Toward a theory of fair interest rates on microcredit: balancing the needs of clients and institutions

Marek Hudon and Joakim Sandberg

Chapter 5 in Handbook of Microfinance, Financial Inclusion and Development, 2023, pp 83-98 from Edward Elgar Publishing

Abstract: One of the most salient debates concerning microcredit pertains to the unexpectedly high rates of interest charged on microloans - rates which frequently are deemed usurious by outside parties. Microcredit is supposed to be to the advantage of poor borrowers, but at the same time microfinance institutions face comparably high costs. This chapter seeks to give theoretical input into the debate on fairness in microcredit interest rates. By drawing on both contemporary discussions in the industry as well as abstract philosophical perspectives on fairness, we classify and theorise four conceptions about fairness in interest rates and pinpoint their limitations. We finally argue for a combination of consequentialist and rights-based concerns which seeks to balance the needs of clients and institutions. We also draw out some practical implications of this view for both microfinance institutions and governments.

Keywords: Development Studies; Economics and Finance (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/view/edcoll/9781789903874/9781789903874.00011.xml (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:elg:eechap:19107_5

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().