1 / 20

Client protection principles Principle #2 in practice

Principle #2 – Transparent and Responsible Pricing This presentation is made possible by the Smart Campaign www.smartcampaign.org. Agenda. Client protection principles Principle #2 in practice Effects of non-transparency and the client perspective Participant feedback

kay
Download Presentation

Client protection principles Principle #2 in practice

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Principle #2 – Transparent and Responsible PricingThis presentation is made possible by the Smart Campaignwww.smartcampaign.org

  2. Agenda Client protection principles Principle #2 in practice Effects of non-transparency and the client perspective Participant feedback Practitioner lessons and good practices Conclusion and call to action

  3. 1. Avoidance of over-indebtedness 2. Transparent and responsible pricing 3. Appropriate collections practices 4. Ethical staff behavior 5. Mechanisms for redress of grievances 6. Privacy of client data Client Protection Principles

  4. Agenda Client protection principles Principle #2 in practice Effects of non-transparency and the client perspective Participant feedback Practitioner lessons and good practices Conclusion and call to action

  5. Transparent and Responsible Pricing: Principle in Practice • Transparently disclose, in a form understandable to clients: • Pricing • Terms • Conditions (including interest charges, insurance premiums, all fees, etc.) Transparent Pricing, terms, and conditions are set in a way that is both affordable to clients and sustainable for the financial institution. Responsible Transparent pricing is a pre-condition to responsible pricing.

  6. Agenda Client protection principles Principle #2 in practice Effects of non-transparency and the client perspective Participant feedback Practitioner lessons and good practices Conclusion and call to action

  7. Lack of transparency affects the client and the MFI Lack of transparency Effects MFI… Client… 1 …loses business when client tells others about her experience. …sees that her savings have decreased and thinks the bank has robbed her. Client does not understand the maintenance fees for her savings account. 2 …loses benefit of investment in new technologies. …is demoralized and does not trust ATM transactions. Client is not awarethat she receives only three free ATM withdrawals before incurring fees. 3 …finds that products intended to add value and attract clients actually have the opposite effect. …concludes that insurance is a rip-off when she does not have the premium returned. Client believes that if she does not file an insurance claim, the premium will be returned to her.

  8. Client Perspective Can your clients agree with the following? • I can easily understand the interest rate and compare it to other institutions. • I received the loan amount as stated in my contract. • I know my installment amounts and when payments are due. • I’ve never had unexpected: late fees, early payment fees, or account activity fees, changes to my interest rate or loan terms. • I understand my responsibilities for delinquent group members. • I know my outstanding debt and the amount in my savings account. • I always have the opportunity to ask questions during my interactions with the institution.

  9. Agenda Client protection principles Principle #2 in practice Effects of non-transparency and the client perspective Participant feedback Practitioner lessons and good practices Conclusion and call to action

  10. Feedback from Participants Have you received training from your institution that highlights transparent and responsible pricing? How do institutions set their prices? What effect does the competitiveness of the local microfinance market have on transparent and responsible pricing at institutions? Have you seen examples irresponsible pricing and/or lack of transparency?

  11. Agenda Client protection principles Principle #2 in practice Effects of non-transparency and the client perspective Participant feedback Practitioner lessons and good practices Conclusion and call to action

  12. Lessons from Practitioners • [Write your points for the presentation here:] • Points • Points • Points • Points

  13. Good Practice Indicators: Institutions with Transparent Pricing Does your institution follow good practices for these transparent pricing indicators? • Follow truth-in-lending laws and required APR or effective interest rate calculation formulae. • Work with the client to understand the price of her loan and all of its terms and conditions. • Also disclose: insurance premiums, minimum balances, all fees, penalties, linked products, third party fees, and whether any of these can change over time. • Provide loan contracts that show an amortization schedule that separates principal, interest, fees; and defines the amount, number and due dates of installment payments. • Train staff to communicate effectively with clients. • Give the client time to review all documentation prior to the sale.

  14. Good Practice Indicators: Institutions with Transparent Pricing Does your institution follow good practices for these responsible pricing indicators? • Are competitive in the marketplace. • Do not subsidize prices. • Favor long-term relationships with clients to short-term profits. • Do not charge customers for their own inefficiencies. • Ears a reasonable rate of return to support operations and grow, while allowing the customer to do the same. • Do not charge excessive pre-payment penalties or account closure fees. • Invest a portion of their profits to increase value to customers, such as lowering interest rates or adding or improving products and services.

  15. Good Practices: Design, Process, Feedback

  16. Good Practice: Financial Literacy for Improved Transparency

  17. Example of Good Practices from Bosnia-Herzegovina Tip: Have loan officers read through contracts with clients before the client signs. Practice Outcome MFI learns where to revise contracts to make them clear; clients are not mis- or under- informed • Organization requires loan officers to read through contracts with clients and ask them questions to ensure that clients: • Understand the terms • Accept the terms

  18. Agenda Client protection principles Principle #2 in practice Effects of non-transparency and the client perspective Participant feedback Practitioner lessons and good practices Conclusion and call to action

  19. Conclusion • Summary: • The Smart Campaign has developed six principles of client protection, one of which is transparent and responsible financing. • Pricing, terms, and conditions must be transparent (fully and clearly disclosed) and responsible (affordable to the client, sustainable to the institution). • Failing to be transparent and responsible turns clients off from using an institution’s products and therefore endangers business. • Good practices are available to help institutions improve in this area. • What next steps can your institution take to make sure that clients understand your products, as well as their own rights and responsibilities? Call to action

  20. Join the Campaign and Endorse the Principles of Client ProtectionHave questions? Want more information?Contact the Smart CampaignEmail: info@smartcampaign.org Thank you!

More Related