Foreign Exchange Risk in Microfinance: An Empirical Evidence

18 Pages Posted: 17 Jun 2014

See all articles by Moh'd Al Azzam

Moh'd Al Azzam

University of Sharjah

Karim Mimouni

McGill University - Desautels Faculty of Management

Sudipta Sarangi

Virginia Polytechnic Institute & State University

Date Written: June 16, 2014

Abstract

Misunderstanding of the structure of microcredit interest rates remains a rich source of generating criticism against the industry high interest rates. Research has focused its attention on the cost structure of interest rates and recently on the macroeconomic and macro-institutional factors. While the cost structure is probably the most important determinant of interest rates, other factors matter too. This paper explores the risk of foreign exchange in microfinance. On average, MFIs that operate in countries with fixed exchange rate regimes tend to charge lower interest rates than those operating in countries with floating exchange rate regimes.

Keywords: microfinance, interest rate, economic development, exchange risk, financial intermediation

JEL Classification: G12, G23, F31, F63

Suggested Citation

Al Azzam, Moh'd and Mimouni, Karim and Sarangi, Sudipta, Foreign Exchange Risk in Microfinance: An Empirical Evidence (June 16, 2014). Available at SSRN: https://ssrn.com/abstract=2451259 or http://dx.doi.org/10.2139/ssrn.2451259

Moh'd Al Azzam (Contact Author)

University of Sharjah ( email )

University City Road
P. O. Box 27272
Sharjah, 27272
United Arab Emirates

Karim Mimouni

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

Sudipta Sarangi

Virginia Polytechnic Institute & State University ( email )

250 Drillfield Drive
Blacksburg, VA 24061
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
101
Abstract Views
833
rank
276,094
PlumX Metrics