Transparent Pricing In Ecuador

Ecuador has one of the fastest growing microfinance sectors in the Latin American region. Following the government’s recent determined effort to reform the existing supervisory framework and provide access to funding for microfinance institutions, the future outlook of the sector looks positive. The leading providers of microfinance are downscaling commercial banks, regulated loans and saving cooperatives, registered cooperatives and non-government organizations. The gap in market penetration between urban and rural areas are relatively high, represents a significant untapped demand for financial services.

Since 2002, microfinance institutions have been incorporated under the regulatory and supervisory framework of the Superintendia de Bancos (SBS) of Ecuador. Laws on consumer protection and transparency in the financial system were introduced in 2004. This law is also applicable on registered NGO-MFIs. The law requires all public financial institutions to disclose their procedures adequately and maintain transparency about the interest rate and fees charged. Interest rates are one of the areas that are highly regulated in the microfinance sector. The Superintendcia de Bancos has instituted a national price formula- TEA (Tasa Efectiva Anual) which mirrors the international Effective Interest Rate formula with the exception that it does not include insurance charges.