Principle # 4 – Responsible
PricingThis presentation is made possible
by the Smart Campaignwww.smartcampaign.org
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1. Client protection principles2. Principle #4 in practice3. Participant feedback4. Tools for improving practice5. Conclusion and call to action
Agenda
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1. Appropriate product design and delivery2. Prevention of over-indebtedness3. Transparency4. Responsible pricing5. Fair and respectful treatment of clients6. Privacy of client data7. Mechanisms for complaint resolution
Client Protection Principles
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1. Client protection principles2. Principle #4 in practice3. Participant feedback4. Tools for improving practice5. Conclusion and call to action
Agenda
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Responsible Pricing
The Principle in Practice:
Pricing, terms, and conditions are set in a way that is both affordable to clients and sustainable for the financial institution.
Consider this:
Financial sustainability is required to continue serving clients, but is not an end in itself.
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Price competitively
Earn reasonable return
Use profits to benefit clients
Set prices that are not subsidized, are market oriented, and competitive within the country context.Earn a rate of return that supports operations and growth, and does not deviate significantly from peers.Invest a portion of the profits to increase value to clients, such as lowering interest rates or adding or improving products and services.
The Principle in Practice
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Do not pass inefficiencies to the client
Set reasonable fees
Compare efficiency to similar competitors and do not transfer inefficiencies to clients.
Do not charge excessive penalties /fees for pre-payment, account closure or other services. For example, fees should not unreasonably compound debt nor prevent a client from changing providers.
The Principle in Practice
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Three important steps for responsible pricing
Formalize pricing procedures for each product.
Compare prices with similar competitors.
Manage profitability targets and offer better value for the money
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1. Client protection principles2. Principle #4 in practice3. Participant feedback4. Tools for improving practice5. Conclusion and call to action
Agenda
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Feedback from ParticipantsHave you received training from your institution that highlights responsible pricing?
What effect does the competitiveness of the local microfinance market have on pricing?
Have you seen examples of irresponsible pricing?
What pricing procedures do MFIs commonly use?
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1. Client protection principles2. Irresponsible pricing3. Principle #4 in practice4. Participant feedback5. Tools for improving practice6. Conclusion and call to action
Agenda
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Technical Tools Getting Started Questionnaire: Self Assessment
for MFIsCalculating Transparent Prices (MFTransparency)Putting Transparency into Practice: Communicating About Pricing Responsible Pricing State of PracticeTechnical Guide for Investors
Samples and Case Studies
Client Welcome KitLoan Agreement for Small Business Clients from CrystalLoan Contract Summary Handout from MiBancoTransparent & Responsible Pricing at Mi-Bospo
Tools available from the Smart Campaign
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1. Client protection principles2. Irresponsible pricing3. Principle #4 in practice4. Participant feedback5. Tools for improving practice6. Conclusion and call to action
Agenda
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Pricing, terms, and conditions must be responsible—affordable to the client, sustainable to the institution.Earning returns is the means to an end (serving clients in the long-term), and not an end unto itself.The Smart Campaign offers tools to help practitioners improve their practices in this area.
Summary
Call to Action: What next steps can your institution take to make sure that your prices are affordable to clients and sustainable for the institution?
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