2008年-世界发展银行全球_Variations_in_Microcredit_Interest_Rates_4页_274kb

Summary of "Variations in Microcredit Interest Rates"

Microcredit interest rates vary significantly across countries, with the global average around 35 percent. However, in countries like Uzbekistan, rates exceed 80 percent, while in Sri Lanka, they are approximately 17 percent. These disparities are not solely due to small loan sizes, as illustrated by Figure 2, which shows that loan size is only one of several factors influencing interest rates.

Core Content

Microcredit interest rates are influenced by multiple factors, including operating costs, public policy, and competitive intensity. These factors interact in complex ways, leading to country-specific differences in pricing strategies and outcomes.

Main Factors Influencing Interest Rates

1. Operating Costs

Operating costs are a primary driver of microfinance interest rates. They typically constitute a large portion of the nominal interest yields, often around 50 percent globally. In countries with lower interest rates, such as Ethiopia and Sri Lanka, operating costs are significantly reduced, accounting for 9.4 percent and 7.7 percent of the gross loan portfolio, respectively.

In contrast, countries with higher interest rates, like Uzbekistan and Mexico, face higher operating costs. In Uzbekistan, operating costs account for 39 percent of the loan portfolio, likely due to the sector's youth and inefficiencies. In Mexico, operating costs make up 45 percent, driven by low average loan sizes (US$387), high labor costs, and the need to operate in rural areas with low population density, increasing transport expenses. Additionally, high profits for MFIs in Mexico contribute to higher interest rates.

2. Public Policy

Public policy plays a crucial role in shaping microcredit interest rates. In Ethiopia and Sri Lanka, public institutions dominate the microfinance sector and often benefit from subsidies, such as subsidized cost of funds or in-kind support. These advantages make it difficult for unsubsidized private MFIs to compete, as they face higher entry barriers and operational costs.

In Uzbekistan, the regulatory environment is different. The country has a relatively small number of microfinance providers serving a large population, indicating a less competitive market. The lack of economic freedom and high demand for cash in Uzbekistan also contribute to higher interest rates, as borrowers are willing to pay more for liquidity.

3. Competitive Intensity

Competition in microfinance markets is not well-documented, and current data is limited. However, anecdotal evidence suggests that in some countries, regulatory changes can reduce competition and allow MFIs to set higher interest rates. For example, in Uzbekistan, the 2006 microfinance law led to the closure of four organizations, potentially reducing competition.

In Mexico, despite a large number of borrowers (2.6 million), competition has not significantly impacted interest rates. However, in certain regions, price reductions have been observed as institutions compete for market share. Market observers also note that loan pricing has become a more strategic focus for MFIs in recent years.

Key Findings

• Loan size is a common factor, but not the only one, in explaining high interest rates.
• Operating costs vary widely by country and are a major determinant of interest rates.
• Public policy can heavily influence interest rates through subsidies and regulatory frameworks.
• Competitive intensity is difficult to measure, but it appears to have limited effects in some markets.
• The reasons for interest rate differences are often country-specific and multifaceted.

Outlook

There is no single explanation for the variation in microcredit interest rates. Researchers are beginning to explore key questions, such as:

• How do borrowers fare in low- and high-interest environments?
• Does increased competition improve MFI efficiency and reduce interest rates?
• What role should public policy play in shaping the microfinance sector?

Better data is needed to provide clearer insights into these issues and to develop more effective strategies for managing microcredit interest rates.

References

• Asian Development Bank. 2008. "Development of Microfinance Organizations in Uzbekistan."
• Gaul, Scott, and Olga Tomilova. 2006. "Microfinance Institutions in Central Asia: Benchmarks and Analysis 2005."
• Gonzalez, Adrian. 2008. "Efficiency Drivers of Microfinance Institutions (MFIs): The Case of Operating Expenses."
• Helms, Brigit, and Xavier Reille. 2004. "Interest Rate Ceilings and Microfinance: The Story So Far."
• Microfinance Gateway. 2005. "Building Back with Microfinance."
• Navajas, Sergio. 2006. "Microfinance in Latin America and the Caribbean: How Large Is the Market?"
• Rosenberg, Richard. 2007. "CGAP Reflections on the Compartamos Initial Public Offering."
• Rosenberg, Richard, Adrian Gonzalez, and Sushma Narain. Forthcoming. "The New Moneylenders: Are the Poor Being Exploited by High Microcredit Interest Rates?"

All CGAP publications are available at www.cgap.org.