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The Lending Interest Rates in the Microfinance Sector: Searching for its Determinants

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  • Pablo Cotler

    () (Department of Economics, Universidad Iberoamericana, Mexico City. Mexico)

  • Deyanira Almazan

Abstract

Using data from 1,299 microfinance institutions (MFIs) in 84 countries and following different approaches, it was found the lending interest rate is determined by the funding cost, the loan size, and the efficiency level of MFIs. With respect to competition, results are mixed. Only in Asia is a negative correlation between competition and lending interest rates detected. For other subsamples, it was found the competition is more likely to be negatively correlated with the size of loans.

Suggested Citation

  • Pablo Cotler & Deyanira Almazan, 2010. "The Lending Interest Rates in the Microfinance Sector: Searching for its Determinants," Working Papers 0110, Universidad Iberoamericana, Department of Economics.
    • Handle: RePEc:uic:wpaper:0110
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    References listed on IDEAS

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    1. Thorsten Beck & Asli Demirgüç-Kunt & Maria Soledad Martinez Peria, 2008. "Banking Services for Everyone? Barriers to Bank Access and Use around the World," World Bank Economic Review, World Bank Group, vol. 22(3), pages 397-430, November.
    2. Rebecca Zarutskie, 2003. "Does bank competition affect how much firms can borrow? new evidence from the U.S," Proceedings 856, Federal Reserve Bank of Chicago.
    3. Aleem, Irfan, 1990. "Imperfect Information, Screening, and the Costs of Informal Lending: A Study of a Rural Credit Market in Pakistan," World Bank Economic Review, World Bank Group, vol. 4(3), pages 329-349, September.
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    Cited by:

    1. Pablo Cotler & Giovanna Aguilar, 2011. "The Microfinance Sectors in Peru and in Mexico: Why have they followed different paths?," Working Papers 0311, Universidad Iberoamericana, Department of Economics.
    2. Philippe Adair & Imene Berguiga, 2017. "What Determines Premium of MFIs in the Mena Region? A Panel Data Analysis (2004- 2014)," Post-Print hal-01667346, HAL.
    3. Philippe Adair & Imène Berguiga, 2015. "The interest rates and performance of MFIs in the MENA region: is there a moral issue?," Post-Print hal-01667342, HAL.
    4. Jacinta C. Nwachukwu & Simplice Asongu, 2015. "The Determinants of Interest Rates in Microbanks: Age and Scale," Working Papers of the African Governance and Development Institute. 15/004, African Governance and Development Institute..

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