IDEAS home Printed from https://ideas.repec.org/p/hhs/sdueko/2012_009.html
   My bibliography  Save this paper

Interest rates in community-managed microfinance: How the poorest Africans earn sixty percent return on their savings

Author

Listed:
  • Rasmussen, Ole Dahl

    () (Department of Business and Economics)

Abstract

It is common to see the interest rate on savings in community-managed microfinance being reported as "20-30% annually". Using panel data from 204 groups in Malawi, I show that the right figure is likely to be at least twice this figure. This is due to sector-wide application of non-standard interest rate calculation and unrealistic assumptions about the savings profile in the groups. In the 204 groups, the annual interest rate on savings is 63%. For transparency and accountability donors, politicians and practitioners should change their interest rate calculations. Furthermore, the proposal method will allow practitioners to better monitor group performance.

Suggested Citation

  • Rasmussen, Ole Dahl, 2012. "Interest rates in community-managed microfinance: How the poorest Africans earn sixty percent return on their savings," Discussion Papers of Business and Economics 9/2012, University of Southern Denmark, Department of Business and Economics.
  • Handle: RePEc:hhs:sdueko:2012_009
    as

    Download full text from publisher

    File URL: https://www.sdu.dk/-/media/files/om_sdu/institutter/ivoe/disc_papers/disc_2012/dpbe9_2012.pdf
    File Function: Full text
    Download Restriction: no

    More about this item

    Keywords

    Microfinance; interest rates; performance monitoring; community-managed microfinance; village savings and loan associations; Malawi; NGO;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:sdueko:2012_009. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lene Holbæk). General contact details of provider: http://edirc.repec.org/data/okioudk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.