Research is the most prominent among the InM activities. The major focus of its research is on microfinance, poverty, and development issues. InM conducts research studies independently and/or jointly with distinguished researchers and institutions from home and abroad. The underlying objective of the research agenda is to get insights into the problems of poverty and development and also to assess the impact of different interventions.
Empirical analysis on pricing issues of MFI loans: Are the MFI lending rates too high?
The present research does not intend to look into the issue of whether the lending rates of MFIs are relatively high or low in isolation. The main purpose would be to identify the major determinants of interest rates charged by MFIs which would be important to identify the scope of improving the cost elements governing microfinance lending operations since cost structure and profitability of MFIs are important determinants of lending rates. There are other non-financial determinants as well such as size of the MFIs (number of borrower or disbursement amount), location of branches (urban or rural), and types of programme (regular microcredit or ultra-poor programme). The study will be conducted, in collaboration with participating MFIs, to bring out a clear picture on MFI lending rates including rationales and justifications. The research will identify major determinants of lending rates and spread for MFIs including the nature and source of funds as well as the cost structure relative to size and operation of MFIs to generate practical recommendations.
The study will be conducted at both institution and branch levels which will facilitate the capturing of scenarios in both overall and specific terms for the MFIs. The branch level analysis will be required especially for assessing the robustness of the findings. For analysis of the above issues, information on some major indicators will be used.