Understanding and Dealing with High Interest Rates on Microcredit: A Note to Policy Makers in the Asia and Pacific Region
Fernando, Nimal A. | May 2006
Abstract
Charging prices high enough to cover costs is essential for any business to survive in the marketplace. This is true for institutions providing microfinance services as it is for any other enterprise. Thus, it is not surprising that many successful microfinance institutions charge high interest rates to cover their high costs. However, despite the success of those institutions in expanding the supply of credit during the last 2 decades to an increasing number of poor and low-income households, some countries in the region seem to be moving to impose ceilings on microcredit interest rates. This paper discusses why such moves are likely to hurt the poor. And the paper points toward a number of positive measures that policy makers could consider to bring down the high microcredit interest rates without hurting the industry and its clients.
Citation
Fernando, Nimal A.. 2006. Understanding and Dealing with High Interest Rates on Microcredit: A Note to Policy Makers in the Asia and Pacific Region. © Asian Development Bank. http://hdl.handle.net/11540/5491.Keywords
Development
Finance
Development Challenges
Development Issues
Development Problems
Microenterprises Finance
Commercial Finance Companies
Enterprise Financing
Financial Analysis
Banking Finance And Investment
Microfinance Programs
Microfinance Institution
Microenterprises Finance
ADB
Project finance
Development plans
Strategic planning
Business Financing
Investment Requirements
Insurance Companies
International Monetary Relations
International Financial Market
Exchange Rate
Microcredit
Insurers
Insurance stocks
Insurance holding companies
Insurance carriers
Insurance agencies
Business subsidies
Investment companies
International banks and banking
Stock exchanges
Grants
Loans
Microloans
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