Contracts, and communication

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My work in microfinance sometimes required that I review, modify, and design loan contract templates between the microfinance organisation (lender) and its clients (borrower).

A contract is a written agreement, usually enforceable by law. As the author of the contract, the lender has the power in this dynamic.

Responsible, inclusive financial institutions use their power to deliver valuable financial and non-financial services to their clients. This usually starts with a contract.

The best contracts provide transparency (to both sides).

Transparency requires effective communication.

Even today, when I visit the websites of the largest commercial banks here in the Philippines, I cannot understand the terms of many of their products. And I have a degree in finance. This frustrates me to no end.

Complexity often benefits those with power.

Fair contracts should always communicate effectively.

"Communication is always understood in the context and experience of the receiver - no matter what was intended."

- Simplicity, Edward de Bono

To be understood, communication must be simple, and clear. Complexity reduces understanding. Simplicity without clarity can mean that some pieces of information are missing, and this can lead to ambiguity and misinterpretation.

Writing an effective and responsible contract requires that we put ourselves in the shoes of all parties.

This is our responsibility when we communicate.