ESTIMATING THE EFFECTIVE COST OF BORROWING TO MICROCREDIT CLIENTS IN GHANA

Samuel K. Afrane, Michael Adusei and Bernard Adjei-Poku

Global Journal of Business Research, 2015, vol. 9, issue 1, 57-66

Abstract: This study estimates the effective cost of borrowing to microcredit clients in Ghana. A simple open-ended questionnaire is administered to 35 microfinance institutions. The study finds that the major costs of borrowing are interest rates and processing fees. The study also finds that the minor costs of borrowing are registration fees, commitment fees, insurance and compulsory savings. In terms of effective cost of borrowing, the study finds that microcredit customers effectively pay at least 8.0 percent interest rate in excess of the stated interest rate

Keywords: Effective Cost; Microcredit; Ghana (search for similar items in EconPapers)
JEL-codes: E43 E51 (search for similar items in EconPapers)
Date: 2015
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