Mexico, interest rate record holder

Source : Mexican Business Web

On average, interest rates of microfinance are of 74.2%, which makes Mexico the country with the highest rates in Latin America, according to the study “Microfinance in Latin America and the Caribbean: The Sector in Figures”, by the Inter-American Development Bank (IDB). This is a rate that is still much less than that charged by money lenders and informal lenders, but twice that of average rates in Peru, Chili and Brazil.

One of the most controversial microfinance players in the country is Compartamos, an MFI whose stock exchange listing made its founders millionaires. The IDB study also shows that Mexican microfinance practises average interest rates that exceed credit card rates, which in February 2011 were at 30.1%.

Microfinance interest rate levels are often criticised but can be explained in terms of operational costs linked to presence on the field of loan officers – the smaller the loans the more there are of them. According to Proferssor MuhammadYunus, an acceptable interest rate level should be around 25%.

For more information: See our file on interest rates.