Sensitivity of Loan Size to Lending Rates Evidence from Ghana’s Microfinance Sector
AbstractThis paper examines the combined effect of interest rates and poverty levels of microfinance clients on loan size. Cross section data on 2,691 clients and non-clients households from Ghana is used to test the hypothesis of loan price inelasticity. Quantile regression and variants of least squares methods that explore endogeneity are employed. We find the expected inverse relationship only for the 20th to 40th quantile range. The semi-elasticity of loan amount responsiveness to a unit change in interest rate is more than proportionate and significant for the poorest group only. Market segmentation based on poverty level is suggested in targeting and sustaining microfinance clients.
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Bibliographic InfoPaper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Working Paper WP2011/03.
Length: 31 pages
Date of creation: 2011
Date of revision:
interest rate; sensitivity; loan; poor; microfinance; Ghana;
Other versions of this item:
- Annim, Samuel Kobina, 2009. "Sensitivity of loan size to lending rates: Evidence from Ghana’s microfinance sector," MPRA Paper 21280, University Library of Munich, Germany.
- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
- G29 - Financial Economics - - Financial Institutions and Services - - - Other
- G20 - Financial Economics - - Financial Institutions and Services - - - General
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