Uganda    Data  Launch  

 Hosted  by    

MFTransparency  and  AMFIU      

Webinar  July  27,  2011  

Promo-ng  Transparent  Pricing  in  the  Microfinance  Industry  

enabling  APR  &  EIR  Program  

�  enabling  Africa  to  Price  Responsibly  and  Educate  on  Interest  Rates  

�  Sponsored  by  the  MasterCard  FoundaFon  

 �   Eight  countries  in  18  months:  Malawi,  Uganda,  Rwanda,  Ghana,  South  Africa,  Tanzania,  Zambia,  Mozambique  

Transparent  Pricing  Ini;a;ve    in  Uganda  

�  Uganda  is  the  second  country  in  the  enabling  APR  &  EIR  Program  to  be  selected  for  the  Transparent  Pricing  Ini-a-ve.  

�  MFTransparency  conducted  a  transparency  workshop  in  Kampala  on  December  3rd,  2010  to  launch  the  Uganda  Ini-a-ve.  

�  The  enabling  Africa  to  Price  Responsibly  &  Educate  on  Interest  Rates  Program  is  a  client  protecFon  effort  of  unprecedented  scale  in  Africa,  covering  Malawi,  Uganda,  Rwanda,  Ghana,  Tanzania,  Zambia,  South  Africa  and  Mozambique.  

�  This  iniFaFve  includes  three  major  components:  the  collecFon  and  publicaFon  of  pricing  data,  training  on  pricing  transparency,  and  the  development  and  disseminaFon  of  educaFonal  materials.    

Transparent  Pricing  Ini;a;ve  in  Uganda  

The  enabling  APR  &  EIR  Program  is  sponsored  by:  

Thank  you  to  our  local  partner  in  Uganda:  

AMFIU:  Opening  Remarks  

Par;cipa;ng  Ins;tu;ons  

Transparent  Pricing  Ini;a;ve  in  Uganda  Par;cipa;ng  MFIs  APAS  Financial  Services  

BRAC  Uganda  Microfinance  

Centenary  Rural  Development  Bank  

Ebirungi  Birugomutuutu  SACCO  

Equity  Bank  

Five  Talents  Uganda  

Gatsby  Microfinance  

Habitat  for  Humanity  Uganda  

Hofokam  

KACITA  CooperaFve  Financial  

Madfa  SACCO  

Par;cipa;ng  MFIs  Micro  Enterprise  Development  Network  

Opportunity  Uganda  

Rural  Credit  Finance  Company  

Rushere  SACCO  

SAO  –  Kampala  SACCO  

Silver  Upholders  

The  Hunger  Project  Uganda  

UGAFODE  Microfinance  

Uganda  Finance  Trust  

Wakiso  Self  Help  SACCO  

Y-­‐Save  SACCO  

Type  of  Ins;tu;on    (22  Ins;tu;ons)  

31.8%  

45.5%  

22.7%  Coop  

Privately-­‐owned  for  profit  

NGO  

Regulated  vs.  Unregulated  

22.7%  

77.3%  

Regulated  

Unregulated  

•  5  insFtuFons  regulated,  17  insFtuFons  unregulated  

Product  Pricing  Analysis  

Loan  Purpose    (59  products)  

10.6%  7.1%   9.4%  

15.3%  

43.5%  

14.1%  

0%  5%  10%  15%  20%  25%  30%  35%  40%  45%  50%  

Housing   Emergency   Consumer   EducaFon   Business   Any  Purpose  

Percen

tage  of  P

urpo

ses  

Purpose  as  a  Percentage  of  Purposes  

Eligibility  

15.0%  

18.8%  

57.5%  

8.8%  

Product  Eligibility  

Must  be  a  salaried  worker  

Must  own  a  home  

Must  run  a  business  

Specific  age  group  (youth,  elderly)  

5%  

95%  

Gender  Focus  

Women  only  

Either  

Lending  Methodology  

61.1%  23.6%  

15.3%  

Individual  

Solidarity  

Village  Banking  

Other  Services  Offered  

34.4%  

20.8%  

15.2%  

14.4%  

12.8%  

2.4%  

0%   5%   10%   15%   20%   25%   30%   35%   40%  

Credit  EducaFon  

Credit  Insurance  

Group  MeeFngs  

Business  Training  

TA  Visits  to  Workplace  

Other  Training  

Percentage  of  services  offered  

Other  Services  Offered  with  Loan  Product  

Repayment  Frequency  

17.7%  

5.1%  

63.3%  

12.7%  

1.3%  0%  

10%  

20%  

30%  

40%  

50%  

60%  

70%  

Weekly   Every  2  weeks   Monthly   Quarterly     Single  end  payment  

Percentage  of  frequencies  

Repayment  Frequency  

Reasons  for  Varia;ons  in  Price  �  16  products  have  a  range  of  interest  rates  

