Microfinance and Moneylender Interest Rate: Evidence from Bangladesh

Debdulal Mallick

World Development, 2012, vol. 40, issue 6, 1181-1189

Abstract: The linkage between the formal and informal credit markets in developing countries has largely been unexplored. This paper addresses one important aspect of the linkage by empirically investigating the impact of the intervention of microfinance programs on the moneylender interest rates in northern Bangladesh, and finds that moneylender interest rates increase with microfinance program coverage. Higher microfinance program coverage increases moneylender interest rates in the villages in which more loans are invested in productive economic activities than consumption. Borrowers resort to moneylenders for additional funds probably because of inadequate supply, unavailability of seasonal working capital from MFIs, and tight repayment schedules, which in turn increase demand for moneylender loans.

Keywords: microfinance; moneylender; interest rate; informal sector; South Asia; Bangladesh (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (58)

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Working Paper: Microfinance and Moneylender Interest Rate: Evidence from Bangladesh (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:40:y:2012:i:6:p:1181-1189

DOI: 10.1016/j.worlddev.2011.12.011

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