Tanzania. Microfinance pricing analysis. Date: September Executive summary

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1 Microfinance pricing analysis Tanzania Date: September 2013 Loan Amounts Transparency Avg Full Clients TZS USD Index APR Number Percent <350,000 <$ % 101,209 23% 350,001 to 1.3M 1.3M to 2.0M 2.0M to 3.0M 3.0M to 4.0M $221 to $786 $787 to $1,258 $1,888 to $2,516 $2,517 to $3, % 194,865 45% 42 82% 34,107 8% 48 70% 30,552 7% 44 67% 15,687 4% >4.0M >$3, % 54,867 13% Product Transparency Index Levels Between 0 and 25 Between 26 and 50 Between 51 and 75 Between 76 and 100 Total Transparent Pricing Practices Declining Balance Interest Products Clients Number Percent Number Percent 4 10% 1,616 0% 26 65% 288,258 67% 6 15% 25,175 6% 4 10% 116,238 27% ,287 Products Clients Number Percent Number Percent 8 20% 141,095 33% Executive summary The institutional level Pricing Transparency Index ranges widely from 12 to 89 in Tanzania. Twelve products showed improvements in their Transparency Index between 2011 and 2013, while six products had less transparent prices. Around a quarter of borrowers benefit from loans priced transparently, however 73% of them receive loans with a Transparency Index below 75/100 This transparency level is explained by pricing practices consisting of multiple price components: 67% of borrowers receive loans which incur interest calculated using a flat interest method; 80% of borrowers pay fees in addition to the interest rate; 50% of borrowers pay a compulsory insurance fee; and 79% must provide compulsory deposits. Prices follow the standard price curve, with prices dropping as loan size increases. Prices average 124% on loans less than $220 then flatten and plateau at around 70% for larger micro-loans. One Fee, or No Fee No Compulsory Insurance Required No Compulsory Deposit Required 27 68% 410,585 95% 13 33% 215,893 50% 13 33% 89,726 21% Data from 18 institutions, with 40 credit products and 431,287 active clients. Calculations based on 192 loan samples. Older data is used for institutions that did not provide refreshed data. Please note that all terms that are in italic and underlined are defined in the glossary. All data used in this report can be received in Excel format (available at info@mftransparency.org) Planet Rating MicroFinance Transparency Paris Lancaster, PA USA t: t: In partnership with

2 Context: Overall transparency of microfinance in Tanzania MFIs that reported to MFTransparency (18 institutions serving 431,451 borrowers) represent 92% of the total market (in terms of number of borrowers) identified below. MFIs that refreshed their pricing data recently (within 2013) represent a slightly lower 87% of the market. MFIs that reported to the MIX Market represent 97% of this total market, with 12% having given data in the past year. More MFIs provided data to MFTransparency in the past two years, but those providing data to the MIX represent a larger share of the market, as several of the top ten MFIs in the country did not provide data to MFTransparency. Five MFIs have been rated by one of the major ratings agencies, although only one of those ratings occurred in the past two years. Age of Data MFT MIX Ratings MFIs Borrowers MFIs Borrowers MFIs Borrowers < 1 year 14 70% 406,102 87% 2 10% 53,804 12% 1 5% 1,027 0% 1-2 years 4 20% 25,349 5% 7 35% 370,580 79% 0 0% 0 0% 2-4 years 0 0% 0 0% 0 0% 0 0% 2 10% 27,169 6% > 4 years 0 0% 0 0% 4 20% 29,061 6% 2 10% 86,805 19% Never 2 10% 35,000 8% 7 35% 13,006 3% 15 75% 351,450 75% Totals , , ,451 Note: This table includes all institutions who submitted data to MFTransparency, submitted data to the MIX in 2010 or later with greater than a one diamond rating, or did both. Institutions that may have been rated but did not disclose their data to either MFTransparency or MIX are not included. Name of MFI Number Clients Institution Age of Data (yrs) MIX Transparency Index Number % Type MFT MIX Ratings Diamonds Change 1 PRIDE Tanzania 104,434 22% NGO N/A BRAC Tanzania 102,392 22% NGO N/A FINCA Tanzania 78,805 17% NBFI NMB 45,197 10% Bank N/A AKIBA 26,995 6% Bank N/A VF-Tanzania 25,000 5% NGO N/A 1.5 N/A 4 N/A. 7 YOSEFO 17,135 4% NGO N/A ABT 15,819 3% Bank N/A Tujijenge Tanzania 10,034 2% Other PTF 10,000 2% NGO N/A 7.5 N/A 1 N/A. 11 Opportunity 8,607 2% NBFI N/A Selfina 8,000 2% NBFI N/A BELITA 5,882 1% NGO 0.6 N/A N/A N/A MCBL 3,685 1% Bank 0.5 N/A N/A N/A FMFC 1,538 0% NBFI 0.6 N/A N/A N/A K-Finance Ltd 1,081 0% NBFI 0.6 N/A N/A N/A Mbinga 1,027 0% Bank MDF Tanzania 606 0% NGO 0.2 N/A N/A N/A Victoria 145 0% NBFI 1.9 N/A N/A N/A F & K Finance 69 0% NBFI 1.9 N/A N/A N/A 25. Note: VF-Tanzania did not submit data to MFTransparency but submitted data to the MIX within the past 2.5 years. PTF provided data to the MIX 7.5 years ago. The Institutional Transparency Index is the weighted average of the Product Transparency Indices for that Institution. / 2

