A COMPARATIVE ANALYSIS OF INTEREST RATES: FORMAL SECTOR BANKS, LOCAL MONEYLENDERS AND MICROFINANCE INSTITUTIONS

Saswatee Mukherjee ()
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Saswatee Mukherjee: Department of Economics, Jadavpur University, Kolkata 700032, India

Journal of Developmental Entrepreneurship (JDE), 2013, vol. 18, issue 01, 1-6

Abstract: This study examines the interest rate differences paid to a bank, a Micro Finance Institution (MFI) and a local moneylender. In a multi-period lending contract, a borrower discounting the future income stream at a constant rate is willing to pay the highest interest rate to the local moneylender, comparatively lower rate to a MFI and the lowest to a formal sector bank. In other words, if the interest rate charged by each of the three lenders is the same, the repayment rate will be highest for a moneylender followed by a MFI and the lowest for a formal sector bank.

Keywords: Interest rates; formal sector banks; moneylenders; MFIs (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1142/S1084946713500076

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