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Why do MFIs charge high interest rates to poor people?

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Question added by Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town
Date Posted: 2014/03/20
Divyesh Patel
by Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town

  1. The administrative costs of making many small loans are much higher than making fewer larger loans.

  2. Loan officers must work longer and harder to assess the feasibility of each loan application and thereby reduce risk because borrowers cannot generally offer traditional collateral nor do they have regular salaried income.

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