3 Product pricing practices in Tanzania Approximately 27% of borrowers received a loan with a good Transparency Index (between 76 and 100), but this represents just 4 of the 40 products surveyed: 67% of borrowers receive loans where interest is calculated based using a flat interest method 80% of borrowers pay fees in addition to the interest rate 79% of borrowers are required to provide compulsory deposits in order to be eligible for a loan 50% of borrowers must pay a compulsory insurance fee to access a loan Price Components, Tanzania Totals for this data analysis Products 40 Clients 431,287 Interest Method Declining Balance 8 20% 141,095 33% Flat 32 80% 290,192 67% Interest Rate Same rate for all loans for the product 25 63% 261,198 61% Different rates for different loans 15 38% 170,089 39% Fees No fees charged 4 10% 87,558 20% 1 Fee charged 23 58% 323,027 75% 2 Fees charged 12 30% 20,644 5% 3 or more fees charged 1 3% 58 0% Insurance No Insurance required 13 33% 215,893 50% 1 Insurance required 27 68% 215,394 50% 2 or more insurance products required 0 0% 0 0% Compulsory Deposit No Compulsory Deposit required 13 33% 89,726 21% Upfront Compulsory Deposit only 18 45% 166,129 39% Ongoing Compulsory Deposits only 0 0% 0 0% Upfront & Ongoing Deposits required 9 23% 175,432 41% Price Structure Including one price component 1 2% 15,819 3% two price components 6 11% 81,349 14% three price components 15 28% 183,022 32% four price components 18 33% 151,097 26% charging all four and using flat interest 14 26% 148,893 26% Products. charging Flat or UpFront Int 32 80% 290,192 67% charging Fees 36 90% 343,729 80% charging Insurance 27 68% 215,394 50% requring Compulsory Deposit 27 68% 341,561 79% Product Transparency Index Between 0 and % 1,616 0% Between 26 and % 288,258 67% Between 51 and % 25,175 6% Between 76 and % 116,238 27% Pricing and Transparency by Loan Amount Transp FullAPR Clients % Clients TZS <350, % 95,267 23% TZS 350,001 to 1,250, % 183,425 45% TZS 1,250,001 to 2,000, % 32,105 8% TZS 2,000,001 to 3,000, % 28,758 7% TZS 3,000,001 to 4,000, % 14,766 4% TZS >4,000, % 51,646 13% Note: Presenting data on 40 products, Filtered to: Exclude products with less than 50 clients, / 3

4 Pricing transparency by institution The transparency level of microfinance institutions in Tanzania is ranked in the following four categories. Their Transparency Index results from specific pricing practices detailed below: Good transparency (76<TI<100): Institutions with the highest Transparency Index in Tanzania are using declining balance interest rates. They use either small fees and inexpensive insurance (e.g., NMB), or they use no fees or insurance and a small compulsory deposit (e.g., FINCA) Average transparency (51<TI<75): Only one MFI falls in this category ABT. Their products use declining balance interest rate and incur no fees, insurance, or compulsory deposit. However, the product is advertised with interest rates from 43-66%, but the average Full APR is 62%. Poor transparency (26<TI<50): 13 of the 18 MFIs fall in the range of poor transparency due to combinations of flat interest rates and a mixture of other pricing components. Very poor transparency (0<TI<25): Two MFIs falls in this range due to flat interest rates, multiple fees, variable cost insurance, large compulsory deposit requirements. Institution Transparency Index Total MF Clients Total MF Portfolio Avg Loan Balance Name Institution TI Rank Number Rank Amt (USD) Rank Amt (USD) Rank Country Totals 466,451 $246,168,929 $ Loan Products # Active Loan Samples Data Status Age Data (mon) 1 NMB ,197 4 $74,528,302 1 $1, FINCA Tanzania ,805 3 $23,938,262 5 $ ABT ,819 8 $32,451,535 4 $2, BRAC Tanzania ,392 2 $19,663,522 6 $ Opportunity , $3,018,868 9 $ FMFC , $392, $ AKIBA ,995 5 $36,852,528 2 $1, Tujijenge Tanzania ,034 9 $2,060, $ Selfina , $3,773,585 8 $ MCBL , $2,837, $ Victoria $377, $2, BELITA , $492, $ K-Finance Ltd , $264, $ YOSEFO ,135 7 $2,211, $ PRIDE Tanzania ,434 1 $33,321,794 3 $ F & K Finance $38, $ MDF Tanzania $148, $ Mbinga , $2,986, $2, VF-Tanzania N/A - 25,000 6 $4,999,450 7 $200 5 N/A - No Data 20 PTF N/A - 10, $1,811, $181 3 N/A - No Data Note: Active loan products are defined as loan products accessed by more than 50 borrowers. Low volume products (accessed by less than 50 borrowers) are not included in the pricing analysis. The Institutional Transparency Index is the weighted average of the Product Transparency Indices for that Institution. / 4

