Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/115387 
Year of Publication: 
2012
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-177
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract (Translated): 
Microfinance institutions (MFIs) have been successful in providing credit to millions of low-income borrowers in groups previously excluded from formal financial services, but they often charge interest rates that many claim are excessive. We examine microfinance interest rates and their determinants in order to understand how these rates might be lowered. Using high-quality financial data from 29 institutions in seven countries over a period of four years, and drawing on information from field visits with clients, we explore patterns of cost and efficiency in MFIs. We find that improved operational efficiency comes with increased competition and institutional age, or learning by doing. Encouragingly, our regression analysis shows patterns of profit-making MFIs charging lower interest rates. We also find that interest rate caps reduce the outreach of these institutions to the poor, women, and rural clients.
JEL: 
G21
O16
E43
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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