I feel MFPs are better positioned to foot the bill for finance education because capacity building of their client will help to build good relationship with their client and reduce risks of loan delinquency on their portfolios. This should be done as one way of self guarding their portfolio as MFPs do this by training their clients in business management before they are given loans. Please note that capacity building is key for the success of any program. Auster
"'w.hiemann' w.hiemann@berlin.de [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com> wrote:
Dear all,
One answer to the WHY is human behavior:
On part of the borrowers: avoiding hardship and maximizing pleasure (loan for holiday, see the start of this thread!), lack of planning and discipline (among others); it is (too?) easy to obtain a loan.
On part of the MFIs: Maximizing income: Incentives (officers earn easier and higher bonus for loans than for deposits!) and targets (“success” = higher indebtedness of poor households); therefore ignoring prudential loan sanctioning policies (business model: high interest rates cover losses from those who commit suicide).
Therefore: Financial Education. But who foots the bill?
Thank you,
Wolfram
From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Dienstag, 7. Oktober 2014 23:15
To: MFP
Subject: Re: [MFP] Wonga under strick regulation
Some responses and comments:
* Yeah, I was using a bit of hyperbole to grab attention. Our industry really needs some waking up. We like to believe our own marketing materials… perhaps because the truth is hard to stomach.
* I’m pretty sure I was on the generous side saying that 300 (10%) of the people on MFP really understand pricing. I’ve spent the last 7 years talking and teaching prices to thousands of people. It’s not an easy topic to grasp and really understand. The majority of people working inside MFIs don’t really know or understand the price they are charging.
* Yes, when someone needs cash, they need to look at cash-flow for debt repayment, but the amount to be repaid is seriously affected by the prices we charge in microfinance and the length of time people stay in debt to us. Borrowing $100 and paying back $120 a month later is a high annualized price, but can be a sound decision. Staying a client of an MFI for a full year (or many years) and pay annualized prices we often charge (> 100% APR) is not a sound decision. You can explore and find out much more about our true prices and how they are correlated to loan amounts and loan terms at our website: www.mftransparency.org
* We find clients systematically borrowing from other MFIs when they already have a loan from one MFI. The “why” is complex and not universal…. maybe we give way too small of loans for their needs (this happens a lot), so they have t
Posted by: austerg <austerg@yahoo.com>
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