5 Transparency and loan amount The first in the pair of graphs below presents the prices quoted to borrowers in Tanzania, in terms of the nominal interest rate. The second graph presents the prices paid by borrowers, using Full APR. The Full APR includes all fees (both upfront and ongoing), insurances, taxes and compulsory deposits paid by the borrower. The trend line on the first graph shows that the quoted interest rate does not vary according to size of the loan. The second graph reveals a rise in the prices paid on smaller loans, with the trend line flattening as loans increase in size. The true prices increase on smaller loans, and as those true prices rise, the quoted interest rate becomes less indicative of the true price. / 5

6 Transparency and full cost As similarly demonstrated by the two graphs on the previous page, the graph below indicates a strong association between a loan product s price and its level of pricing transparency. As Full APR increases, the corresponding Transparency Index value decreases. The Pricing Transparency Index is MFTransparency s scale for rating the level of transparency of a price. The Index can be applied at a range of levels country, institution, product and loan. The Index shows the percentage of the loan price that is communicated by the lender s nominal interest rate to the borrower. The higher the Pricing Transparency Index rating equals the more transparent the price, with a perfect score being 100. Quoted nominal interest rate 25% Example: x 100 = x 100 = 33 Full APR (int + fee + ins + dep) 75% The graph below varies from any other country in the region, in that there is a notable product that is off the curve, having both a relatively high Full APR but still having a high Transparency Index. FINCA s Village Banking product was previously priced at 4.0% per month flat, with no fees or insurance, and a small compulsory deposit, resulting in an average Full APR of 112% and a Transparency Index of 43. FINCA recently changed the interest rate method on all their microloan products from flat to declining balance. The interest rate on the Village Banking product changed to 6.5% per month declining balance, still with no fees or insurance, and with the same compulsory deposit. The Full APR of the product dropped to 92%, and the Transparency Index improved dramatically to 85, becoming one of the most transparent products in the country. / 6

7 Loan characteristics: Loan size Loan characteristics: Loan term Microloans in Tanzania are defined as loans under TZS 5,000,000. The data presented below shows a clear correlation between the size of the loan and its price. The graph presents loans grouped by size. A large range in prices is seen in smaller loan amounts, while larger loan amounts show less variation. The size of each data point relates to the number of borrowers who have a loan of that product in that size. The larger the data point the higher the number of borrowers who have that loan. Most microloans in Tanzania have a loan term of between 4 and 18 months. The data presented here shows that prices fall as the loan term increases, consistent with the comparatively lower operating cost ratio for longer loans. The Transparency Index in relation to loan size (previous table) shows that prices are slightly more transparent for loans of high amounts. The correlation of Transparency Index with pricing when using the loan term follows a similar trend. Loan Amt Ranges 1:<350,000 2:<1,250,000 3:<2,000,000 4:<3,000,000 5:<4,000,000 6:>4,000,001 By Segment # Samples Avg Price 124% 89% 83% 70% 67% 67% Transp Index Loan Term 1:<=4m 2:>4 and <=8m 3:>8 and <=12m 4:>12 and <=18m 5:>18 and <=24m # Samples :>24m Avg Price 168% 95% 68% 82% 41% 38% Transp Index By Segment The size of each data point relates to the number of borrowers who have a loan of that product in that size. The larger the data point the higher the number of borrowers who have that loan. / 7

8 Loan characteristics: Matrix of price by loan size and loan term Loan characteristics: Loan purpose The matrix presents the prices (Full APR) calculated using original loan documentation representing real loans given to actual borrowers in Tanzania. The higher the price, the darker the shading is. In Tanzania, the highest prices are seen on the top left of the matrix (smallest loans, shortest terms), and the lowest on the bottom right (largest loans, longest terms). This reflects the fact that the pricing of products partially depends on their level of operating expenses and that the operating expense ratio increases dramatically for smaller loans and for shorter loans. The vast majority of microloan products on offer in Tanzania are designed for business purposes. Loans designed for purposes other than business are rare; however, there are some loans which can be used for purposes as specified by the borrower. There are no loan products in the MFTransparency dataset for Tanzania that are designed specifically for the purpose of housing, education or agriculture. Consumer loans show the lowest prices, but these loans go to a small number of clients. Loan Amounts Loan Terms (in months) Purpose 1:Business 2:Housing 3:Consumer 4:Emergency TZS USD < >18 All terms <350,000 <$ %. 74%.. 120% 350,001 to 1.3M $221 to $786 92% 102% 57% 122%. 88% 1.3M to 2.0M $787 to $1,258 89%. 66%.. 71% 2.0M to 3.0M $1,888 to $2, % 3.0M to 4.0M $2,517 to $3, %.. 66% >4.0M >$3,145 66% 104% 47%.. 61% All amounts 100% 104% 62% 85% 38% 88% 5:Any Purpose 6:Mult Purpose # Samples Avg Price 88%. 38% 39% 63% 134% Transp Index By Segment The Full APR of loans with amounts between 350,000 and 1,300,000 TZS are higher for loans with terms between months than for loans with terms less than 6 months. This is due to the cost impact of on-going compulsory deposits - these contribute to increasing the Full APR as the duration of loans increases. / 8

