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21.10.2011

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Interest rate transparency: pan-African forum in Nairobi

Source : Microfinance Africa Afmin

“Operation truth” on microloan prices: since 2008, the MF Transparency association has been working to make microfinance interest rates transparent. Its action consists essentially of compiling an inventory of interest rates practiced by local Microfinance Institutions (MFIs) and promoting transparency with respect to loan applicants. In Nairobi from 5th to 7th October, the NGO co-organised the first pan-African forum on the topic. This was the occasion for representatives of MFIs from more than 20 African countries to attend training sessions, have discussions with their colleagues and make action plans, in line with the programme proposed by MF Transparency.

For the MFIs, in the first place transparency consists of clearly and simply displaying the real interest rates applied and expressing them in terms of monthly repayments. Besides, one of the tools recommended by MF Transparency is giving the borrower a repayment calendar card – extremely useful if the customer is able to read… But more than anything, explains MF Transparency, it’s about combatting additional “hidden” costs, like fixed administrative expenses.

The Nairobi forum was jointly organised with AFMIN, the African MFI network, the UN agency UNCDF, the French Development Agency AFD and the CGAP research centre. For all these players, best practices for transparency with respect to borrowers is an essential factor of responsible microfinance.

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