The Business Case for Transparent Pricing

> Posted by Cara Forster
Mexico - Bank Client 3Here at the Center, we’re working to unite the microfinance industry behind the Six Principles of Client Protection.  We believe these principles can stimulate practices that are good for both consumers and providers of financial services.  We believe that treating your customers fairly is not only the right thing to do, but also good business for any MFI.
Recently, I moderated a webinar on Transparent Pricing for a number of MFIs from the ACCION Network. This webinar was part of a series of presentations we’re conducting with these MFIs on the Six Principles. As in previous webinars, we heard from both microfinance practitioners and thought leaders on best practices and what works in the field.
One practitioner shared with us the set of practices that her institution uses to implement its commitment to transparency.  She explained that this commitment to behaving transparently toward clients was good for the institution’s financial bottom line.  Among the benefits she listed were lower exit rates, increased customer loyalty, increased repayment rates, and stronger relationships between clients and loan officers. She explained that her institution had even developed several indices to track customer satisfaction, service quality, and adherence to standards. 
One of the indices tracks Service Quality, which includes variables related to the technical assistance provided to clients, amount of information shared with clients, and adherence to methodological requirements among others.  During the Webinar, she explained that with inclusion of transparency in the index, they had seen client retention rates rise.  The Service Quality index shows a steady upward trend since the end of 2007.  In 2007, Service Quality stood at 73%, prompting the institution to implement a program designed to improve Service Quality.  A year later, the institution had improved to 88%, after which it began to give awards and acknowledgements for high quality service.  As of April of this year, the index showed Service Quality at 90%, well on its way to achieving the institution’s goal of 92% for the year.     
But, the benefits of transparency don’t accrue just to the MFI. Our presenter also spoke of clients who had a better understanding of the financial products they were buying. By understanding the risks and rewards of the products on offer, this MFI’s clients were able to work with bank staff to choose products that better met their needs.  Thanks to the reputational benefits of its commitment to transparency, this MFI is successfully bringing financial services to clients who previously distrusted banks.
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