9 MFI characteristics: Loan portfolio scale MFI characteristics: Institution type The size of the institution in terms of gross loan portfolio shows a correlation with the prices charged by the institutions. The data presented here shows that institutions with a larger portfolio charge lower prices on average, and score higher on the Transparency Index rating than those products from smaller institutions. This could be attributed to efficiency gains created by larger institutions and the resultant lower operating costs being passed onto the borrower in the form of reduced prices. The majority of samples collected were non-bank financial institutions (NBFI) and banks. Cooperatives and rural banks do not feature in the dataset, with non-governmental organizations (NGOs) represented by four institutions. The analysis shows that prices charged by the NGOs are higher and less transparent than those charged by the other institution types. The banks charge the lowest prices, however the NBFI s score a slightly higher Transparency Index. Portfolio Scale 1:<$1.0M 2:<$5.0M 3:<$20.0M 4:<$30.0M 5:<$40.0M 6:>$40.0M By Segment # Samples Avg Price 136% 85% 66% 78% 65% 27% Transp Index Inst Type 1:NGO 2:Coop 3:Bank 4:Rural Bank 5:NBFI 6:Other By Segment # Samples Avg Price 106%. 58%. 99% 104% Transp Index / 9

10 Pricing trends in Tanzania A detailed table on pricing trends of each product is included in Appendix 3. Additional details are available by requesting the full TILT tables from MFTransparency at info@mftransparency.org. A close study of this table, along with other data and information presented in this report, illustrates why any general conclusions about pricing trends must be done with great care. It is far from easy to determine Are prices going up or down in Tanzania? or Did the true price of this product really change? The main reasons for this include: Range in prices and the Spread Index: A product rarely has one true price. Prices of a product will vary due to the composition of the pricing components and how they interact with loan amount, loan term, grace periods, and other factors. The only loan product that has one universal Full APR is a loan with a declining balance interest rate and no other charges. Every other price factor complicates the price, sometimes quite dramatically. Examining the Pricing Table (Appendix 2) shows that samples of BELITA s SME loan have Full APRs ranging from 101% to 293%, a very wide range. The Spread Index columns in that table are a valuable indication of how reliable the average price is for describing all loans in that product. For example, BELITA s SME Loan Spread Index is 190 (calculated as ( ) / 101), while ABT s one loan product has samples ranging from 59% to 64%, giving a Spread Index of 10. Thus, ABT s average price is much more indicative of the loan product s price than is BELITA s average loan price. Inconsistent loan sample attributes: The graphs in this analysis report show the prices of every loan sample, but the tables summarize these prices into the average Full APRs. Comparing the average Full APR price of a product over time to identify change can potentially give inaccurate conclusions. The loan samples used for pricing calculations in the first round of data are not always identical to those used for the second round of analysis, varying in both loan amount and loan term amongst other attributes. Pricing components are sensitive to these loan sample attributes; for example, a large upfront fee will have more impact on shorter term loans than longer term ones resulting in a higher APR on shorter loans. A drop in the average Full APR seen in the tables may be due to a difference in attributes of the loan samples used for the pricing calculations in each year rather than due to a drop in prices. The most precise means of determining change in prices would be to take exactly the same loan, with exactly the same repayment schedule and calculate the Full APR last year and this year, and then to repeat that process with more samples. In actuality, if pricing conditions changed, it may well be that some loans have a lower price while some loans have a higher price within the same loan product. These are the realities when loan prices are not based solely on declining balance interest. Increasing loan sizes over time: An MFI may leave the price components of a product unchanged but shift toward gradually larger loan sizes, resulting in a lower Full APR. This is a common occurrence over time; a fact documented in other MFTransparency resources that disprove arguments that MFIs have lower efficiency ratios over time solely due to increased scale and increased competition. Drops in efficiency ratios (and sometimes accompanying drops in portfolio yield) are usually the result of increases in average loan balance. Click here for more information on this. The problem with averages: As highlighted above, determining the price change of a single product is complex, and when extrapolating to analyze the price changes of an MFI with multiple products, or price changes within an entire country, one encounters a large number of complex assumptions that must be taken into consideration. The same issues with Full APR also hold true for determining the average Transparency Index of a product and of an institution s blend of products. Those products with a high Spread Index have a wide range of prices and have a correspondingly wide range of Transparency Indices. MFTransparency is currently investigating adapting the Transparency Index accordingly in the future to provide a more accurate indicator of the range of transparency of a true microloan price. / 10

