1. Transparency
Training recipients attending not fewer than 6 hours of instruction and not more than 20 hours of instruction are heretofore obligated to compensate the training institution a fee equivalent to $100 per training day, with the exception of days in which the recipient did not attend more than 75% of the instruction time.

2. Objectives Understand why transparency is important
Describe good transparency practices
Identify Smart Campaign tools for improving transparency
New slide

3. The Principle in Practice:
Transparency
The Principle in Practice:
Providers will communicate clear, sufficient, and timely information in a manner and language that client can understand, so that clients can make informed decisions.
Consider this:
Transparency is a pre-condition to many of the other principles—foremost, responsible pricing.
This is the Campaign’s definition of the principle “Transparency.” An institution puts the principle into practice by communicating clear, sufficient, and timely information in a manner and language that client can understand, so that clients can make informed decisions.
Consider this: Transparency is an important part of many of the other principles. Foremost, it is a pre-condition to responsible pricing. In other words, transparency is the foundation of responsible pricing.

4. Lack of transparency affects the client and the FI
Effects the…
Client…
FI… 1
Client does not understand the maintenance fees for her savings account.
…sees that her savings have decreased and thinks the bank has robbed her.
…loses business when client tells others about her experience. 2
…is demoralized and does not trust ATM transactions.
…loses benefit of investment in new technologies.
Client is not aware that she receives only three free ATM withdrawals before incurring fees.
When institutions are not transparent with clients, both clients and the institution will likely suffer consequences. This chart list three common ways that an institution is not transparent with clients, followed by the possible effects on the client, and the possible effects on the MFI. 3
Client believes that if she does not file an insurance claim, the premium will be returned to her.
…concludes that insurance is a scam when she does not have the premium returned.
…finds that products intended to add value and attract clients actually have the opposite effect.

5. Lack of transparency affects the client and the FI
Effects the…
Client…
MFI… 4
Client is not aware of the penalty charges on late payment of loans
…thinks the loans are expensive and the FI hides costs
…reputation is at risk. 5
…feels cheated and overcharged .
…repeat business is at stake.
Client is told of loan processing/application fee at disbursement stage.
When institutions are not transparent with clients, both clients and the institution will likely suffer consequences. This chart list three common ways that an institution is not transparent with clients, followed by the possible effects on the client, and the possible effects on the MFI. 6
Client signs loan agreement without the FI explaining collateral in simple language
…concludes that FI can take their assets willy-nilly
…finds that collateral based loans result in low loan uptake

6. Client Voices: Regardless of education levels, understanding of loan terms is low.
Benin N= 1420
Georgia N=913
Pakistan N= 1000
Peru N=1000

7. Lack of understanding leaves some customers feeling cheated.
Were you surprised by something related to the loan after taking it? (all current and former clients)
Photo taken by Peruvian respondent

8. “Empty wallet -- to signify monthly expenditures, the increase of dollar rate…” - Male, Georgia

9. Lack of information about insurance is worrying

10. Better disclosure practices make business sense
With the exception of Pakistan, a clear correlation emerged between client understanding of loan terms and whether a client rated his or her experience with MFPs as favorable or not (Figure 10). Those clients with a strong understanding of loan terms and conditions were more likely to rate their MFP experience as favorable or very favorable. Those that did not understand terms well were more likely to rate their MFP experience as very unfavorable or unfavorable.

