The Determinants of Interest Rates in Microbanks: Age and Scale

Jacinta Nwachukwu (jcnwachukwu@uclan.ac.uk) and Simplice Asongu

No 15/004, Working Papers of the African Governance and Development Institute. from African Governance and Development Institute.

Abstract: This study investigates the legitimacy of the relatively high interest rates charged by those microfinance institutions (MFIs) which have been transformed into regulated commercial banks using information garnered from a panel of 1232 MFIs from 107 developing countries. Results show that formally regulated micro banks have significantly higher average portfolio yields than their unregulated counterparts. By contrast, large-scale MFIs with more than eight years of experience have succeeded in lowering interest rates, but only up to a certain cut-off point. The implication is that policies which help nascent small-scale MFIs to overcome their cost disadvantages form a more effective pricing strategy than do initiatives to transform them into regulated institutions.

Keywords: Microfinance; microbanks; non-bank financial institutions; interest rates; age; economies of scale; developing countries (search for similar items in EconPapers)
JEL-codes: E43 G21 G23 G28 N20 (search for similar items in EconPapers)
Pages: 35
Date: 2015-02
New Economics Papers: this item is included in nep-ban, nep-dev, nep-mac and nep-mfd
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http://www.afridev.org/RePEc/agd/agd-wpaper/The-De ... es-in-Microbanks.pdf Revised version, 2014 (application/pdf)

Related works:
Working Paper: The Determinants of Interest Rates in Microbanks: Age and Scale (2015)
Working Paper: The Determinants of Interest Rates in Microbanks: Age and Scale (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:agd:wpaper:15/004

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