11 Appendix 1: List of participating institutions Institution Data Avg Loan Bal (Rank) Client Distribution by Loan Amount (Nat'l Currency) Status Number Prods Totals Less Than 350,001 1,250,001 2,000,001 3,000,001 More than Price by Loan Client Distribution Age (mon) Amt (USD) # 350,000 1,250,000 2,000,000 3,000,000 4,000,000 4,000,000 Amount Inst Dist Country Dist Country Total $528 Clients 405,968 95, ,425 32,105 28,758 14,766 51,646 Products: 40 Avg Price 87% 124% 89% 82% 70% 67% 66% Transp Ind # samples PRIDE Tanzania $319 (10) Clients 104,434 30,388 61,197 5,226 5,100 1, Products: 3 Avg Price 87% 92% 87%. 89% 79% 78% # samples BRAC Tanzania $192 (4) Clients 102,392 30,018 60,270 5,236 5, Products: 2 Avg Price 66% 83% 76% 53% 54% 53% 53% # samples FINCA Tanzania $303 (9) Clients 78,805 24,801 40,960 7,881 1,721 1, Products: 3 Avg Price 78% 96% 77% 76% 77% 71% 62% # samples NMB $1,649 (17) Clients 45,197 4,520 4,520 6,780 6,780 4,520 6 Products: 1 Avg Price 27% 32% 27%. 25%. 25% # samples AKIBA $1,470 (16) Clients 26,995 3,116 5,356 1,189 3,000 1,268 1,807 2 Products: 4 Avg Price 55% 95% 60% 58% 53% 40% 37% # samples VF-Tanzania $200 (5) Clients 25,000 N/A Products: N/A Avg Price # samples YOSEFO $129 (2) Clients 17, Products: 3 Avg Price 92% 88% 98% 88% 92% 89%. # samples ABT $2,051 (18) Clients 15, ,582 2,373 1,582 4,746 7 Products: 1 Avg Price 62% 64% 64%. 59%. 59% # samples Tujijenge Tanzania $228 (6) Clients 10,034 1,196 4,891 2,242 1, Products: 4 Avg Price 104% 134% 105% 100% 112% 77% 75% # samples PTF $181 (3) Clients 10,000 N/A Products: N/A Avg Price # samples Opportunity $348 (12) Clients 8,607 2,022 1,821 2,229 1, Products: 2 Avg Price 79% 84% 80% 73% 73%. 66% # samples Selfina $381 (13) Clients 8, Products: 2 Avg Price 102% 127% 99% 104% 103% 87% 105% # samples BELITA $84 (1) Clients 5,882 2,353 1, Products: 1 Avg Price 164% 293% 131%. 121%. 142% # samples MCBL $867 (15) Clients 3, Products: 4 Avg Price 55% 72% 54% 63% 39%. 45% # samples FMFC $327 (11) Clients 1, Products: 2 Avg Price 67% 75% 69% 67% 62% 65% 58% # samples K-Finance Ltd $244 (7) Clients 1, Products: 2 Avg Price 136% 203% 138% 100% 104%. 102% # samples Mbinga $2,791 (20) Clients 1, Products: 3 Avg Price 74%. 93% 91% 43% 58% 59% # samples MDF Tanzania $250 (8) Clients Products: 1 Avg Price 194% 241% 166% 155%... # samples Victoria $2,602 (19) Clients Products: 1 Avg Price 69%. 77% 70%.. 64% # samples F & K Finance $560 (14) Clients Products: 1 Avg Price 245% 282% 208%.... # samples / 11