11. CPP #3: Adequate Standards of Care
Policy and documented process are in place to require transparency on product terms, conditions and pricing.
✔Provides client all key facts document
✔ Loan Contracts includes key information credit process /client rights.
✔ Clients informed of Savings process , terms and conditions
✔ Insured clients given information at time of enrollment
✔ Client education on products
✔ Information provided on payment transaction
✔ Fees charged by 3rd party disclosed to clients.
Standards – CPP 3 – 3 standards, 20 compliance criteria and 13 indicators
Policy and documented process are in place to require transparency on product terms, conditions and pricing. (Focus on WHAT)
The FI communicates with clients at an appropriate time and through appropriate channels. (Focus on WHEN)
The FI takes adequate steps to ensure client understanding and support client decision making. (FOCUS on WHERE all to display)
Ask the participants, to see the first indicator and list out the key information that FIs should provide for loans?
Answer: Total Loan Amount, Pricing - including fees, total cost of credit (principal, interest and fees), APR/EIR. - disbursement date and loan term; - repayment schedule with principal and interest amounts, number, and due dates of all repayment installments; - and moratorium interest rates.
Ask participants
For Savings: what terms and conditions should be communicated to client? Answer – interest rates, min balance, no of free withdrawals etc.
For Insurance product – what information's about insurance should be given to clients? Answer - Premium; - events covered; - individuals covered; - amount and term of coverage; - when and how to file a claim; - required documentation to prove damage; - any major exclusions; - terms related to cancelation and prepayment; and - cooling off periods, cancellation rights, and other relevant rights under policies.
Policy and documented process are in place to require transparency on product terms, conditions and pricing.
The FI provides clients with a Key Facts Document that contains the following information about their loans:
- total loan amount; - pricing, including all fees; - total cost of credit (all principal, interest and fees) and APR/EIR; - disbursement date and loan term; - repayment schedule with principal and interest amounts, number, and due dates of all repayment installments; - and moratorium interest rates.
Loan contracts include all information included in the Key Facts Document, in addition to:
- grace period (if any); penalties for arrears or prepayment; - compulsory savings (if any); - linked products (if any); - member or guarantor obligations (if any);
collateral (if any) collateral seizing procedures; - any restrictions on loan use; - cooling off periods; - cancellation rights; - consequences of late payment and default; and whether terms and conditions can change over time.
Contracts are written in simple language and do not contain illegal clauses.
For loans with a group guarantee or a guarantor, member or guarantor obligations are clearly defined, and communicated to group members or guarantors.
For variable rate loans and loans denominated in a foreign currency different from the main currency of the client source of income, the FI demonstrates that it clearly explains pricing and cost scenarios to the clients, including a pessimistic scenario.
If the FI deducts the first payment from principal and fees (i.e. upfront fee, insurance, guarantee deposit), it clearly communicates this to clients before disbursement.
Savings documentation includes:
- fees (including closure fees); - interest rate and how amounts will be calculated; - minimum and maximum balances; and whether deposits are governmentally insured
Savers are informed of timing, conditions and fees for accessing their savings and equity shares, if relevant.
If savings are used as cash collateral for loans, the documentation available to the client specifies whether and how savings can be used in case of default.
Insured clients are provided the following information at the time of enrollment (orally and/or in writing):
- premium; - events covered; - individuals covered; - amount and term of coverage; - when and how to file a claim; - required documentation to prove damage;
- any major exclusions; - terms related to cancelation and prepayment; and - cooling off periods, cancellation rights, and other relevant rights under policies.
Clients are informed about the importance of informing beneficiaries of their coverage under the client’s insurance products.
FIs make the same effort to educate clients about their products, whether the products are sold as voluntary, mandatory or bundled.
Clients initiating or receiving money transfers and other payment transactions are provided the following information, when applicable:
- amount paid by sender in sender's currency; - estimated exchange rate; - amount to be received in the destination currency; - fees; - instructions for collecting money; - cancellation conditions; - instructions for resolving errors; - transaction confirmation; - taxes (if any); and - linked products (if any).
Documentation that lists all fees, terms, taxes and cancellation conditions is accessible for clients of any payment service provided at the FI's agent (such as: money transfers, bill payments, airtime top-up, and deposit withdrawal) .
Fees charged by third-party providers or agents are fully disclosed to clients.

12. CPP #3: Adequate Standards of Care
The FI communicates with clients at an appropriate time and through appropriate channels.
✔ Documented communication process
✔ Adequate time to review contracts
✔ Signed copy of contract - loan, payments
✔ Detailed certificate of insurance coverage
✔ Renewal - client notified.
✔ Credit and Savings – oral and written .
✔ Regular/ On demand information on account balances – accurate and clear.
Standards and Indicators – CPP 3 (10 mins) Contd.
2nd Standard is about HOW? How to communicate to clients? 2 Compliance Criteria
The FI communicates with clients at an appropriate time and through appropriate channels.
A documented process is in place to communicate information related to the product or service (on product terms, conditions and pricing, including contracts) before the client signs or renews it.
The FI gives clients adequate time to review the terms and conditions of products, ask questions, and receive additional information prior to signing contracts. The client has an opportunity to decline the product (loan + insurance combination in the case of bundled products).
Upon signing, clients receive a signed copy of contract with no blank spaces. This applies to group products as well as individual. Digital services should be embedded into account opening documents for ease of client processing.
Clients receive a certificate of coverage that includes the most salient information, which in all cases includes: - premium; - events covered; - individuals covered; - amount and term of coverage; - when and how to file a claim.
This certificate is delivered to clients promptly after enrollment (in the case of insurance enrollment at the time of the loan application, the certificate should be delivered at or before loan disbursement).
If products renew automatically, the FI provides clients notice and, for voluntary products, the opportunity to opt out. Communication for credit and savings products is orally and in writing.
The FI notifies clients before any change, including expiration, cancellation or material change of terms (such as insurance coverage) or price. Where relevant, FI informs clients of any right or procedure to prevent the change. Communication for credit and savings products is orally and in writing.
When initiating an insurance claim, clients are provided information on their prospective benefits.
A documented process is in place to provide clients with regular and on-demand information on account balances. Information is accurate and clear.
The FI gives clients receipts via , paper, or text message (SMS) for every transaction. Appropriate format varies with channel and with client capability.
For loans with a group guarantee or a guarantor and group savings accounts, each member in the group or guarantor receives notification of the total balance of the account at least quarterly. Clients are permitted to review the account activity upon request.

