFiction Efficiency & Competition Identical Product
Market Conditions and Profit Sources Hidden Smoke & Mirrors Deception Price Transparent TextbookFiction Efficiency & Competition Identical Product
Market Conditions and Profit Sources Hidden Smoke & Mirrors Deception Price Transparent TextbookFiction Efficiency & Competition Different Identical Product
Cost and Price of a $300 loan is very different than for a $1000 loan
Market Conditions and Profit Sources Hidden Smoke & Mirrors Deception Price Transparent TextbookFiction Controlled Confusion Efficiency & Competition Efficiency & Confusion Different Identical Product
Market Conditions and Profit Sources Hidden Smoke & Mirrors Deception Price Transparent TextbookFiction Controlled Confusion Efficiency & Competition Efficiency & Confusion Different Identical Product
Market Conditions and Profit Sources Hidden Smoke & Mirrors Chaos Deception Mass confusion Price Transparent TextbookFiction Controlled Confusion Efficiency & Competition Efficiency & Confusion Different Identical Product
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
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 client Client MFI Adequate PROFIT Affordable PRICE Responsible Profit Targets Transparent Pricing
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
Promoting Transparent Pricing in the Microfinance Industry MicroFinance Transparency is an NGO registered in the USA