High Implicit Interest Rates in the Context of Informal Traditional Housing Transactions: Evidence from Morocco
AbstractAbstract: The objective of this research is to investigate the situation of the poor in Morocco through assessing the implicit charges of informal housing transactions in different cities. A model allowing the calculation of the implicit interest rate from the traditional-mortgage transactions is applied. Data about traditional-mortgage housing transactions, duration, and rental values are collected from a sample of households in different cities. The results reveal that these transactions are costly although they involve small amounts of money. On average, a rate higher than 6% but lower than 50 % is implicitly implied in traditional-mortgage transactions. The overall results confirm that poor households are implicitly charged higher interest rates in their housing transactions in comparison with the explicit rates charged by formal credit markets, including microfinance. This implies that administrative and economic policies are to be further developed to ensure that poor households can easily access formal credit markets.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 38732.
Date of creation: 31 Apr 2012
Date of revision:
Keywords: Implicit interest rate- Informal Traditional Housing- Poverty-Morocco;
Find related papers by JEL classification:
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
- NEP-ARA-2012-05-22 (MENA - Middle East & North Africa)
- NEP-IUE-2012-05-22 (Informal & Underground Economics)
- NEP-URE-2012-05-22 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Manojit Bhattacharjee & Meenakshi Rajeev, 2010. "Interest rate formation in informal credit markets in India: does level of development matter?," Brooks World Poverty Institute Working Paper Series 12610, BWPI, The University of Manchester.
- Ronald U. Mendoza, 2011. "Why do the poor pay more? Exploring the poverty penalty concept," Journal of International Development, John Wiley & Sons, Ltd., vol. 23(1), pages 1-28, January.
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