Microfinance in Palestine: Are loans too expensive and should interest rates be capped?


A study carried out by Marco Azzalini of the Italian Agency for Development Cooperation AICS – Jerusalem Office with Valeria E. Pujia and Katia Raguzzoni of Microfinanza Srl which also received comments from the president of Link2007, Paolo Dieci.
The document is in English.
“In Palestine as in other countries, a debate over interest rates and other fees applied by MFIs is growing. It is a common belief that loans offered by local MFIs are overpriced and thus, large shares of the population – in particular micro-entrepreneurs, small-scale farmers and women – cannot afford to take up credit. Many stakeholders are also advocating for a government intervention to set
an interest rate ceiling for specific economic sectors or beneficiary groups, most in need of finance.
Are Palestinian MFIs asking for disproportionate interest rates and fees? Are they inefficient or making too much profit? Based on the
experience in other countries, are “interest rate caps” effective in fostering financial inclusion among marginalized groups? This brief
aims to shed light on these issues and provide policymakers and donors in Palestine with some general recommendations.”

Download the document