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Title:Sensitivity of loan size to lending rates: Evidence from Ghana's microfinance sector PDF Logo
Authors:Annim, Samuel Kobina
Issue Date:2011
Series/Report no.:Working paper // World Institute for Development Economics Research 2011,03
Abstract:This paper examines the combined effect of interest rates and poverty levels of microfinance clients on loan size. Cross section data on 2,691 clients and non-clients households from Ghana is used to test the hypothesis of loan price inelasticity. Quantile regression and variants of least squares methods that explore endogeneity are employed. We find the expected inverse relationship only for the 20th to 40th quantile range. The semi-elasticity of loan amount responsiveness to a unit change in interest rate is more than proportionate and significant for the poorest group only. Market segmentation based on poverty level is suggested in targeting and sustaining microfinance clients.
Subjects:interest rate
sensitivity
loan
poor
microfinance
Ghana
JEL:G20
G29
I30
ISBN:978-92-9230-366-2
Document Type:Working Paper
Appears in Collections:WIDER Working Papers, United Nations University (UNU)

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