| Pricing is a very important function in the life of an organisation. It is a critical factor in the survival and good health of every organisation that relies on sales of its products: "If prices are too high, business is lost; if prices are too low the enterprise may be lost". So the establishment of appropriate interest rates is crucial for the effective operation and financial management of financial institutions. It is essential for managers to understand different methods of calculation and their impact on yield and on the cost to borrowers. To ensure self-sufficiency, institutions have to design an interest rate and fee structure that will cover their costs - cost of funds, operating costs, loan loss provision and effect of inflation. On the cost side, identifying sources of profitability (and losses) allows a financial institution to focus on promoting their winning products and redesigning those less profitable. Once a financial institution has determined the market share it aims to achieve with its selected products and services in a given geographical area and time frame, it can translate this into a certain number of branch offices and field staff, which determines its cost structure. Finally by combining the product pricing, the cost structure and the financing plan, a business plan can be prepared. | 
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