Unraveling the Determinants of Microcredit Interest Rate

The introduction of microcredit has drawn significant attention to the interest rates charged by microfinance institutions, capturing policymakers worldwide. Despite competitive nature market, borrowers still bear burden relatively high rates. Similar other loans, requires repayment, and rate is determined various factors. Nevertheless, acknowledging that intrinsically linked risk associated with essential. Microfinance institutions often deal from low-income backgrounds, making repayment process inherently riskier. This study aimed address crucial question concerning factors influencing loan rates, an area not been extensively studied. Since respondents are SMEs, they have questioned about them. If enterprises a well-established track record, opt for short-term loans smaller amounts, maintain accurate accounting records, lender may consider offering lower rate. Understanding determinants helps in segmenting based on their profiles. Policymakers regulators can use insights develop appropriate regulations balance need financial inclusion consumer protection. Additionally, educating how calculated, ways improve creditworthiness empower them make informed decisions negotiate better terms.