The effects of the interest rate ceilings on the micro lending market in South Africa

Happy Mohane, Gerhard K. Coetzee and William Grant

Agrekon, 2000, vol. 39, issue 4, 9

Abstract: Interest rates are a topical subject in the micro lending industry in South Africa. The micro lending industry has been accused of charging usurious interest and exploiting the consumers. This has led to the Department of Trade and Industry passing a Usury Act with an aim of protecting the consumers. The Act imposes interest rate ceilings on loan finance provided by money lending institutions. These ceilings are proposed to be linked to the prime rate. Given this, it is not possible for micro lenders to charge full-cost recovery interest rates. This paper tries to highlight the effects of interest rate ceilings on the micro finance market. It argues that the biggest cost component of microlenders is administration costs and not the cost of capital, thus linking ceilings to the prime rate is illogic.

Keywords: Financial Economics; Marketing (search for similar items in EconPapers)
Date: 2000
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ageconsearch.umn.edu/record/54233/files/27 ... ant%20Dec%202000.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:agreko:54233

DOI: 10.22004/ag.econ.54233

Access Statistics for this article

More articles in Agrekon from Agricultural Economics Association of South Africa (AEASA) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().