4.5%  

27.3%  

27.3%  9.1%  

31.8%  

Branch  office  locaFon  

Client  profile/Client  risk  

Length  of  Fme  as  client  

Loan  size  

Other  

Interest  Calcula;on  Method  

22.8%  

77.2%  

Declining  Balance  

Flat  

Fees  &  Insurance  �  All  products  (100%)  have  a  fee  �  36%  of  all  fees  are  for  the  purpose  of  insurance  

64%  

36%  

Fee  &  Insurance  

Other  Type  of  Fees  

Insurance  

100%  

0%  

Products  with  a  Fee  

Fee  

No  Fee  

Fees  &  Insurance  

95.3%  

4.7%  

Disbursement  vs.  Ongoing  Fees  

Disbursement  

Ongoing   7.43%  

92.57%  

Disclosed  on  Repayment  Schedule    

Disclosed  

Not  disclosed  

Compulsory  Savings  �  33  products  out  of  59  require  compulsory  savings  �  Of  the  33  products  that  require  savings,  2  disclosed  the  amount  of  compulsory  savings  on  the  repayment  schedule  

�  For  11  products,  borrowers  control  savings  internally  

40.7%  

15.3%  

44.1%  

Compulsory  Savings  

Required  for  all  loans    

Required  for  some  loans  

Never  required  

36.4%  

30.3%  

33.3%  

Compulsory  Savings  by  Type  of  Ins;tu;on  

Coop  

NGO  

Privately-­‐owned  for  profit  

Pricing  Calcula;ons  

Interest  Rate  Calcula;ons  

    Interest   Fees   Insurance  Security  Deposit  

APR  (Interest  +  Fees  +  Insurance)   X   X   X      

APR  (Including  Security  Deposit)   X   X   X   X  

EIR  (Interest  +  Fees  +  Insurance)   X   X   X      

EIR  (Including  Security  Deposit)   X   X   X   X  

APR  Ranges  by  Ins;tu;on  Type  

52.1%   52.5%   48.6%  

0%  

50%  

100%  

150%  

200%  

Co-­‐op   NGO   Privately-­‐owned  For-­‐Profit  

APR  by  Ins;tu;on  Type    (Weighted  Average,  Minimum  and  Maximum)  

APR  (Int  +  Fees  +  Insurance)  

APR  Ranges  by  Loan  Purpose  

Business   Housing   Emergency   Consumer   EducaFon   Any  Purpose  Minimum  APR   19%   19%   49%   27%   19%   26%  Maximum  APR   161%   161%   157%   109%   161%   157%  Weighted  Average  APR   58%   41%   73%   55%   54%   46%  

58%  41%  

73%  55%   54%   46%  

0%  20%  40%  60%  80%  

100%  120%  140%  160%  180%  

APR  (In

t  +  Fees  +

 Insurance)   APR  by  Product  Purpose  

APR  Ranges  by  Rural/Urban  

Rural   Urban   Both  Minimum   27%   19%   23%  Maximum   154%   161%   119%  Weighted  Average  APR   51%   73%   40%  

50.7%  72.6%  

40.4%  

00%  20%  40%  60%  80%  

100%  120%  140%  160%  180%  200%  

APR  (In

t  +  Fees  +

 Insurance)   APR  by  Geographic  Focus  

MFTransparency  Interac;ve  Price  Graphs  

Filter  Graphs:  Loan  Size  

Filter  Graphs:  Number  of  Clients  

Filter  Graphs:  Loan  Term  

Filter  Graphs:  Loan  Purpose  

Filter  Graphs:  Ins;tu;on  Type  

Filter  Graphs:  Interest  Rate  Type  

Filter  Graphs:  Interest  Rate  Formula  

Price  Graphs  APR  (Int  +  Fees  +  Insurance)  

Products  with  >  50  Ac;ve  Borrowers      

Products  with  >  50  Ac;ve  Borrowers    Loan  Amount  <  5,000,000  UGX  

Products  with  >  50  Ac;ve  Borrowers  Ins;tu;on  Type:  Privately-­‐owned  for-­‐profit  

Products  with  >  50  Ac;ve  Borrowers  Ins;tu;on  Type:  NGO  

Products  with  >  50  Ac;ve  Borrowers  Ins;tu;on  Type:  Coopera;ves  

Products  with  >  50  Ac;ve  Borrowers  Purpose:  Business  

Products  with  >  50  Ac;ve  Borrowers  Purpose:  Educa;on  

Products  with  >  50  Ac;ve  Borrowers  Purpose:  Consump;on  

Products  with  >  50  Ac;ve  Borrowers  Purpose:  Housing  

Products  with  >  50  Ac;ve  Borrowers  Interest  Calcula;on  Method:  Flat  

Products  with  >  50  Ac;ve  Borrowers  Interest  Calcula;on  Method:  Declining  Balance  

Summary  �  Ins;tu;on  cost  structure:  Every  insFtuFon  has  a  unique  cost  structure  which  requires  a  unique  pricing  strategy.  