12 Appendix 2: Pricing per product Note: summary of pricing data collected for each MFI for all loans products provided to more than 50 borrowers. For access to all data, please Abbreviations: up = up-front; on = on-going. Inst & Product Target Group Loan Amounts Pricing (FullAPR) Nominal Interest Rate Fees Insurance Compulsory Deposit Institution Product NumClients % Tot Avg Bal Amt (Min) Amt (Max) Min & Max Avg APR Spread Transp Ind Current Current Current Current ABT Business 15, % $2, , ,000,000 59%-64% 62% %-66.0%, Decl None None None BELITA SME Loan 5, % $84 50,000 15,000, %-293% 164% %-96.0%, Flat 2% up 1.50% up 25% up 2,000 on BRAC Tanzania Microfinance 100,061 98% $ ,000 2,600,000 74%-83% 78% %-33.8%, Flat 1% up None 10% up BRAC Tanzania Enterprise 2,331 2% $1,232 1,200,000 14,000,000 53%-54% 53% %-26.0%, Flat 1% up 2,000 up None 10% up F & K Finance SME Loan % $ ,000 1,500, %-336% 245% %, Flat 10,000 up 1% ongoing 20% up FMFC Jamii 1,342 87% $152 50,000 2,000,000 69%-76% 72% %, Flat 1% up 3,000 up 1% up 10% up 2% on FMFC Personal 121 8% $1,115 1,000,000 10,000,000 58%-66% 63% %, Flat 1.50% up 10,000 up 1% up 15% up FINCA Tanzania Individual 8,607 11% $1, ,000 30,000,000 60%-62% 61% %-60.0%, Decl 0.50% up None None FINCA Tanzania Small Group 8,196 10% $ ,000 4,000,000 79%-81% 80% %, Decl 1% up None 10% up FINCA Tanzania Village 62,002 79% $181 30,000 3,000,000 90%-97% 92% %, Decl None None 10% up 2,000 on K-Finance Ltd Business 71 7% $2,016 1,000,000 30,000, %-107% 103% %, Flat 2% up 1% up None K-Finance Ltd Group 1,010 93% $ ,000 1,100, %-234% 178% %, Flat 1% up 5,000 up 1% up 20% up 1,000 on Mbinga Salary 86 8% $2, ,000 6,000,000 50%-60% 58% %, Flat 2% up 1% up 1% up None Mbinga Business 58 6% $19,038 1,000,000 45,000,000 58%-73% 61% %-24.0%, Flat 3 fees 1% up None Mbinga Solidarity % $1, ,000 3,500,000 23%-243% 112% %-30.0%, Flat 1.50% up 2% up 1%-2.50% up 30% up 10,000 on MCBL Agriculture 271 7% $ ,000 5,000,000 40%-40% 40% %, Decl 2% up 0.65% up 15% up MCBL Group % $ ,000 2,200,000 79%-87% 81% %, Flat 2% up 0.65% up 15% up MCBL Business % $1, , ,000,000 43%-58% 50% %, Flat 2% up 0.65% up 15% up MCBL Salaried 2,162 59% $ ,000 9,000,000 35%-39% 38% %-18.0%, Flat 2% up 0.65% up None NMB MSE Loan 45, % $1, ,000 10,000,000 25%-32% 27% %, Decl 1.50% up 0.75% up None Opportunity Pamoja 3,536 41% $ ,000 1,500,000 86%-92% 88% %, Flat 2% up 1% up 10% up Opportunity Solidarity 5,071 59% $ ,000 7,500,000 66%-76% 72% %, Flat 1.50% up 1% up 10% up Selfina Microleasing 500 6% $1, ,000 4,000, %-127% 108% %-33.6%, Flat 15,000-0 up None 25% up Selfina Work Capital 7,500 94% $ ,000 5,000,000 87%-93% 91% %, Flat 15,000-0 up None 20% up Tujijenge Tanzania Flexible 2,648 26% $188 50,000 4,000,000 91%-138% 126% %, Flat None None 20% up Tujijenge Tanzania Group Loan 7,089 71% $127 50,000 4,000, %-130% 126% %, Flat None None 20% up Tujijenge Tanzania Individual 137 1% $3, ,000 15,000,000 79%-95% 83% %, Flat 20,000 up 2% up None 10% up Tujijenge Tanzania MYC % $1, ,000 50,000,000 73%-92% 80% %, Decl 20,000 up 6% up None None Victoria Small Loan % $1, ,000 10,000,000 68%-78% 71% %, Flat 30,000 up 2% up 2% up None YOSEFO Benkijamii 3,305 19% $44 50,000 1,500,000 90%-106% 95% %-29.0%, Flat 0.50% up 1% up 25% up YOSEFO Group Loan 13,714 80% $146 50,000 2,000,000 62%-106% 90% %-29.0%, Flat 0.50% up 1% up 25% up YOSEFO Mavuno 116 1% $542 2,000,000 15,000,000 89%-92% 90% %-29.0%, Flat 0.50% up 1% up 25% up 1,500 on AKIBA Individual 13,606 50% $2, ,000 50,000,000 42%-50% 45% %-22.0%, Flat 1% up 10,000 up 1% up None AKIBA Group 10,387 38% $ ,000 3,000,000 91%-96% 95% %, Flat 1% up 1% up 20% up AKIBA Consumer 2,755 10% $1, ,000 35,000,000 32%-58% 39% %, Flat 2% up 1% up None AKIBA Home 247 1% $1, ,000 20,000,000 38%-40% 39% %, Flat 1% up 10,000 up 1% up None PRIDE Tanzania MEC Loan 101,152 97% $ ,000 3,000,000 97%-142% 119% %, Flat 1% up 1.35% up 25% up 3,000 on PRIDE Tanzania Premium 2,439 2% $2,259 3,000,000 35,000,000 78%-81% 79% %-24.0%, Flat 1% up 1.35% up 25% up 13,000 on PRIDE Tanzania Salary 843 1% $ ,000 15,000,000 39%-43% 41% %, Decl 10,000 up None None MDF Tanzania Group % $ ,000 5,000, %-299% 194% %-48.0%, Flat 2.50%-3% up 15,000 up 2% up 10%-20% up 1, on / 12

