Resources to assess Responsible Pricing indicators
Dimension 6 of the Universal Standards about Responsible Growth and Returns assesses responsible pricing through a combination of quantitative indicators; these indicators assess whether an FSP is in the accepted performance range for the effective interest rate, the operating expense ratio, the loan loss expense ratio and the return on assets.
The following resources will help you conduct a thorough and harmonized calculation of these ratios.
For further guidance on the financial indicators used to assess responsible pricing, please refer to Standard 6B in the Audit and Implementation Guide.
Calculate the Annual Percentage Rate (APR)
APR is a way of disclosing an annualized interest rate that includes the effects of interest, fees, commissions, calculation methods and other loan requirements (forced savings) on the total cost of the loan. It is an effective interest rate. APR represents the real financial cost paid by the clients for their loans. And this calculation method makes it a standard measure that allows for a comparison of the cost of different loan products.
Cerise's Excel-based APR Estimation and Benchmarking Tool makes it easy for SPI users to calculate the APR and complete the indicator on Loan Pricing in the Organization Information section of SPI online. And it now includes a streamlined version of the well-established Microfinance Transparency APR Calculator as a separate tab right inside the Excel file, as well as a worksheet to compile other APRs from peers and conduct the comparison. The APR Estimation and Benchmarking Tool is available in English, French, and Spanish.
Download The APR Estimation and Benchmarking Tool and choose the language directly in the Excel file.
Important: extract the ".zip" file before using the Excel file, otherwise the macros will not work. If needed, you can unblock macros by modifying the properties of the file as follows:
- Open Windows File Explorer and go to the folder where you saved the file.
- Right-click the file and choose Properties from the context menu.
- At the bottom of the General tab, select the Unblock checkbox and select OK.
Also download the worksheet (3 languages inside), to help you collect the data you will need to complete the tool: APR Worksheet
For definitions, see this resource: Concepts and Key Definitions for Pricing
To know more about the difference between the APR Estimation and Benchmarking Tool and the MTF APR Calculator, and how they can be used together to calculate the APR of a loan portfolio, check out this 2-part tutorial:
Calculate the other financial indicators and assess their performance range
We have also developed a CP4 Companion tool that will calculate automatically for you the three other ratios used to assess responsible pricing: Loan Loss Expense Ratio (in % of average assets), Operating Expense ratio (in % of average assets) and Return on Assets.
Simply input the financial statements for the past three full years into the tool and analyze the calculated ratios that will appear in the box “Data to analyse”. We’ve also added a brief section of the key financial indicators that are requested in the SPI Online tools.
Download the CP4 Companion and choose the language directly in the Excel file.
More resources on assessing responsible pricing
- To learn more on EIR, APR, etc., read Microfinance TRAPS, The Microfinance Transparent Pricing Supervision Handbook
- On the differences between flat and declining, see the Consumer Pricing Education Animation
- To understand the rationale of how these tools assess pricing fairness, read the research paper by Rozas D. (2016) Assessing Price Fairness, and more recently: Rozas D., Anton Diaz P. (2023): Assessing Responsible Pricing for Inclusive Finance Providers - An update to the 2016 research