We examine the relation among microfinance institution (MFI) interest rates, loan loss rates, and regulations. Our results suggest that a positive and causal association exists where loan loss rates drive MFI interest rates after controlling for confounding factors. This positive association holds after accounting for potential endogeneity and reverse causality based on various econometric methods. Although endogeneity cannot be ruled out fully, the results of our tests suggest it plays a limited role. Our results support the price-rationing proposition that MFIs ration credit and there is unmet demand at the market-clearing price, but MFIs know that only entrepreneurs with a higher probability of default will take loans at higher interest rates. In addition, our results suggest that the positive association between MFI interest rates and loan loss rates is more pronounced in countries with individualistic and uncertainty-avoiding cultures as well as in countries with more human capital development.
JEL: G21, G15, G18, G38, I31, L26
Keywords: Microfinance, MFI interest rates, Loan loss rate, Regulation, MFI profitability
학회소식
[2016년 제 3차] Microfinance Interest Rate Puzzle: Price Rationing
작성자 : 관리자
조회수 : 1044
게시일 :
2016-08-24