13. CPP #3: Adequate Standards of Care
The FI takes adequate steps to ensure client understanding and support client decision making
✔ Disclose pricing publicly - Branch/Agent
✔ Consistent marketing material
✔ Participate in transprency initiatives , if any
✔ Staff trained to explain and verify client understanding.
✔ Use local language – oral and written.
✔ Internal control to verify policies /process
3rd Standard is about Client Understanding and Education? 4 Compliance Criteria
The FI takes adequate steps to ensure client understanding and support client decision making.
The FI's public information supports informed decision making by clients.
Basic product information on product and service features, including pricing, is displayed and visible in branches (e.g., posters, brochures, pamphlets) and should be readily available and proposed at agents.
The FI discloses the pricing information in the public domain (e.g., website and branches) using the common standard for quoting interest rates (APR or EIR). In addition, the FI can also disclose other formats in markets in which interest rates are quoted in another form by nearly all offerers (e.g. flat rates, CAT in Mexico, TCEA in Peru, TEAC in Bolivia, etc.).
Marketing materials provide pricing information that is consistent with ultimate product terms and conditions.
The FI participates in industry transparency initiatives, if available.
Staff are trained to explain pricing, terms and conditions to clients and verify client understanding in accordance with policies, and they demonstrate this understanding in practice. They receive refresher trainings annually.
The FI communicates all information related to products and policies to clients in plain language; information is not hidden in legalese or small print.
The FI communicates all information related to products, services and policies to clients in the local language and at an appropriate level given financial literacy limitations. For less literate clients, oral communication supplements written information.
The FI has and uses an internal control process to verify uniform application of policies and procedures related to transparency.

14. Good practice: Make communication meaningful to the client.
Don’t use fine print. Can you read the bottom of this slide?
Use plain language. Which statement is more meaningful?
A. Non-repayment will result in action on the part of the institution at the immediate outset of the delinquency.
B. The institution will begin the loan collection procedures on the first day the client is late.
Fit the communication method to the client. Are your documents written in the local language? How would a blind person access your important contractual information?
Transparency is more than full disclosure. It means communicating in a way that is meaningful to clients—a way they can easily understand the information. Here are some questions to consider.
Fine print is often overlooked by clients. Minimize the use of fine print.

15. Good practice: Confirm client understanding.
Use:
Call backs
Check lists
“Key facts” or FAQ document
Glossaries for key terms
Analysis of common complaints/questions to improve communication
Another good practice is to inform the client and then confirm that they’ve understood the information. This can be accomplished using:
Call backs
Check lists for information that staff should cover with the client
Key facts or FAQ documents that the client can take home
Glossaries for key terms (especially those that many clients may not be familar with)
Analysis of common questions/complaint—these can help a provider understand the common misunderstandings that clients have

16. 
I can easily understand the interest rate and compare it to other institutions.
I know my installment amounts and when payments are due.
I’ve never had unexpected: late fees, early payment fees, or account activity fees, changes to my interest rate or loan terms.
The institution has explained my responsibilities for delinquent group members.
I can easily find out the amount of my outstanding debt and the balance in my savings account.
I am always given the opportunity to ask questions during my interactions with the institution.   
Transparent and responsible pricing requires an institution to think from the perspective of their clients. This checklist will help you think about how well your clients understand pricing.
[Ask participants: Do you think your clients would agree with all of the following statements? Read the statements.]
If there are statements here that your clients wouldn’t agree with, your institution should examine how pricing and term information is disclosed to clients.  

17. Tools available from the Smart Campaign
These, and dozens more tools are available for free on the Smart Campaign website.

18. Tools available from the Smart Campaign
These, and dozens more tools are available for free on the Smart Campaign website.