Towards reasonably priced microcredit: analysing Egyptian NGO-MFIs' cost structure and financial performance
Interest rates have always been a much debated topic in microfinance, as the prices paid by low-income clients tend to be higher than conventional banks' rates. In Egypt, microcredit rates are increasingly being criticized and viewed as unreasonably high. The study analyses the effective interest rates charged by Egyptian NGO-MFIs compared with commercial banks' rates, and using time series cross-sectional regression models, the study examines the main determinants affecting NGO-MFIs’ portfolio yield and operating expenses in order to identify prospects for providing reasonably priced credit for low-income Egyptians. Findings suggest that, as the average portfolio yield for NGO-MFIs in Egypt has exceeded the global average portfolio yield, there is a clear potential for providing microcredit at lower prices, and much can still be done towards more operational efficiency.