1. Prices and Profits: Who Watches Which, and How do they Relate? Chuck Waterfield SPTF Conference Panama June 2013 Promoting Transparent Pricing in the Microfinance Industry

2. Prices or Profits? Fair prices and Fair Profits… which drives which? Can you have fair prices and unfair profits? Or unfair prices and fair profits? Which aspect do clients and MFIs focus on? Which should we focus on when determining responsible practice?

3. Double Bottom Line – There is a balance between business and client Client MFI Ideally, we seek a “win-win” in which both the client and the MFI benefit

4. Double Bottom Line – There is a balance between business and client Client MFI Ideally, we seek a “win-win” in which both the client and the MFI benefit Affordable PRICE Adequate PROFIT

5. Double Bottom Line – There is a balance between business and client Client MFI Ideally, we seek a “win-win” in which both the client and the MFI benefit Affordable PRICE Adequate PROFIT Price Costs

6. Double Bottom Line – There is a balance between business and client Client MFI Ideally, we seek a “win-win” in which both the client and the MFI benefit Affordable PRICE Adequate PROFIT Price Costs In Microfinance, neither of these are easy to understand! The depend on the PRODUCT

7. Price Product Market Conditions and Profit Sources

8. Price Product Identical Transparent Market Conditions and Profit Sources

11. Price Product Identical Transparent Efficiency & Competition Market Conditions and Profit Sources

12. Price Product Identical Transparent Textbook Fiction Efficiency & Competition Market Conditions and Profit Sources

13. Price Product Identical Transparent Hidden Textbook Fiction Efficiency & Competition Market Conditions and Profit Sources

16. Price Product Identical Transparent Hidden Textbook Fiction Efficiency & Competition Deception Market Conditions and Profit Sources

17. Price Product Identical Transparent Hidden Textbook Fiction Smoke & Mirrors Efficiency & Competition Deception Market Conditions and Profit Sources

18. Price Product Identical Different Transparent Hidden Textbook Fiction Smoke & Mirrors Efficiency & Competition Deception Market Conditions and Profit Sources

19. Cost and Price of a $300 loan is very different than for a $1000 loan

21. High Prices do not necessarily mean High Profits

22. Price Product Identical Different Transparent Hidden Textbook FictionControlled Confusion Smoke & Mirrors Efficiency & Competition Efficiency & Confusion Deception Market Conditions and Profit Sources

23. Price Product Identical Different Transparent Hidden Textbook FictionControlled Confusion Smoke & Mirrors Efficiency & Competition Efficiency & Confusion Deception Market Conditions and Profit Sources

26. Typical Price Curve from MFT

27. Price Product Identical Different Transparent Hidden Textbook FictionControlled Confusion Smoke & MirrorsChaos Efficiency & Competition Efficiency & Confusion DeceptionMass confusion Market Conditions and Profit Sources

28. Price Product Identical Different Transparent Hidden Textbook FictionControlled Confusion Smoke & MirrorsChaos Efficiency & Competition Efficiency & Confusion DeceptionMass confusion REALITY Market Conditions and Profit Sources

29. Price Product Identical Different Transparent Hidden Textbook FictionControlled Confusion Smoke & MirrorsChaos Efficiency & Competition Efficiency & Confusion DeceptionMass confusion REALITY OPTIMAL GOAL Market Conditions and Profit Sources

30. Double Bottom Line – There is a balance between business and client Client MFI Affordable PRICE Adequate PROFIT Transparent Pricing Responsible Profit Targets

31. Defining a Responsible Price

35. Moving Forward Transparent Pricing Insist on transparent pricing of all responsible MFIs Urge regulators to require transparent pricing of all lenders Continue to study and learn from true prices Responsible Profit Targets Determine thresholds for responsible profit Make the system simple, requiring little more than financial statements Use as an initial hurdle for additional certification of responsible practice

36. Promoting Transparent Pricing in the Microfinance Industry MicroFinance Transparency is an NGO registered in the USA