A new United States non-profit organization, MicroFinance Transparency (MF Transparency), will publish the interest rates and other basic information about the lending practices of microfinance institutions (MFIs) worldwide. Supported by many throughout the world of microfinance, the founding of this new organization comes at a time of fierce debate over the role of commercial microfinance.

According to their website, “MFTransparency will be the venue for the microfinance industry to publicly demonstrate its commitment to transparency, integrity and poverty alleviation. [Their] ultimate goal is to provide essential information necessary for healthy free market conditions.” By publishing annualized per year (APR) interest rates and other basic data, MF Transparency will allow the microfinance industry to have many of the same standards that are enforced in commercial lending in countries throughout the world.

Both sides of the for-profit debate support this cause. According to the Microcredit Summit Campaign, MF Transparency will expose those MFIs “attracted by near-monopoly lending environments and misleading pricing systems compounded by borrowers’ frequent lack of understanding of the financial details of credit transactions,” quelling the fears of many opposed to commercial microfinance and separating ethical for-profit institutions from any who might try to take advantage of the poor. By providing “objective and verifiable” information to all microfinance stakeholders, the new organization also plans improve the market efficiency, often the most crucial piece of the for-profit argument. To learn more about the ongoing disagreements regarding commercial microfinance, please read this previous microcapital story.

MF Transparency was founded by Charles Waterfield, a professor at Columbia University. The idea was first announced at the Asia-Pacific Regional Microcredit Summit 2008, which occurred last week. The newly formed organization will be supported by donor funding, though the website does not yet provide a list of donors. Over 40 MFI executives, academics, consultants and other industry players have already endorsed the organization. The MFIs that have already endorsed the new endeavor represent 74 million clients worldwide.

By Greg Casey, Research Assistant

Additional Resources:

Wall Street Journal Online: “Lending Groups for Poor Agree To Disclose Rates”

BusinessWeek: “Setting Standards for Microfinance”

The New Nation: “Microcredit lenders urged to improve transparency”

Vancouver Sun: “Micro-financiers track loan costs in developing world”

MicroCapital article, August 1 2008: “Nobel Laureate Muhammad Yunus Speaks Out Against For-Profit Microfinance from Asia-Pacific Microcredit Summit”

MicroCapital article, May 19, 2008: “MICROFINANCE EVENT: Asia-Pacific Regional Microcredit Summit 2008 Hosted by Microcredit Summit Campaign and Gema PKM”

MicroFinance Transparency: home

MF Transparency: “MF Transparency Press Release”

MF Transparency: Endorsements