Microfinance and Rate of Interest

Microfinance is considered as key Instrument to fight against poverty and slogan of Microfinance practitioners is “serving poorest of the poor”.

There are two arguments to the rate of return:
1. Dimensioning Marginal Rate of Return (DMR) to capital.
2. Poor’s are already paying higher rate of interest to many lenders.

Financial sustainability / profitability:
1. Subsidy: Khushhali Bank receives 20% and Grameen Bank 30% of markup.
2. High rate of interest: Yugoslavian banks receive 70% and Latin American banks 50% of markup.

 Till 1980’s the trend was to provide subsidized credit.
 At that time rate of interest less then rate of inflation.
 And effective rate of interest is less the 0%
 After 1980’s the trend has changed.
 Now banks charge high rate of interest to cover the cost of lending.

 There is an argument that poors problem is of access but not of rate of return.
 And it is......

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Title: Microfinance And Rate Of Interest
Approximate Word Count: 749
Approximate Pages: 3 (250 words per double-spaced page)

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