Q.

How do your partners interest rates compare to market norms?

Opportunity International, November 17, 2014

Our partners interest rates are comparable to or lower on a risk/reward adjusted basis to what other organisations charge on typical microfinance loans in emerging markets. Because of the vast differences in transaction costs and sizes of microfinance loans from market to market, it is inappropriate to compare them to conventional loans. As noted by The Consultative Group to Assist the Poor (CGAP), “Administrative costs are inevitably higher for tiny microlending than for normal bank lending. For instance, lending $100,000 in 1,000 loans of $100 each will obviously require a lot more in staff salaries than making a single loan of $100,000.” Local money lenders typically charge interest rates that are 3 to 10 times what Opportunity International partners charge. According to one study, “The median informal rate charged by informal money lenders was 10 to 25 percent per month. Rates of 5 to 20 percent per day were reported in five countries.”