How can poor people afford such high interest rates?
Microcredit interest rates are set to provide viable, long-term financial services on a large scale, while subsidized interest rates generally benefit only a small number of borrowers for a short period. Studies conducted in India, Kenya and the Philippines found that the average annual return on investments by microbusinesses ranged from 117 to 847 per cent. These high returns are commonplace among microentrepreneurs, and while the interest rates seem high, they usually represent only a small portion of microentrepreneurs’ total returns. Interest rates charged by informal moneylenders are overwhelmingly higher than those of MFIs.
