Publication

This article is concerned with the claim of microfinance institutions that increased interest rates do not reduce the poor’s access to credit and increases the micro lenders profitability. The author argues that this theory only makes sense if the poor are rate insensitive and thus tests the assumption of price inelastic demand using randomized trials conducted by a consumer lender in South Africa. The publication concludes that the demand curves are downward-sloping, and steep for price increases relative to the lender’s standard rates.