13 Appendix 3: Pricing trend Note: this table is a summary of pricing data collected for each MFI for all loans products provided to more than 50 borrowers. The data is presented only for products for which data is available during the first and the second data collections. For access to all data, please info@mftransparency.org. Abbreviations: up stands for up-front; on stands for on-going. Inst & Product Number of Clients Transparency Index Spread Index FullAPR (Avg) Quoted Interest Rate Compulsory Fees Compulsory Insurance Security Dep Description Institution Product Change Change Change ABT Business 12,035 15, % 62% 4% 42%-66% DB 42%-66% DB None None None None N/A N/A BELITA SME Loan 4,500 5, % 164% 13% 48%-96% FL 48%-96% FL 2% up 2% up None 1.50% up 25% up 1,000 on 25% up 2,000 on BRAC Tanzania Microfinance 108, , % 78% 78% 22% FL 33%-34% FL 11% / 12% 1% up 1% up None None 10% up 10% up BRAC Tanzania Enterprise 3,232 2, % 53% 53% 22%-24% FL 25%-26% FL 3% / 2% 1% up 4,000 up 1% up 2,000 up None None 10% up 10% up F & K Finance SME Loan %. 60% FL. 10,000 up. 1.00% on. 20% up FMFC Jamii 5,169 1, % 72% -24% 30%-% FL 30% FL / 30% 2% up 1% up 3,000 up None 1.00% up 15% up 2% on 10% up 2% on FMFC Personal N/A % 63% 63% % FL 24% FL 24% None 1.50% up 10,000 up None 1.00% up None 15% up FINCA Tanzania Individual 6,844 8, % 61% -3% 36% FL 36%-60% DB Method 15,000 up 0.50% up None None N/A N/A FINCA Tanzania Small Group 3,195 8, % 80% -8% 42% FL 65% DB Method None 1% up None None 10% up 10% on 10% up FINCA Tanzania Village 57,981 62, % 92% -20% 48% FL 78% DB Method None None None None 10% up 2,000 on 10% up 2,000 on K-Finance Ltd Business % 103% 4% 36% FL 60% FL 24% 10,000 up 2% up None 1.00% up N/A N/A K-Finance Ltd Group 702 1, % 178% -23% 48% FL 48% FL 1% up 5,000 up 1% up 5,000 up None 1.00% up 20% up 2,000 on 20% up 1,000 on Mbinga Salary % 58% 6% 24% FL 24% FL 1% up 2% up 2% up 1% up 1.00%-1.50% up 1.00% up N/A N/A Mbinga Business % 61% 9% 10%-24% FL 10%-24% FL 3 fees 3 fees 1.00%-2.50% up 1.00% up N/A N/A Mbinga Solidarity 12, % 112% -18% 10%-30% FL 10%-30% FL 1.50% up 2% up 1.50% up 2% up 1.00%-2.50% up 1.00%-2.50% up 30% up 5,000 on 30% up 10,000 on MCBL Agriculture % 40% 12% 30% FL 30% DB Method 1.50% up 2% up None 0.65% up N/A 15% up MCBL Group % 81% 28% 30% FL 30% FL 1.50% up 2% up None 0.65% up N/A 15% up MCBL Business 2, % 50% 12% 22% FL 22% FL 1.50% up 2% up None 0.65% up 15% up 15% up MCBL Salaried. 2, %. 10%-18% FL. 2% up. 0.65% up. N/A NMB MSE Loan 46,000 45, % 27% -1% 24% DB 24% DB 1.50% up 1.50% up None 0.75% up N/A N/A Opportunity Pamoja 3,200 3, % 88% -17% 36% FL 36% FL 2% up 2% up None 1.00% up 20% up 10% up Opportunity Solidarity 635 5, % 72% -10% 24% FL 30% FL 6% 1.50% up 1.50% up None 1.00% up 20% up 10% up Selfina Microleasing %. 30%-34% FL. 15,000-0 up. None. 25% up Selfina Work Capital. 7, %. 34% FL. 15,000-0 up. None. 20% up Tujijenge Tanzania Flexible 4,885 2, % 126% 21% 36% FL 48% FL 12% 2,000 up 2% up None None None 20% up 20% up Tujijenge Tanzania Group Loan 12,483 7, % 126% 10% 36% FL 48% FL 12% 4,000 up None None None 20% up 20% up Tujijenge Tanzania Individual % 83% 13% 36% FL 36% FL 10,000 up 2% up 20,000 up 2% up None None N/A 10% up Tujijenge Tanzania MYC N/A % 80% 80% % FL 40% DB 40% None 20,000 up 6% up None None None N/A Victoria Small Loan %. 30% FL. 30,000 up 2% up. 2.00% up. N/A YOSEFO Benkijamii. 3, %. 24%-29% FL. 0.50% up. 1.00% up. 25% up YOSEFO Group Loan. 13, %. 24%-29% FL. 0.50% up. 1.00% up. 25% up YOSEFO Mavuno %. 24%-29% FL. 0.50% up. 1.00% up. 25% up 1,500 on AKIBA Individual. 13, %. 20%-22% FL. 1% up 10,000 up. 1.00% up. N/A AKIBA Group. 10, %. 27% FL. 1% up. 1.00% up. 20% up AKIBA Consumer. 2, %. 18% FL. 2% up. 1.00% up. N/A AKIBA Home %. 20% FL. 1% up 10,000 up. 1.00% up. N/A PRIDE Tanzania MEC Loan. 101, %. 30% FL. 1% up. 1.35% up. 25% up 3,000 on PRIDE Tanzania Premium. 2, %. 22%-24% FL. 1% up. 1.35% up. 25% up 13,000 on PRIDE Tanzania Salary %. 36% DB. 10,000 up. None. N/A MDF Tanzania Group %. 36%-48% FL. 2.50%-3% up 15,000 up. 2.00% up. 10%-20% up 1, on / 13