�  Product  cost  structure:  Different  loan  products  can  have  significantly  different  cost  structures.  It  is  therefore  necessary  to  look  at  each  loan  product  individually  when  assigning  loan  prices.    

�  Limita;ons  of  porbolio  yield:  If  we  do  not  analyze  costs  and  prices  on  a  product-­‐by-­‐product  basis,  our  overall  poroolio  yield  may  be  posiFve,  but  some  individual  products  not  profitable.  This  can  cause  sustainability  problems  in  the  future.  

�  Remember:  Each  product  is  unique  and  requires  a  disFnct  pricing  strategy.  

Recommenda;ons  

Loan  Documenta;on:  Considera;ons  

• It  is  important  to  always  consider  the  true  price  of  a  loan  from  the  point-­‐of-­‐view  of  the  client  

• How  much  money  does  a  client  have  to  spend  in  order  to  access  a  loan?    

Client  perspecFve  

• Shows  the  expected  cash  flow  for  the  client  • Should  disclose  all  charges  made  at  disbursement  and  during  the  loan  term  

Repayment  schedule  

• At  the  local  industry  level,  lenders  and  other  stakeholders  should  define  a  standard  interest  rate  calculaFon  and  loan  documentaFon  system  

• StandardizaFon  allows  for  comparison  across  compeFng  loan  offers  from  the  perspecFve  of  the  client  

StandardizaFon  

Loan  Documenta;on:  Case  Study  Gatsby  Micro  Finance  Ltd  –  an  example  of  transparent  loan  documentaFon  

Loan  Documenta;on:  Case  Study  Gatsby  Micro  Finance  Ltd  is  commended  for  the  disclosure  on  its  loan  documentaFon  of:    �  All  charges  at  applica;on  (e.g.  registraFon  fees,  loan  commission,  applicaFon  fees)  

�  All  charges  at  disbursement  (  e.g.  registraFon  fees,  loan  commission)  �  Annual  interest  rate  charged  �  Interest  rate  method  used  �  Grace  period  and  interest  charged  during  grace  period  �  Cash  flow,  differenFaFng  between  the  principle,  interest,  penalty,  total  repayment  and  total  balance  

Resources:  Recommended  Repayment  Schedule  Template  

General  Recommenda;ons  Loan  documentaFon  

• Communicate  as  much  informaFon  on  both  repayment  schedule  and  contract  

Interest  rate  calculaFon  method  

•  Switch  from  flat  to  declining  balance  to  enhance  transparency  

Technical  assistance    

MFTransparency  is  happy  to  provide  assistance  to  implement  these  changes  

Financial  Literacy  Program  

MFTransparency  is  currently  piloFng  a  financial  literacy  program  in  Malawi  and  Rwanda.

The  educaFonal  resources  we  will  develop  for  Malawi  and  Rwanda  will  also  be  adapted  to  the  unique  context  of  other  countries  included  in  the  enabling  APR  &  EIR  Program.

We  collaborate  with  our  local  partners  to  adapt  these  materials  to  the  local  context  and  implement  them  successfully.  

Ques;ons  &  Answers  

Ways  to  Get  Involved  �  Endorse  MFTransparency.  More  than  800  individuals  and  organizaFons  have  signified  their  support  in  principle  of  MFTransparency's  mission  by  becoming  an  endorser.  Add  your  name  to  the  list:  htp://www.muransparency.org/endorsements/form/  

�  Educate  about  transparent  pricing.  MFTransparency  develops  and  disseminates  educaFonal  resources  covering  a  range  of  topics  related  to  transparent  pricing.  These  materials  are  all  available  free  of  charge  through  the  Resources  Library  on  our  website.    

�  Par;cipate  in  country  projects.  We  work  with  government  agencies,  networks,  associaFons,  donors,  investors,  academics  and  other  stakeholders  in  every  project  country  and  always  welcome  new  partnerships.  MFIs  can  also  acFvely  parFcipate  by  submivng  their  data  when  MFTransparency  launches  the  Transparent  Pricing  Ini-a-ve  in  their  country.  

     

Promo;ng  Transparent  Pricing    in  the  Microfinance  Industry