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High Implicit Interest Rates in the Context of Informal Traditional Housing Transactions: Evidence from Morocco


  • Driouchi, Ahmed
  • Mertou, Amat


Abstract: 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.

Suggested Citation

  • Driouchi, Ahmed & Mertou, Amat, 2012. "High Implicit Interest Rates in the Context of Informal Traditional Housing Transactions: Evidence from Morocco," MPRA Paper 38732, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38732

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    References listed on IDEAS

    1. 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.
    2. 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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    Cited by:

    1. repec:spr:soinre:v:133:y:2017:i:2:d:10.1007_s11205-016-1368-4 is not listed on IDEAS
    2. Carlos Serrano-Cinca & Begoña Gutiérrez-Nieto & Beatriz Cuéllar Fernández & Yolanda Fuertes-Callén, 2013. "Poverty penalty and microfinance," Working Papers CEB 13-029, ULB -- Universite Libre de Bruxelles.

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    Keywords: Implicit interest rate- Informal Traditional Housing- Poverty-Morocco;

    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

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