The Determinants of Interest Rates in Microbanks: Age and Scale

Jacinta Nwachukwu () and Simplice Asongu

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates the legitimacy of the relatively high interest rates charged by those microfinance institutions (MFIs) which have been transformed into regulated commercial banks using information garnered from a panel of 1232 MFIs from 107 developing countries. Results show that formally regulated micro banks have significantly higher average portfolio yields than their unregulated counterparts. By contrast, large-scale MFIs with more than eight years of experience have succeeded in lowering interest rates, but only up to a certain cut-off point. The implication is that policies which help nascent small-scale MFIs to overcome their cost disadvantages form a more effective pricing strategy than do initiatives to transform them into regulated institutions.

Keywords: Microfinance; microbanks; non-bank financial institutions; interest rates; age; economies of scale; developing countries (search for similar items in EconPapers)
JEL-codes: E43 G21 G23 G28 N20 (search for similar items in EconPapers)
Date: 2015-02-01
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mfd
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Related works:
Working Paper: The Determinants of Interest Rates in Microbanks: Age and Scale (2015)
Working Paper: The Determinants of Interest Rates in Microbanks: Age and Scale (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:67298

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