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CGAP Newsflash: What Determines Microcredit Interest Rates? A joint paper by CGAP, KfW and MIX, Microcredit Interest Rates and Their Determinants, finds that the operating costs of MFIs remain the largest determinant of microcredit interest rates. Operating expenses fell substantially through 2007 as microlenders became more efficient, but this downward trend was interrupted in 2008 and 2011.The percentage of borrowers' interest payments that went to microlenders' profits dropped from about 20 percent in 2004 to 10 percent in 2011. During the same time, funding costs have climbed as microlenders fund more of their portfolio from commercial borrowing. Microcredit interest rates, measured by the global median interest yield of microfinance institutions (MFIs), averaged 27 percent in 2011, with global microcredit interest rates declining substantially between 2004 and 2007. An interactive data set offered by MIX supports this new paper and provides more than 800 data cuts that allow users to slice data for their needs and download the results. The online database, available at MIXMarket.org, is especially practical for users looking to customize data for a specific region or country. Read the paper at CGAP.org and explore the data at MIXMarket.org. You have been sent this email because you are on the CGAP emailing list. If you prefer not to receive further emails, please email us at CGAP@WorldBank.org
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