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Interest Rates, Target Markets and Sustainability in Microfinance

Nwachukwu, Jacinta (2013) Interest Rates, Target Markets and Sustainability in Microfinance. Oxford Development Studies. ISSN 1360-0818

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Abstract

This paper presents evidence on the reliability of claims in the literature on microfinance institutions (MFIs) regarding the role of interest rates and institutional design in helping MFIs to realize financial self-sufficiency. It pools data from 426 institutions in 41 developing countries from 2004 to 2008. Contrary to expectations, the results of an ordered-logistic regression strongly support an inverted U-shaped function for the relationship between interest rates and sustainability, irrespective of customer orientation. Additionally, a shift away from the poorest borrowers in the low-end market does not significantly improve the likelihood of being more profitable after controlling for other relevant covariates. MFIs may not, therefore, be forced to drift away from their original goal of serving the underprivileged in pursuit of financial viability.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Schools: The Business School
Related URLs:
Depositing User: Cherry Edmunds
Date Deposited: 26 Nov 2013 11:48
Last Modified: 26 Nov 2013 11:48
URI: http://eprints.hud.ac.uk/id/eprint/19234

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