A Survey of Term Structure and Determinants of Interest Rates : the Case of Moneylenders in Nairobi

Abstract

The variety of financial needs that exist can not always be adequately met by the forma l financial sector. Even formal micro-financial programs created to bridge this gap, often still manage to sieve out those regarded as the "hardcore poor" through their screening processes. Where the majority of the population has limited access to forma l finance, informal micro-lending becomes the alternative business practice. However, one of the main accusations leveled against moneylenders (individuals who provide loans routinely with the expectation of profiting), is that they charge exorbitant interest rates, thereby exploiting the mostly low income borrowers who have no alternative credit sources ..........................................