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On the Determination of Interest Rates in Rural Credit Markets: A Case Study from the Sudan

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  • Saleem, Samir Taha

Abstract

This paper shows the lender's risk theory is inadequate for explai ning the high interest rates prevailing in the Sudanese rural credit markets and that these rates can best be explained by the existing po wer relations between the lender and the borrower operating through t he undervaluation of the borrower's collateral. A theoretical framewo rk which accommodates the lender's risk theory and the theory of coll ateral undervaluation is formulated. This is then confronted with act ual data in order to examine the empirical relevance of the two theor ies. It was found that the lender's risk theory can explain only abou t 12 percent of the observed rates. Copyright 1987 by Oxford University Press.

Suggested Citation

  • Saleem, Samir Taha, 1987. "On the Determination of Interest Rates in Rural Credit Markets: A Case Study from the Sudan," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 11(2), pages 165-172, June.
    • Handle: RePEc:oup:cambje:v:11:y:1987:i:2:p:165-72
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    Cited by:

    1. Anwar Ahmed, 1994. "The Informal Financial Sector in Bangladesh: An Appraisal of its Role in Development — A Comment," Development and Change, International Institute of Social Studies, vol. 25(3), pages 635-640, July.
    2. Adam B. Elhiraika, 1996. "Risk‐Sharing And The Supply Of Agricultural Credit: A Case Study Of Islamic Finance In Sudan," Journal of Agricultural Economics, Wiley Blackwell, vol. 47(1‐4), pages 390-402, January.
    3. Hassanain, Khalifa, 1991. "The short-term stagflationary impact of stabilization policy in Sudan: a test of the new structuralist hypothesis," ISU General Staff Papers 1991010108000017624, Iowa State University, Department of Economics.
    4. Geoff Bright, 1999. "Assessing the Effects of Hazards and Interventions on Farm Household Liquidity in Sudan ‐ A Preliminary Accounting Model," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 83-92, January.

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