Are customers willing and able to pay such high interest rates?
Experience has shown customers to be willing to pay high interest rates. Given the positive impact a microcredit has on their income situation, MFI clients are able to repay the requested interest rates. Default rates are very low, with an average repayment rate of around 97 percent. For microentrepreneurs the alternatives are either even higher rates in the informal sector (with moneylenders sometimes charging interest of 20 percent per day!), or no access to credit at all. Access to monetary means of payment and capital are often the only way for microentrepreneurs to significantly boost their earnings. People in poor sections of the population are usually compelled to work less efficiently. Here microcredits can lead to significant improvements. The income generated with a microcredit is often many times higher than the interest paid on the loan. This fact makes microfinance economically viable and is one of the main reasons for the rapid expansion of privately financed microfinance
