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A Comparative Analysis Of Interest Rates: Formal Sector Banks, Local Moneylenders And Microfinance Institutions

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  • SASWATEE MUKHERJEE

    (Department of Economics, Jadavpur University, Kolkata 700032, India)

Abstract

This study examines the interest rate differences paid to a bank, a Micro Finance Institution (MFI) and a local moneylender. In a multi-period lending contract, a borrower discounting the future income stream at a constant rate is willing to pay the highest interest rate to the local moneylender, comparatively lower rate to a MFI and the lowest to a formal sector bank. In other words, if the interest rate charged by each of the three lenders is the same, the repayment rate will be highest for a moneylender followed by a MFI and the lowest for a formal sector bank.

Suggested Citation

  • Saswatee Mukherjee, 2013. "A Comparative Analysis Of Interest Rates: Formal Sector Banks, Local Moneylenders And Microfinance Institutions," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 1-6.
    • Handle: RePEc:wsi:jdexxx:v:18:y:2013:i:01:n:s1084946713500076
    DOI: 10.1142/S1084946713500076
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    Cited by:

    1. Khan Jahirul Islam, 2023. "Strategic default, multiple installments, and the role of informal moneylender in microcredit contract," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(2), pages 204-220, June.

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