There is no research supporting the idea that competition reduces rates charged by microfinance institutions in the industry. Even so, it’s hard to find microfinance clients in India who are concerned about interest rates or even take it into consideration when deciding to take a loan
When people hear on the news that microfinance institutions charge 25 percent, 30 percent or even 80 percent interest on loans, they often are outraged. How can these organizations get away with charging the poor these high rates, and why does no one regulate the industry? And most of all, why are the poor paying these exorbitant rates?
[This article has been reproduced with permission from Knowledge Network, the online thought leadership platform for Thunderbird School of Global Management https://thunderbird.asu.edu/knowledge-network/]