Question

costs associated with Micro-Finance.

Answer 1

Answer) There are three types of Microfinance costs when it makes loans which are as follows:-

1st one is the cost of money when it lends.

2nd one is the cost of loan defaults, and it is proportional to the amount lent.

For illustration, if the cost spent by the Microfinance for the money it gives is 10%, and it encounters defaults of 1% of the quantity lent, then these two costs will amount to $11 for a loan of $100.

And 3rd one is transaction costs and it is not proportional to the amount lent.