Thanks for your comment! Please have a look at our recent post on pricing transparency at the consumer level: http://www.mftransparency.org/pages/2010/03/15/in...

Thanks for your comment! Your example from South Africa is very interesting. We believe pricing transparency is the foundation for healthy free market conditions and informed consumer choice. I agree that there may be other, complementary factors that are necessary to promote the informed decision-making of microfinance clients.

One of these factors is certainly financial literacy, as you mentioned. Disclosure of effective interest rates alone may not always be sufficient, as the figure may not be meaningful to clients where financial literacy is a general problem. Similarly to the outcomes of the study you mentioned, in Mexico, where I’m currently based, some industry stakeholders told me clients tend to base their financial decisions on the marketing appeal rather than the CAT, in case the figure is disclosed. Over here, it is generally argued that the reason for this behavior is a lack of financial education and that clients don’t always use comparison tools like the CAT (if available) where they don’t understand the concept.

At MFTransparency we take this aspect very seriously and we have defined the development of educational materials for the consumer level as an important priority for 2010-2011. You also mentioned the threat of interest rate ceilings and the adverse effect on access to finance. If policy makers realize that disclosure of APR/EIR coupled with client education promotes healthy market developments, undesirable intervention can be prevented.

What’s your perspective on this? Do you agree with this approach? Do you have additional ideas what else might work?