14 Glossary Compulsory Deposit - A requirement for borrowers to set aside funds as a condition on receiving the loan. Full APR This is the true price of the loan paid by the borrower in annualized terms. The full annualized percentage rate includes the impact of interest, all fees paid by the borrower (both upfront and ongoing), all compulsory insurances fees paid, all taxes and all compulsory deposits (sometimes called savings ) required from the borrower. Full APR = interest + fees + insurance + tax + compulsory deposit. The calculation is done on a discounted cash flow method and the result is annualized using a nominal annualization process (e.g., 1%/month x 12 months = 12% per year) rather than by compounding (e.g., 1% per month -> (1.01)^12-1 = 12.7%). Graph legend the legend at the top of each graph shows the number of data points present in each category shown on the graph. The legend changes for each graph. The figure in parentheses indicates the number of data points for that category. Interest rate: declining balance - Interest calculation based on the outstanding loan balance the balance of money that remains with the borrower as the loan is repaid during the loan term. Interest rate: flat method - Interest calculation based on the original loan amount throughout the loan term rather than on the money the borrower actually has. Low Volume Product Products with less than 50 borrowers are considered as low volume products, and are not included in the pricing analysis. Loan Sample these are examples of real loans given to actual borrowers. MFTransparency collects loan documentation (scans/print-outs of repayment schedules and loan contracts) from the microfinance institutions and uses these to calculate the price paid by the borrower. Loan Segmentation the size ranges used to categorize loans vary for each country but are consistent within the country. There are 6 segments of loan size, categorizing loans by their disbursement amount. For example if the biggest loan is 100,000 then the segments are: 1) loans under 8,000 (8%), 2) loans between 8% to 30,000 (30%), 3) loans between 30% to 50,000 (50%), 4) loans between 50% to 70,000 (70%), 5) loans between 70% to 90,000 (90%), and 6) between 90% -105,000. Microloan Credit products issued by microfinance institutions that fall under a specified size limit. Microloans are defined by their size rather than by other attributes such as loan purpose. The size limit varies for each country. Where country-specific legislation does not specify an upper size limit for microloans, MFTransparency determines a suitable maximum loan size in conjunction with other industry actors. MFI (Microfinance Institution) A financial institution or microfinance provider that has at least one micro-loan product. Nominal Interest Rate - The interest rate details as quoted by the institution to the borrower. This is annualized for the purposes of the analysis graphs. If a product is advertised with an interest rate of from 18% to 22% then the 18% figure is used in the calculations. Participation Rate - The market share (in terms of borrowers) represented by the institutions that have disclosed their transparent prices in the respective country. Product Eligibility - The characteristics that borrowers must meet in order to be eligible to receive a loan product; for example, if the loan is available to both males and females, if they need to be a salaried employee, if they need to be in a certain age range, etc. Portfolio Size - An approximation of the outstanding principle for all outstanding client loans, including current, delinquent and restructured loans, but not loans that have been written off or employee loans. Pricing Transparency Index - A scale for rating the level of transparency of a true price. The Index can be applied at a range of levels country, institution, product and loan. It is calculated as the nominal annual interest rate divided by the Full APR of that loan, e.g., a product advertised as 20% interest rate and with a Full APR of 50% would have a Transparency Index of 20% / 50% x 100 = 40. A perfect score is 100. For Institution and Country Indices, MFT generates weighted averages based on clients in each product. Product Purpose - The purposes for which the loan product can be used, for example for business (income generation) purposes, emergency purposes, consumption, education, housing, agriculture or multiple purpose loans. Size of data points (bubbles) each bubble represents the price of one loan sample. The size of the data point relates to the number of borrowers who have a loan at that size. For countries where MFTransparency does not have borrowernumber data, all data points are presented in uniform size. Spread Index Calculates how broad the range of sample prices are, calculated as (Highest Lowest) / Lowest x 100. A small number means a small range of prices for that product. Total Cost of Credit - Total amount paid by the borrower for the loan including all fees and other charges from the lender. Transparent Pricing Initiative Country-by-country projects that collect and disclose details of credit products on offer in each country, with a particular focus on disclosure of the prices paid by borrowers for these products. Details of these loan products are voluntarily disclosed by the microfinance institutions. / 14

15 Promoting Transparent Pricing in the Microfinance Industry Read more on Research papers and microfinance sector overviews are publicly available, contributing to the knowledge-sharing among microfinance practitioners, researchers and students Rating reports and country studies may be purchased per unit or through Planet Rating s subscription service during the 24- month period following their publication. After the initial 24-month validity, rating reports are made freely available in an effort to contribute to further transparency in the microfinance industry. To download our reports please create a free user account on Planet Rating s website, or contact us to learn more about Planet Rating s subscription service. rating@planetrating.com Read more on MicroFinance Transparency (MFTransparency) facilitates microfinance pricing disclosure, offers policy advisory services and develops training and education materials for all market stakeholders. Representing an industry movement toward responsible pricing practices, MFTransparency has worked in 29 countries, with pricing data submitted voluntarily by over 500 institutions representing loan products sold to nearly 50 million clients. Transparent Pricing Data visit the TILT (Truth in Lending Tables) Data Platform. Transparent Pricing Resources visit the Resources Library for educational content. Transparent Pricing Developments - visit the News & Features section of MFTransparency s website. info@mftransparency.org / 15