Welcome to the Interest Traffic Light website

This site is for microfinance investment professionals to access a new tool designed to help them evaluate the level of interest rates charged by microfinance institutions (MFI).

The level of interest rates is one of the most discussed issues in microfinance and rates vary greatly between regions, products and institutions. In order to assess if an MFI will provide an appropriate level of social and financial returns, microfinance investors must determine if the institution is practicing responsible pricing.

Responsible pricing is defined by the SMART Campaign’s Client Protection Principles as “pricing, terms, and conditions set in a way that is both affordable to clients and sustainable for financial institutions”.

The Interest Traffic Light proposes a framework to evaluate and eventually score MFIs according to the interest rates they charge. Microfinance investors can use it for MFIs that charge effective rates considered to be above the norm. It takes into account absolute rates as well as a set of underlying factors that determine what MFIs need to reasonably charge their clients: the value provided to clients, the MFI’s rates and costs in comparison to peers, its history of lowering rates, profitability and the use of profits. The tool yields a recommendation whether to approve the investment without further conditions (Green), with specific conditions (Yellow) or not at all (Red). 

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