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Fair Microfinance Loan Rates
Author(s) -
Jarrow Robert,
Protter Philip
Publication year - 2019
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/irfi.12195
Subject(s) - loan , microfinance , fixed interest rate loan , term loan , business , financial system , non conforming loan , interest rate , credit risk , non performing loan , actuarial science , economics , monetary economics , finance , economic growth
This paper uses a reduced form credit risk model to determine fair lending rates for microfinance loans. A fair lending rate is defined to be that rate which makes the loan have a net present value of zero to the lender, after the inclusion of the lender's costs of issuing and monitoring the loan.