Background:
Borrowers of microfinance institutions (MFIs) are not able to compare the cost of credit among different MFIs. It is impossible to compare interest rates from MFI to MFI, taking into account commissions, fees, when principal is repaid, and other variables. This site has been created to assist and encourage MFIs to become more transparent in the disclosure of the cost of their credit product, which will allow borrowers to make a more informed credit choice.
Purpose:
Calculating the "effective" interest rate of microfinance loan products will benefit:
- The Borrower: She will be able to compare interest rates among MFIs (which choose to participate) and make an informed decision based on the cost of the loan, given the services the MFI offers.
- The MFI: The MFI will be able to create more accurate budgets knowing the APR of their loan product(s). The MFI can market their participation in The Project to their clients, financiers, and donors. The institution will be more transparent and be seen as more professional in lending operations, as they voluntarily adopt the same "truth-in-lending" standards banks, finance companies, and credit card companies disclose to their clients.
- The Donor: The donor will know the APR being charged by their funded institutions has been professionally and independently verified.
- The Financier: The financier will be able to create better pro-forma projections, knowing the APR of the funded loans.
Process:
Within 48 hours you will receive
- Calculated APR spreadsheet, based on the information submitted
- A request for further information if the information submitted was not complete or unclear
- Web link to the APR Calculation in the catalogue of interest rates
Cost:
The cost of performing the interest rate analysis varies from free to $50 per loan product. Please enquire about volume pricing for MFIs with a significant number of loan products, or networks desiring all members to participate in The Project:
- Basic Service - Free calculation, catalogued without reference to the institution
- Certified Service - $50 per loan product. This gives you the right to market the loan product as having been certified by the MFI APR Project. You will given rights to a unique seal, which can be used as deemed most effective for one year from the calculation date.
- Renewal Service - $25 for renewal of the certificate where there has been no change in the loan product. For quality control purposes, this will need to be performed each year.
APR Defined
Microfinance has adopted the term "effective" interest rate to mean the "effective" cost of borrowing, from a client's point of view. This would include all "out of pocket" costs to the borrower in obtaining credit, including interest, commissions, fees, maintenance of value,
a charge for inflation, as well as a charge for forced savings (less any guaranteed interest the MFI credits to their client's account). The term given to the cost of a loan in the United States of America is APR, meaning "Annual Percentage Rate". In addition to moving
the microfinance industry into greater transparency, the goal is to also encourage the adoption of consistent terms from the banking/finance world into microfinance.
Contact MFI Consulting
All e-mail will be answered as soon as possible. Feel free to e-mail the following:
|
|