I have a question not directly related to this post, but that maybe you guys can address in another post. What is the relationship between interest rate transparency and financial literacy? It seems to me that transparency has 2 sides: (1) lenders being honest and clear about the costs of loans they provide, and (2) how borrowers and potential borrowers understand the information disclosed (or not) by the lenders. Is MFTransparency involved in financial literacy? How do you see these two things working together?

MixMarket is probably the best source of information on microfinance, and their new design and features are indeed very well made and very useful.

Just to play devil's advocate, however, keep in mind that reporting to the MixMarket is voluntary (as is reporting to the Microcredit Summit Campaign, the other source of data on microfinance), and therefore the information is not perfectly representative of all microfinance institutions.

Jonathan Morduch and myself have written a paper (to be published in the microfinance special issue of the journal Perspectives on Global Development and Technology in 2010 and available on the Financial Access Initiative website at <a href="http://financialaccess.org/sites/default/files/Se..." target="_blank">http://financialaccess.org/sites/default/files/Se... that outlines some of the differences between MixMarket and Microcredit Summit Campaign data, and how they can impact some important analyses of microfinance.

Your mention of CAT in Mexico is interesting. In South Africa, interest rate disclosure is mandated by law, there exists a national debate about interest rate ceilings, and the Microfinance regulatory council (MFRC) is very aggressive on recording complaints from microfinance clients about interest rates abuse (among other things). Yet, lenders set interest rates very high (in 2004, a leading MF lender charged 11.75% per MONTH, although the lender believed in pricing transparency and did not change any origination fee or other hidden fee). This example needs to be taken cautiously, since an interest rate ceiling has since been imposed; I don't know how much that lender charges now.

Transparency by itself also does not necessarily mean that prices go down. Probably financial literacy is a problem (it is lacking worldwide). Borrowers are also sensitive to many cues other than interest rates (see Financial Access Initiative director Dean Karlan's paper titled "What's Advertising Content Worth?" for a study of microfinance borrowers in South Africa: for example, showing a picture of an attractive woman on a flyer increased loan demand by as much as a 25% reduction in the interest rate).