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Estimating The Effective Cost Of Borrowing To Microcredit Clients In Ghana

Author

Listed:
  • Samuel K. Afrane
  • Michael Adusei
  • Bernard Adjei-Poku

Abstract

This study estimates the effective cost of borrowing to microcredit clients in Ghana. A simple open-ended questionnaire is administered to 35 microfinance institutions. The study finds that the major costs of borrowing are interest rates and processing fees. The study also finds that the minor costs of borrowing are registration fees, commitment fees, insurance and compulsory savings. In terms of effective cost of borrowing, the study finds that microcredit customers effectively pay at least 8.0 percent interest rate in excess of the stated interest rate

Suggested Citation

  • Samuel K. Afrane & Michael Adusei & Bernard Adjei-Poku, 2015. "Estimating The Effective Cost Of Borrowing To Microcredit Clients In Ghana," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 9(1), pages 57-66.
    • Handle: RePEc:ibf:gjbres:v:9:y:2015:i:1:p:57-66
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    References listed on IDEAS

    as
    1. Md. Abul Basher, 2007. "Empowerment of microcredit participants and its spillover effects: evidence from the Grameen bank of Bangladesh," Journal of Developing Areas, Tennessee State University, College of Business, vol. 40(2), pages 173-183, January-M.
    2. Michael Adusei, 2013. "Determinants Of Credit Union Savings In Ghana," Journal of International Development, John Wiley & Sons, Ltd., vol. 25(1), pages 22-30, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Effective Cost; Microcredit; Ghana;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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