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Sensitivity of Loan Size to Lending Rates: Evidence from Ghana's Microfinance Sector

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  • Samuel Kobina Annim

Abstract

This paper examines the combined effect of interest rates and poverty levels of microfinance clients on loan size. Cross section data on 2,691 clients and non-clients households from Ghana is used to test the hypothesis of loan price inelasticity. Quantile regression and variants of least squares methods that explore endogeneity are employed. We find the expected inverse relationship only for the 20th to 40th quantile range. The semi-elasticity of loan amount responsiveness to a unit change in interest rate is more than proportionate and significant for the poorest group only.

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  • Samuel Kobina Annim, 2011. "Sensitivity of Loan Size to Lending Rates: Evidence from Ghana's Microfinance Sector," WIDER Working Paper Series wp-2011-003, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2011-003
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    References listed on IDEAS

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    1. Carla Henry & Manohar Sharma & Cecile Lapenu & Manfred Zeller, 2003. "Microfinance Poverty Assessment Tool," World Bank Publications - Books, The World Bank Group, number 15065.
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    6. Morduch, Jonathan, 1999. "The role of subsidies in microfinance: evidence from the Grameen Bank," Journal of Development Economics, Elsevier, vol. 60(1), pages 229-248, October.
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    Cited by:

    1. de Lucinda, Claudio Ribeiro & Vieira, Rodrigo Luiz, 2014. "Interest Rates and Informational Issues in the Credit Market: Experimental Evidence from Brazil," World Development, Elsevier, vol. 59(C), pages 47-58.
    2. Adlah A. Alessa & Wafa Fahad Alsaeed & Jamel Azibi & Aymen Ajina, 2017. "The Effect of Suspended Salary Allowance on Business Loan in Saudi Arabia," Business and Management Research, Business and Management Research, Sciedu Press, vol. 6(4), pages 26-39, December.

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