Principle #3 – Transparency

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by the Smart Campaign

www.smartcampaign.org

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1. Client protection principles

2. The client perspective on transparency

3. Principle #3 in practice

4. Participant feedback

5. Tools for improving practice

6. Conclusion and call to action

Agenda

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1. Appropriate product design and delivery

2. Prevention of over-indebtedness

3. Transparency

4. Responsible pricing

5. Fair and respectful treatment of clients

6. Privacy of client data

7. Mechanisms for complaint resolution

Client Protection Principles

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1. Client protection principles

2. The client perspective on transparency

3. Principle #3 in practice

4. Participant feedback

5. Tools for improving practice

6. Conclusion and call to action

Agenda

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Lack of transparency affects the client and the MFILack of transparency

Effects the…Client… MFI…

Client does not understand the

maintenance fees for her savings

account.

Client is not awarethat she receives

only three free ATM withdrawals before

incurring fees.

Client believes that if she does not file an insurance claim, the premium will be

returned to her.

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…sees that her savings have

decreased and thinks the bank has robbed her.

…is demoralized and does not

trust ATM transactions.

…concludes that insurance is a

scam when she does not have the premium

returned.

…loses business when client tells others about her

experience.

…loses benefit of investment in

new technologies.

…finds that products intended to add value and

attract clients actually have the opposite effect.

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I can easily understand the interest rate and compare it to other institutions.

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.The institution has explained my responsibilities for delinquent group members.

I can easily find out the amount of my outstanding debt and the balance in my savings account.

I am always given the opportunity to ask questions during my interactions with the institution.

Can your MFI clients agree with the following?

The client perspective on transparency

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1. Client protection principles

2. The client perspective on transparency

3. Principle #3 in practice

4. Participant feedback

5. Tools for improving practice

6. Conclusion and call to action

Agenda

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Transparency

The Principle in Practice:

Providers will communicate clear, sufficient, and timely information in a manner and language that client can understand, so that clients can make informed decisions.

Consider this:

Transparency is a pre-condition to many of the other principles—foremost, responsible pricing.

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Disclose information

Train staff

Provide total cost

Disclose the prices, terms, and conditions of all products, including fees and information on the recovery process, and whether these can change over time.Train staff to communicate effectively with clients, including clients with literacy limitations.

Follow truth-in-lending laws and required APR or EIR formulae. If no requirements, show at least the total cost the client pays.

The Principle in Practice

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Use multiple channels

Allow time for questions

Provide account information

Use multiple channels for disclosing information, such as brochures, meetings, orientation sessions, posters, etc.

Allow adequate time for clients to review information and ask questions prior to signing contracts.

Regularly provide accurate account information, such as savings account balances and receipts for all transactions.

The Principle in Practice

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Good Practice: Increase client understanding

Good practice: Make communication meaningful to the client.

• Don’t use fine print. Can you read the bottom of this slide?

• Use plain language. Which statement is more meaningful?• A. Non-repayment will result in action on the part

of the institution at the immediate outset of the delinquency.

• B. The institution will begin the loan collection procedures on the first day the client is late.

• Fit the communication method to the client. Are your documents written in the local language? How would a blind person access your important contractual information?

Fine print is often overlooked by clients. Minimize the use of fine print.

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Good Practice: Confirm client understanding

Good practice: Confirm client understanding.

Use: • Call backs• Check lists• “Key facts” or FAQ

document• Glossaries for key

terms• Analysis of

common complaints/questions to improve communication

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1. Client protection principles

2. The client perspective on transparency

3. Principle #3 in practice

4. Participant feedback

5. Tools for improving practice

6. Conclusion and call to action

Agenda

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Feedback from participants

Have you received training from your institution that highlights transparent pricing?

What effect does the competitiveness of the local microfinance market have on transparent pricing at institutions?

Have you seen examples of lack of transparency?

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1. Client protection principles

2. The client perspective on transparency

3. Principle #3 in practice

4. Participant feedback

5. Tools for improving practice

6. 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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Pricing, terms, and conditions must be transparent (fully and clearly disclosed).

Transparency allows clients to use products effectively and to make their own informed decisions.Clients need to have access to information that is meaningful to them.

The Smart Campaign offers tools to help providers improve their transparency.

Summary

Call to Action: What next steps can your institution take to ensure that clients understand your products, as well as their own rights and responsibilities?

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Thank you!

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Download the Getting Started Questionnaire and conduct a client protection self-assessment.

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