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If the default rate is high enough then 70% could be what it takes for the lender to make a profit. Someone who thought that was the best rate they could get co
by te_platt 18y ago
If the default rate is high enough then 70% could be what it takes for the lender to make a profit.
Someone who thought that was the best rate they could get could agree to such a rate.
- nostrademons 18y agoThen they should focus on lowering the default rate, not increasing the interest rate. The Grameen bank gets repayment rates of over 98%. Assuming a cost of capital of 3%, if they need to charge 70% interest to make a profit then roughly 40% of their loans are defaulting. A 40% default rate means people are using these loans for consumption, not investment. You need better financial education then, not better access to credit.
- te_platt 18y agoThat sounds like a good next step. Move from no access to capital to lousy access to better access. The attitude I saw from critics of the program was that some how people should go from no accss to good access, and if that's not possible they should stay with no access.
- eru 18y agoPerhaps it's not the default rate - but the overhead. Those loans are pretty small.
- pmjordan 18y agoYet it's possible to run a current account on far less? I doubt that's the problem.
- eru 18y agoOr perhaps it is just a sign of an immature market. They charge so much because they can get away with it. With competition the rate should go down. Even if it is mainly caused by overhead, as companies will figure out how to operate more efficiently.
- anamax 18y agoFeel free. Nothing is stopping you from loaning your money at a lower rate, from providing education, etc. What? You only tell other people what to do with their money? If your advise is not good enough for your money....