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Microfinance and Moneylender Interest Rate: Evidence from Bangladesh

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  • Mallick, Debdulal

Abstract

The linkage between the formal and informal credit markets has long been of great interest to development economists. This paper addresses one important aspect of the linkage by empirically investigating the impact of the microfinance program expansion on the moneylender interest rates in Bangladesh, and finds that moneylender interest rates increase with microfinance program expansion. MFI program expansion increases moneylender interest rates in the villages in which more loans are invested in productive economic activities than consumption. Borrowers resort to moneylenders for additional funds because of inadequate supply, unavailability of seasonal working capital from MFIs, and tight repayment schedule, which in turn increases demand for moneylender loans.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17800.

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Date of creation: May 2009
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Handle: RePEc:pra:mprapa:17800

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Keywords: Moneylender; microfinance; interest rate; informal sector.;

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Cited by:
  1. Berg, Claudia & Emran, M. Shahe & Shilpi, Forhad, 2013. "Microfinance and moneylenders : long-run effects of MFIs on informal credit market in Bangladesh," Policy Research Working Paper Series 6619, The World Bank.
  2. Janda, Karel & Zetek, Pavel, 2014. "Survey of Microfinance Controversies and Challenges," MPRA Paper 56657, University Library of Munich, Germany.
  3. Mallick, Debdulal & Nabin, Munirul, 2010. "Where NGOs go and do not go?," MPRA Paper 27185, University Library of Munich, Germany.
  4. Dan Brockington & Nicola Banks, 2014. "Exploring the Success of BRAC Tanzania’s Microcredit Programme," Brooks World Poverty Institute Working Paper Series 20214, BWPI, The University of Manchester.
  5. Narayan Chandra Das & Nayma Qayum & Mehejabeen Khan & Fazlul Karim, 2010. "Social Protection Package for the Retrenched Workers of State-owned Enterprises: A quick Assessment," Working Papers id:2710, eSocialSciences.
  6. Janda, Karel & Zetek, Pavel, 2013. "Macroeconomic factors influencing interest rates of microfinance institutions in Latin America," MPRA Paper 49973, University Library of Munich, Germany.
  7. Ha van Dung, 2014. "Short-term precaution, insurance and saving mechanisms in rural Vietnam," Working Papers CIE 82, University of Paderborn, CIE Center for International Economics.

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