 Lowering the interest burden for microfinanceInsu Song, Carrie Lui and John Vong International Journal of Process Management and Benchmarking, 2014, vol. 4, issue 2, 213-229 Abstract: MFIs have a high interest rate burden due to the small amount per transaction of microcredit and inevitably high operating cost per transaction. To ensure financial viability and to expand the depth and breadth of their operations, MFIs have to adopt cost recovery interest rates on microcredit, hence, MFIs have to charge interest rate high enough, usually substantially higher than the bank loan risk free interest rate. The major factors determining the interest rate on microcredit are the cost of funds, operating costs, loan loss cost and capital for business expansion. To illustrate the impacts of the above factors on interest rate, we present a summary of the current cost structures of microfinance institutes (MFIs) in three Southeast Asia countries, Cambodia, Vietnam and Indonesia. Then, we review existing studies and propose new uses of mobile technologies and financial market innovations for lowering the interest burden. Keywords: microfinance institutions; mobile technologies; insurance; interest burden; interest rates; microcredit; cost structure; Cambodia; Vietnam; Indonesia; financial markets; market innovation. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ids:ijpmbe:v:4:y:2014:i:2:p:213-229 Access Statistics for this article More articles in International Journal of Process Management and Benchmarking from Inderscience Enterprises Ltd |
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