Are Microcredit Interest Rates Excessive?

Over the past two decades, institutions that make micro loans to low-income borrowers in developing and transition economies have focused increasingly on making their operations financially sustainable by charging interest rates that are high enough to cover all their costs. They argue that doing so will best ensure the permanence and expansion of the services they provide. Sustainable (i.e., profitable) microfinance providers can continue to serve their clients without needing ongoing infusions of subsidies, and can fund exponential growth of services for new clients by tapping commercial sources, including deposits from the public.

Bibliographic Details

Main Authors:	Rosenberg, Richard, Gonzalez, Adrian, Narain, Sushma
Language:	English
Published:	World Bank, Washington, DC 2009-02
Subjects:	ACCESS TO FINANCIAL SERVICES, ADMINISTRATIVE COST, ADMINISTRATIVE COSTS, ANNUAL RETURN, BANK INTEREST RATES, BANK LENDING, BANK LOANS, BANK RATES, BANKS, BORROWER, COMMERCIAL BANKS, COMPETITIVE MARKETS, CONSUMER, COST OF FUNDS, CREDIT CARD, CREDIT CARD RATES, CREDIT OPTIONS, CREDIT UNION, CREDIT UNIONS, DEFAULT RATES, DEPOSIT, DEPOSITS, ECONOMIES OF SCALE, EXPLOITATION, FINANCIAL SUSTAINABILITY, HIGH INTEREST RATES, INFORMAL LENDERS, INTEREST CHARGE, INTEREST CHARGES, INTEREST INCOME, INTEREST RATE, INTEREST RATE CAPS, INTEREST RATE LEVELS, INTEREST RATES, LEARNING CURVE, LOAN, LOAN PORTFOLIO, LOAN SIZES, LOW-INCOME, LOW-INCOME BORROWERS, LOWER INTEREST RATES, MFI, MFIS, MICROCREDIT, MICROFINANCE, MICROFINANCE INSTITUTIONS, MICROLOAN, MONEYLENDERS, OPERATING COSTS, OUTREACH, POOR BORROWERS, PRIVATE INVESTORS, PUBLIC OFFERING, RETURN, RETURNS, RETURNS ON EQUITY, SALARIES, SAVINGS, SAVINGS SERVICES, SHAREHOLDER, SHAREHOLDERS, TAX, TRANSITION ECONOMIES, VALUABLE, WEB SITE,
Online Access:	http://documents.worldbank.org/curated/en/2009/02/10399236/microcredit-interest-rates-excessive https://hdl.handle.net/10986/9498
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