Intention versus impact : comparing interest rates charged by non-profit organizations and commercial banks in the Latin American microfinance industry
The process of commercialization in the microfinance industry has brought with it a large amount of controversy. The following study attempts to contextualize the controversy and include a conceptual analysis of the main perspective represented by the Welfarist and Institutionalist positions. One primary concern of the Welfarists is that the for-profit motive of commercial institutions will have an upward pressure on interest rates, expressed as full APRs. This thesis utilizes information on 1,061 loans obtained from Bolivia, Ecuador and Colombia, within a multiple regression model in order to analyze the relationship between full APRs and legal status of the organization of origination. This research provides evidence that commercial institutions do not charge higher interest rates than non-profit organizations within the Latin American microfinance industry.
